Are financially stable employees more productive? Should your staff’s financial wellness be a priority for your business?
The short answer: Yes.
It’s understood – employees have a lot on their minds, right? And why wouldn’t they? The jobs they perform for you are extremely important.
When you see them at their desks, laser-focused on that computer screen, you just know the wheels are turning and they’re deep in thought about work.
Any minute, they’re going to give you the latest details on how they’ll finish up that big project. Snag a new lead. Close one more deal.
But actually, what’s got their attention may be none of the above. Instead, you know what they could be thinking about?
Money. And the fear of not having enough, or not making good use of what they have.
Don’t think your employees’ cash-flow problems are any of your concern? Actually, their financial situation can affect productivity and your bottom line.
Take a look at how an employee’s money problems can affect an entire department or organization. Then, explore a few tips you can use to help your employees feel more financially secure and improve engagement.
Employees’ money problems are also your problems
Financial security equals confidence. And when you boost your employees’ confidence, they will typically perform better than employees who lack confidence.
So, when your employees have personal stressors, like money concerns, it can affect the quality of their work. They may become more distracted and make careless mistakes. Also, it could lead to less social engagement with other employees.
For instance, a group of team members may go out to lunch. One employee may not join them because they don’t have the cash to enjoy the outing. Or, an employee may change their behavior and stop pitching in for parties, group gifts and more.
Their co-workers’ perception may be that they’re being anti-social or cheap, when in fact the employee is just not comfortable sharing their money struggles and personal business.
When an employee is worried, unproductive and can’t afford to participate in group activities and outings because of finances, it not only affects the person but the team as a whole.
Addressing the issue: Where to start
While you may not ever know the full extent of an employee’s financial situation, there are things you can do to help them on their journey to financial wellness. Start by offering a solid benefits package that includes a great portfolio of health insurance options to choose from.
This alone can help ease some of your employees’ money concerns because they will have the opportunity to get things like medical insurance, disability, flexible spending accounts, retirement plans and more.
With so many options, they won’t have to keep themselves up all night wondering if an illness or accident could ruin them financially.
Here are 5 ways you can help your employees become more financially stable:
1. Provide a tool to help take the guesswork out of benefits enrollment
Sometimes, employees are so afraid of a health crisis, or just don’t know what to choose, that they end up making a fear-based decision and select a more expensive plan than they truly need.
Take purchasing car insurance, for example. Oftentimes, people will pay more monthly for car insurance so they can get a low deductible, usually $500. However, if they crunched the numbers, they could be paying more than $500 a year in higher premiums just to have the lower deductible. This is a decision based on the fear that they will get in an accident and have to come up with more than $500. The reality is that they may be better served with a higher deductible and lower monthly cost.
That’s why, when offering access to health insurance benefits, it can be helpful to provide an easy, question-and-answer tool employees can use to drill down and determine the type of coverage they actually need. Simple questions, such as “How often do you go to the doctor?” or “How many prescriptions do you take regularly?” are common examples.
This way, when making their elections, your employees can feel certain they’re choosing coverage based on their actual needs instead of choosing the plan with a level of coverage they may never need.
2. Offer disability insurance for added peace of mind
Life can happen in an instant. It could be a happy moment such as the birth of a child, or a more painful situation like an accident. In the event an employee is unable to work for a period of time, they can have peace of mind there is some level of income replacement available to them during their absence.
By offering short-term disability insurance, you allow new moms to go on maternity leave and still get paid a percentage of their income. If an employee is involved in a non-work-related accident that prevents them from being able to do their job for a while, short-term disability insurance will fill in some of the income gaps. Plus, when their short-term disability insurance runs out, long-term will kick in if they need it.
When you provide employees with disability insurance options, they’ll feel confident their financial well-being will be protected when faced with the unexpected.
3. Make a 401(k) plan available to them
For some employees, nothing’s scarier than thinking about the future and knowing they have nothing saved. They may spend countless hours worrying about how they’re going to survive in retirement. This fear could easily distract employees and make them ineffective at work, especially as they age.
When you offer a 401(k) plan, your employees will feel more assured about their future. As they watch their savings grow, they will not only gain more confidence in their ability to build wealth, but see the possibility that they can have a comfortable nest egg down the line. Also, offer an employer match, if possible, on a percentage of their pay. They’ll have even more money at retirement thanks to your company, plus you’ll receive a tax benefit. Everybody wins.
You may find that some employees are hesitant to join a 401(k) because they don’t understand how it works or feel intimidated about choosing investment funds. The good news is, with many 401(k) plans today, they don’t have to know the ins of outs of investing. A solid 401(k) plan has tools to walk employees through the process and offers funds that invest to achieve results geared toward a specific retirement year.
While 401(k) savings are meant for employees to use at retirement, there are times when employees need access to their savings. If you have employees dealing with true financial hardships that are crippling them with fear and preventing them from doing their jobs, having access to their 401(k) may be the answer. Many 401(k) plans allow employees to access their savings through loans, withdrawals at an age earlier than retirement age, and for certain qualifying financial hardships. Also, historically, the federal government will relax requirements when there is a natural disaster declared in a given region.
If the plan allows these types of withdrawals, making sure employees understand that they may have access in a time of need may encourage them to face their fear. It can definitely help them get out of a financial crisis and ease anxiety.
4. Promote the money-saving value of a flexible spending account
Employees may overlook the benefits of signing up for a flexible spending account (FSA) simply because they don’t realize the value in it.
Since money placed in an FSA account is use-it-or-lose-it money, some employees think they’re going to lose the money. But, with a little planning, the opposite is usually true. It’s an amazing benefit and so easy to use.
For example, employees know specific expenses they’ll have every year, no matter what. This could be a new pair of glasses, recurring prescription drug costs or copays, copays for regular doctor visits, etc. They can put pre-tax money away in an FSA, and when it’s time to fill a prescription, pay a copay or shell out money on new glasses, they can just use the money that’s available in their FSA.
Also, using the FSA eliminates the need for them to figure out how they’re going to come up with a chunk of money when they need to get that yearly eye exam and glasses. For instance, your employees will probably find it more convenient to have $35 deducted from their monthly paycheck, rather than pay $500 all at once for something they knew they’d have to pay for during the year.
FSA contributions are deducted before federal, state, social security and Medicare taxes are calculated. Employees save money by using their FSA contributions to pay amounts that they would otherwise pay with after-tax money from their pocket. When you educate your employees about the benefits of an FSA, you help them save money, therefore adding another layer of financial assurance.
5. Don’t forget about an Employee Assistance Program
From raising kids to caring for aging parents, everything costs money. And, for employees in the sandwich generation – where they’re raising kids and taking caring of their parents at the same time – money concerns are probably always top of mind.
It can be overwhelming – and sometimes, employees may just need help figuring out where they should start when trying to tackle life’s challenges.
Providing an employee assistance program (EAP) is a way you can help employees get the information and guidance they need. For example, when they’re ready to find out more about resources available to help them care for their parents, the EAP should offer access to elder care consultation services.
Or, maybe employees want to create a will and need legal advice. They can be referred to an attorney and get a consultation.
Furthermore, someone on your team may even be looking to adopt a child and wants advice on how to get started. The EAP can point that person in the right direction.
Best of all, consultations are free so employees don’t have to worry about spending money or time searching for guidance on their own.
Want to provide your employees with access to benefits that will give them peace of mind about their financial future? Download our free e-book, HR Outsourcing: A Step-by-Step Guide to Professional Employer Organizations (PEOs), and find out how a PEO can help you tailor a package that’s just right for your business.