We’ve all heard the stats on how financially stressed people are today. Even before the COVID-19 pandemic created widespread economic uncertainty across the world, the average American was living paycheck to paycheck. And it’s not only lower-income earners who are struggling: Nearly one in three American workers runs out of money before payday – even those earning over $100,000 a year .
While employers may dismiss employees’ finances as a personal matter, in reality the stress associated with financial instability impacts business. For example, a study by PwC found that 35% of employees are distracted at work due to financial matters , while Fidelity Investments reported that employees with high debt miss more work on average than those with minimal debt .
And financial stress isn’t just affecting employees’ health and productivity, it’s also determining how they navigate their career decisions. Finances determine which job offers people can afford to accept, whether or not they can upskill themselves to prepare for the future of work, and when they can retire and open up opportunities for the next generation. All of these factors have a trickle-down effect on an organization’s ability to attract and retain the best talent, to have the right skills represented, and to get the best work out of their people.
There are a lot of factors that go into being financially well. According to Tom Rath and Jim Harter – workplace well-being researchers at Gallup and authors of Wellbeing: The Five Essential Elements – it’s about “effectively managing your economic life” through healthy spending, emergency preparedness, access to information and tools for decision-making, and future planning .
So how does the U.S. workforce measure up to these standards?
Let’s start with healthy spending. Prior to the onset of the COVID-19 pandemic – which has undoubtedly worsened the financial situation for many – debt was already a serious issue for many Americans. According to PwC’s 2019 Employee Financial Wellness Survey, 59% of workers consistently carried balances on their credit cards, and 37% of those workers reported finding it difficult to make the minimum payment on time . Student loan debt is also a serious impediment to financial wellness, with one in five American adults carrying it . But perhaps the most alarming fact is that one in ten Americans have used a payday loan service in the last two years, with two-thirds of borrowers using them to cover regular expenses, like rent .
Saving for emergencies and future planning are also significant weak spots. Less than half of the population (41%) has enough savings to cover a $1,000 emergency . And 56% of baby boomers have less than $100,000 saved for retirement, leaving only 37% confident that they can retire when they want to.
Americans’ financial acumen isn’t particularly strong, either. According to Standard & Poor’s Global Financial Literacy Survey, the U.S. adult financial literacy level is 57%, ranking the country at number 14 in the world . Few schools are teaching financial education, and only 17 states require a personal finance course to graduate high school.
Financial stress has a profound impact on people – the study I referenced earlier by Fidelity Investments, for example, also found a correlation between poor health and a lack of financial wellness . Not only does stress itself harm people’s physical health, concerns about the cost of healthcare can cause employees to avoid seeking treatment for symptoms they’re experiencing and put off routine tests and check-ups that would help prevent more serious illness.
Being financially stressed can also lead to an increased reliance on payday loans, resulting in high fees that can create a never-ending cycle of debt – and stress. To put the scale of this issue into perspective, there are more payday storefronts in the U.S. today than there are McDonald’s restaurants.
Employees’ financial stress can have several negative impacts on the organizations they work for. When the people on your team are unhealthy – mentally and or physically – that translates to higher employer healthcare costs, and an increase in sick days. Absenteeism then affects the rest of the workforce, as other employees work overtime to pick up the slack from absent workers. Lowered productivity due to distraction is another issue, as is increased turnover. And, finally, older workers may delay their retirement due to higher benefits costs or not being financially prepared, which limits the upward mobility of younger workers.
The scope of employee financial wellness is broad. Having a 401k matching program doesn’t mean an organization has financial wellness covered. Supporting financial wellness means offering programs that address the employee’s complete financial picture, from health benefits to retirement planning to debt management.
Here are three key strategies to help your organization create a financial wellness program that will truly benefit your workforce – and your business.
The ultimate goal for your organization’s employee financial wellness program should be to spend your benefits budget on programs that will have a positive – and measurable – impact on your workforce KPIs. To do this well, you’ll need to dive deep into your workforce to understand them as individuals, learning what their pain points are and what’s getting in the way of their financial stability.
