When employees feel financially secure, they can be more engaged, focused, productive, and loyal workers.
But simply offering a variety of financial benefits may not be enough to let all members of your workforce actually achieve financial wellness. And that’s especially true in the wake of the pandemic.
So what are you doing right? And what can you improve?
Measuring financial well-being can help you answer those important questions.
Why Measure Financial Wellness and Why Now?
“A person’s financial well-being comes from their sense of financial security and freedom of choice – both in the present and when considering the future,” according to the Consumer Financial Protection Bureau .
A SoFi at Work analysis of the Bureau’s 2017 National Financial Well-Being survey of more than 14,400 respondents shows that over 50% of American workers are financially vulnerable, with 40.9% financially precarious and 11.4% financially distressed.
More surprising? The employees in these categories are not always the ones you might expect. Sixty percent of those surveyed who felt financially vulnerable and were employed were making more than $75,000 a year. And 50% of the same group had earned at least a bachelor’s degree.
More recently, the pandemic has impacted some workers’ ability to save for retirement, according to results from the Employee Benefit Research Institute’s 2021 Retirement Confidence Survey of 3,017 American adults. Three in ten workers said reduced hours, lower-income, or job changes due to COVID-19 have affected their retirement savings.
As an HR professional, you may want to take the measure of financial well-being in your workforce. Doing so can let you see firsthand the financial struggles your employees may be going through, how those struggles connect to business outcomes, and how your Total Rewards strategy can help.
How to Better Understand Your Unique Workforce
Measuring financial well-being will allow you to determine what segments of your workforce are suffering the most. It can also help you figure out what you can provide to help all your employees move forward. For many employers, that’s a two-part process.
1. Wage Assessment
Many employers start this process by assessing wages. No doubt you’ve compared your wage and salary decisions against competitors’ offerings, the local labor market, and industry averages. Indeed, you may be paying above the industry standard. But it’s important to remember that even above-standard wages don’t ensure financial wellness. Your workers may still be struggling.
With that in mind, you may want to compare your company’s wages against what constitutes a local living wage in the areas where your employees work. MIT’s Living Wage Calculator may be able to assist you with this. This tool helps determine how much money a person in a specific area needs to earn to cover basic expenses and how much that person has leftover for disposable income, including saving for the future. This may be a more realistic gauge for all levels of your workforce when assessing wages and determining financial well-being.
2. Self-Assessment Survey
The next step is to gather input from your employees. If you haven’t already, you’ll want to design an online financial wellness assessment survey and encourage all employees to participate.
An effective self-assessment survey analyzes four pillars of financial security.
Spending: With these questions you’ll find out how many employees are spending beyond their incomes either because they have expenses that are higher than their income or because of bad spending habits. By asking how long employees think their money would last if they suddenly lost their income, you’ll also collect data on how many of your employees are prepared for an emergency.
Saving: Retirement savings will likely dominate this section. How many employees are participating in your organization’s 401(k) or other retirement savings programs? How much of their annual income are they saving? Are they taking advantage of any match? Do they have an idea of how much they’ll need to save for retirement?
You’ll also want to find out how much your employees are saving for other goals such as emergency savings funds, college tuition, or a home down payment. This may be especially important if your benefits package includes other types of savings programs in addition to retirement.
Debt/Borrowing: Here’s where you want employees to ‘fess up to credit card debt, mortgages, student debt (their own or their children’s), and personal loans. Assessing debt is a vital element for financial wellness. Some leverage, such as a mortgage or tuition loans, can be useful financial wellness tools. But credit card and other debt can be among the biggest obstacles to financial well-being.
Planning: Questions concerning employees’ purchase of life insurance and disability income insurance can paint a picture of how well-protected they are – an important element of financial wellness. This is a good place to ask if employees have set financial goals for the future and if they’ve worked with a financial counselor to do so. You’ll get a sense of what percentage of your employees are looking forward while still taking care of short-term needs/desires. Importantly, this will also let you know how much of your workforce is engaging with the financial planning tools you may be offering.
Depending on your workforce and your goals for the assessment, you may also want to include more subjective elements in your research, such as employee diaries or interviews. This can add human stories to the data collected and help inform new benefits going forward.
Sofi at Work offers a comprehensive benefits assessment tool that can be customized to your workforce.
Measuring Financial Wellness Empowers Employees
When employees take a smart, well-written, and well-designed assessment survey, they’re not just providing information to their bosses, they’re also thinking through their own financial wellness strategy.
Incorporating an interactive tool that gives immediate feedback can help employees identify their status as they emerge from the pandemic and balance their short- and long-term financial goals.
Providing a one-on-one meeting with a financial planner or other expert for each employee to have after completing the survey encourages your workers to take action with their newfound knowledge and further enhance their overall financial wellness. (It can also prompt more willingness to take the assessment among employees.)
Measuring Provides a Compass for Your Financial Wellness Benefits
You’ll also want to analyze your own data on the benefits you’re currently providing to determine how well they’re contributing to employee financial wellness. A comprehensive look at who is using what benefits–including everything from health insurance to 401(k)s to paid parental leave and student loan assistance–and what employees are paying for or contributing to those benefits, can unlock details about access and participation among all levels of your workforce.
A benefit analysis combined with a wage assessment and employee financial wellness survey helps provide a deeper understanding of gaps in your Total Benefits strategy, areas where employee engagement and education are needed, and what new tools and programs might enhance financial well-being among your workers.
Measuring your employees’ financial well-being now, can lead to the design and implementation of benefits that will enhance financial wellness for all of your employees in the future.
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