Employers: Your current employee financial wellness program is not enough
Over the last few years, the perceived importance of financial wellness benefits for employees has been steadily growing. There have been a number of research efforts that have concluded the same thing — financial wellness benefits are critical for employees for their overall well-being; and crucial for employers to hire, retain, and develop a productive workforce.
While employers recognize this for the most part, the efficacy of their programs is a constant source of disappointment for benefits and people leaders: Not enough employees use their financial wellness benefits as the leaders would like. This is an especially pronounced issue among the middle-income employee population — those who actually need these benefits the most.
For example, a large industrial manufacturing company has a generous 401(k) match program for all their employees regardless of job function. They make enrolment easy, they adequately communicate about these plans during enrolment season, and they hope that employees take advantage of this program. Yet, take-up of this benefit among the middle-income population is <10%.
The disappointment among HR leaders is understandable.
Our employees are leaving money on the table. I wish we could convince them to use the benefits they already have access to.
— Chief HR Officer, F500 manufacturing company
But why these disappointing results?
Because the financial wellness program is not doing enough for employees.
It sucks to hear it; but its true.
But why is it not doing enough? What is it missing?
After having spoken with more than 100 middle-income employees, we have found that there are 2 themes for why this is a somewhat inevitable outcome:
- There is a mismatch between what is being offered and what employees perceive as needed
Most employers offer a 401(k) plan, many offer a 401(k) match, many offer on-demand financial education and/or planning, some of them offer safety net insurance such as short/long-term disability…
Very few of them offer products to save for emergencies, support for short-term liquidity needs, habit-building products to save and invest, or active education and coaching in personal financial management to learn by doing
2. There are psychological barriers to leveraging benefits that are already offered
Vast majority of middle-income employees are stressed due to their finances. In this situation, most programs force them to learn on their own time; make smart, logical decisions about money management; take actions consistent with those decisions; and be consistent in these actions.
Psychology research has shown that these things are hard for anyone. And for people who are already stressed about money, the need to do these things on their own can be crippling, which it often is.
So how can we overcome these difficulties?
A slightly different framework for financial wellness benefits might be a good start.
Consider employees’ near-term as well as long-term financial health. Help them manage their day-to-day in addition to planning for their retirement.
Assistance focused mostly on the far future is no longer enough.
In addition, focus on solutions that build habits with little to no effort from your employees. Give them access to platforms that take less energy, time, and focus — this is key to helping them build and stick to good money habits.
At River, we are building an end-to-end financial wellness platform starting with products that help employees achieve near-term financial health. We know this is a gap at most employers, and we want to help.
And we’re building these products to fully automate your employees’ financial wellness journey. The less effort from them, the more they’ll stick to new habits and build wealth over time.
If you’d like more information on how we can help, please reach out to our cofounder Santosh at santosh@getriver.co.