If you’re using modern Human Capital Management (HCM) platform that unifies your workforce data from a variety of sources, you can leverage insights from it to drive your employee wellness strategy. By using data sources from core HR systems and benefits providers, you can gauge adoption and usage of the benefits and wellness programs you’re already offering and look for patterns based on employee demographics.
Employee surveys and benchmark data can help to fill in the gaps with more information, such as the reasons behind an identified pattern. Surveys can also help you to measure the impact of any changes or new programs you introduce on employees’ reported stress and engagement levels to determine what’s working and what isn’t.
One size fits all typically does not fit the needs of the modern workforce. The next step in your efforts to build a financial wellness program that truly benefits your workforce is to leverage the data-driven insights you’ve uncovered to expand and personalize the benefits and wellness programs you offer based on the actual pain points of employees.
Organizations should look for gaps in the existing benefits and wellness offerings and aim to create a program that has a full range of options for employees to choose the best opportunities to improve their personal financial wellness. Leveraging segment analyses done during the data gathering exercise will also help HR teams guide employee selections and “package” them internally in a way that highlights their benefits to various segments of the workforce.
For example, some common wellness offerings, such as health benefits and 401k matching, may be less attractive to younger workers who are currently healthy but saddled by student loan debts, or struggling to save a down payment for a home in an expensive housing market. And hourly workers, contract workers, and those with cash flow struggles may value having an on-demand pay solution that allows them to access their pay as soon as it’s earned, rather than waiting for the next payday.
The last piece of the puzzle is to build awareness of your organizations’ commitment to financial wellness and encourage adoption, which can be done through training. A flexible learning platform is a key tool to support this endeavor, as it allows for personalization. People consume information in different forms based on personality, age, and other factors, so offering training through different media, formats, and devices will also help to increase engagement.
Data, analysis, and segmentation do not end when it comes to training and awareness. These tools can be used to understand who is potentially not using programs that they should be, and why. Understanding what the barriers are to adoption – from a lack of awareness to a need for different types of training – can help HR teams address issues quickly.
Investing in employee financial wellness is a strategy that will benefit employees and organizations alike. For one, improving employees’ financial stability can improve the ROI on labor costs by lessening employees’ financial stress so that they can focus on their work, increasing their productivity and reducing absenteeism. It can also be a powerful tool for recruiting and retaining top talent, as employees are likely to place a high value on opportunities to improve their financial stability, health, and overall wellness. Improving employee financial wellness should be a top priority for organizations navigate through the current crisis to build a stronger, more resilient workforce for the future.
 Inside the Wallets of Working Americans, 2nd Annual Report, Salary Finance, 2020
 PwC 8th Annual Employee Financial Wellness Survey, PwC, 2019
 Total Well-being: A Comprehensive Approach, Fidelity Investments, 2017
 Your Spending and Your Financial Well-Being, Gallup, 2010
 PwC 8th Annual Employee Financial Wellness Survey, PwC, 2019
 These Five Charts Show How Bad the Student Loan Debt Situation Is, NBC News, 2019
 Report on Payday Lending, CFPB
 41% of Americans Would Be Able to Cover a $1,000 Emergency with Savings, CNBC, 2020
 Financial Literacy Around the World, Standard & Poor’s Ratings Services, 2015
Total Well-being: A Comprehensive Approach, Fidelity Investments, 2017
Patrick Luther is Vice President and Principal, Financial Services at Ceridian. He has over 10 years of experience in product management and marketing of enterprise software, and 10+ years in consulting for the financial services sector. Patrick is a former U.S. Navy Lieutenant, and has held leadership roles at IBM, Rational, Infosys, Deloitte, and various SaaS startups. Patrick holds a B.S. in Mechanical Engineering from the University of Rochester and an MBA from Yale.View Collection