Employee Financial Wellness Program: What Is It and How Can It Benefit Small Business?

Financial well-being is a complex topic, with living expenses, debt, and healthcare costs all on the rise. Add to that the ongoing financial impact of the COVID-19 pandemic and the rise in inflation, and you may have employees more stressed about money than ever before.

With heightened concerns around finances, there's a strong possibility that your staff would positively embrace an employee financial wellness program. Regardless of how well-compensated your staff may be, this type of resource can help them feel more financially confident and prepared for the future.

What Is Employee Financial Wellness?

Financial wellness or well-being refers to an employee's overall financial health and knowledge, paired with the absence of money-related stressors such as unforeseen expenses. What does employee financial wellness mean for businesses? How well an employee can manage money impacts their morale, engagement, and productivity while at work — factors that can all impact the business significantly.

Why Is Financial Wellness Important?

Many employees may be experiencing unexpected bills, little or no savings, and the need to take a second job, all factors that can lead to financial stress. Your workers' worries could compound even further due to a lack of financial knowledge or a basic understanding of money matters in the first place.

Employees who have their finances in order (the ability to pay bills on time, have savings and emergency funds set up, etc.) are often in a better position to put their energy and focus on work, be more engaged, and stay productive. On the other hand, an employee who struggles financially may be unproductive if they have to deal with money matters during work hours. They may also be frustrated or disengaged, which can cause a ripple effect throughout the rest of your staff.

What Is a Financial Wellness Program?

To help combat stresses around money matters, employers may want to implement a financial wellness program for employees. These programs are aimed at educating employees to help them manage their money and reduce financial burdens. Financial wellness programs may include features such as personal financial coaching on specific topics, online education, budgeting tools, credit resources, alternatives to traditional banking, and flexible access to earned wages.

Examples of How Employee Financial Wellness Programs Can Help Employees

A financial wellness program can help employees with a variety of financial challenges. These can range from saving for a major life event — a wedding, first home, education, or retirement — to managing everyday expenses such as bills and debt payments. Employees may also struggle to understand the importance of having savings, and they may only fully understand the ramifications of this when they experience an emergency.

A lack of financial knowledge can hold anyone back. Left with few reliable resources like where to find information and get financial questions answered, your employees may continue to struggle. As diverse as your employees are, so too are their levels of financial knowledge. Common topics employees often need help with may include:

Household Budgeting

This could include creating a budget for the first time, getting expenses under control, and setting realistic goals for a household budget.

Managing Credit and Debt

Workers may want to better understand how credit works, credit score factors and credit history, student loans, refinancing, bankruptcy, and creating a personal financial strategy.

Investing

Investing topics may include planning for retirement, understanding different types of accounts available, and best places to get started based on age and goals.

Saving

Employees may be looking for help developing money-saving tips and strategies, creating an education savings plan, and how to choose between saving and investing.

Taxes

This includes how to reduce the risk of tax-time errors, understanding deductions, and tax breaks for education, moving, and homeownership.

Insurance

Your workforce may be looking for different types of insurance, life insurance options, and the details of long-term care and disability insurance.

Banking

This could include spending and savings account options with the ability to access money securely online.

What Are the Benefits of Employee Financial Wellness Programs?

Financial wellness programs can have an immediate impact on employees' money issues. More broadly, it can also have a long-term, positive impact on their contributions and engagement at work.

Traditional financial services often fall short in meeting the needs of everyday workers. Michael Woodhead, Chief Commercial Officer at FinFit, highlights this gap by stating, "Middle-class Americans don't have access to financial services. The LMI community is not served by the banking world." This underscores the necessity for financial wellness programs that offer alternative solutions, such as competitive financial services and earned wage access.

Help Employees Reduce Stress

You may offer benefits that encourage healthy habits, but financial challenges can be a significant source of stress for employees. When team members face rising stress levels, it can have a negative impact on both their performance and productivity. Having adequate support can help employees manage stress and solve problems.

Reduce Absenteeism

An employee struggling with a money issue may need to take time off to handle the problem or simply be too overwhelmed to focus on anything else. An effective financial wellness program aims to help employers mitigate absenteeism rates, since this can cost a small business in the form of lost productivity, and the impact it has on remaining team members.

Improve Employee Productivity

Financial stress is a silent productivity killer in many workplaces. Woodhead points out, "The ravages of financial stress on an individual can lead to increased levels of absenteeism and presenteeism," directly impacting a company's efficiency. Implementing a financial wellness program can help alleviate these pressures, allowing employees to focus more on their work and less on their financial worries.

Form a Stronger Personal Bond With Staff

An employee financial wellness program can be customized to address specific financial issues your employees may face at any given time. Survey your staff anonymously and ask what topics such a program could address to boost their financial confidence.

When you receive feedback about the topics of interest, structure the timing of programming to align with your team's personal financial goals and realities. For example, employees may express their need to build up savings in an emergency fund. The financial wellness program can offer introductory resources on how to create a budget or steps for setting up a savings account. The more relevant your financial wellness initiatives are to your staff, the more your business can benefit from it.

What Other Ways Can Employers Help Employees Enhance Their Financial Wellness?

In addition to offering a financial wellness program, employers can consider offering the following benefits and resources that may help them make better money management decisions.

Split-To-Save Feature Through Direct Deposit

If you offer direct deposit, you can encourage better saving habits with a split-to-save feature. This allows employees to designate a fixed portion or percentage of their paycheck each pay period into a designated account.

Auto-Enrolling in a 401(k) Plan

Offering a retirement plan is a powerful way for employers to help employees automate contributions for their non-working years. An auto-enrollment feature in a 401(k) plan takes this a step further: Eligible employees are automatically enrolled in the company's plan at a default contribution rate — streamlining the enrollment process and still giving them the option to opt out if desired.

Employee Assistance Programs With Financial Wellness Services

An employee assistance program (EAP) can help employees resolve a variety of different issues that might adversely affect their work performance. From financial challenges to resources that assist in handling stress, an employee assistance program provides a confidential source that employees and their families can use to find support. A mentally healthy workplace is good for business, so consider taking steps today to improve the mental health of your employees.

Student Loan Assistance

Under SECURE Act 2.0 in 2024, employers will be allowed to make matching contributions to an employee’s 401(k) per their plan provisions when an employee makes a student loan repayment. This holds a two-fold benefit for employees, who can continue paying off student loans while saving for retirement .

Employee Wellness Program

This is an employer-initiated approach to improve employee health and wellness by supporting and encouraging healthy behaviors. A wellness program may offer education, wellness challenges, biometric screenings, and anything else that can help staff make better lifestyle choices. While this isn't a replacement for insurance, wellness programs are geared toward making proactive health decisions, which could help curb costly medical conditions down the line.

Earned Wage Access

Allow your employees to get paid early to handle emergencies without waiting for payday.

Safwan Shah, founder and CEO of Payactiv, emphasizes the role of earned wage access in supporting financial wellness, explaining, "Offering pay on demand is a declaration to your employee that I know and I care." This benefit helps employees manage unexpected expenses without waiting for payday, fostering a sense of trust and understanding between employers and their workforce.

How Much Does a Financial Wellness Program Cost?

Not all financial wellness programs are alike, and businesses have different budgets to devote to such a resource. As diverse as your employees are, so too are the gaps in their financial understanding. As such, the costs of a financial wellness program can depend on many factors, including company size, how much you want to customize the program, account management and support features, and whether you want employees to be able to access advisors or personalized help. You may also want to check to see whether a third-party provider you already use, such as a payroll service, offers financial wellness resources as part of its services. This can help with overall benefits budgeting.

How To Start an Employee Financial Wellness Program

If you're limited in the number of employee benefits you can offer job candidates and employees, don't underestimate the power of providing resources such as financial wellness solutions, which can make a lasting impact in your employees' lives. At no cost to them, Paychex clients can take advantage of offering a curated, digital marketplace to employees so they can access affordable personal, professional, and financial benefit options to fit lifestyle needs and support their financial goals.