When it comes to financial matters — handling debt, saving for a home, saving for retirement, etc. — most employees are clueless.
One report found that three quarters of employees are not financially secure, and the majority (60%) is feeling stressed about their financial situation.
This situation surely impacts you adversely through employee distraction, illness, and in extreme situations, theft.
What can you do to help your employees gain financial wellness?
Become the teacher
Earlier this month CNN had an article entitled: “Sex Ed is Required. Why Isn’t Financial Education?” Others can ponder the answer, but employers should help to fill the education gap where possible. This doesn’t mean holding classes on debt management or retirement planning, but it does mean helping employees to address certain key financial concerns.
Provide health coverage
Having adequate health coverage goes a long way in avoiding financial catastrophe when accidents and illnesses occur. Even if the law does not require you to offer coverage to your staff because you have fewer than 50 full-time and full-time equivalent employees, it makes good sense — morally and financially — to provide coverage to the extent your budget allows.
Explain to employees how your coverage offering works: what the plan covers, what the cost will be to employees, etc. Make explanations available in multiple ways: group explanations, written statements given to employees, options for personal explanations by a manager, benefits person, or you (the owner).
Contribute to retirement plans
At present, private companies aren’t required to offer any retirement plans. This may change soon with some states mandating certain coverage. However, having a retirement plan offers employees the opportunity to save for the future on a tax-advantaged basis. For example, if you have a 401(k) plan, their contributions (withheld from their compensation) are not currently taxed.
You can encourage savings by:
- Offering a plan and explaining how it works. For example, you can use an automatic 401(k) in which contributions are automatically made at a fixed percentage of compensation unless an employee opts out or chooses a small contribution amount. If you can’t afford to offer and maintain a plan, at least set up a payroll withholding option for employees to make contributions to MyRAs.
- Making employer contributions. Depending on the type of plan, you may or may not be required to make contributions. If you offer matching contributions, your employees need to know who to optimize their contributions in order to earn free money (your contributions).
- Explaining the savers credit. Employees with income below a set amount (depending on their tax filing status) can qualify for a federal tax credit to further reduce their income. In other words, they can avoid current tax on compensation AND receive a tax credit.
Financial wellness programs
Some large corporations are now offering these programs as the new employee benefit. These programs provide financial education to employees.
Small businesses that want to offer this type of benefit but can’t afford outside advisors or structured financial wellness programs, can still be helpful to employees. The report referenced earlier found that 70% of millennials want information online; you can provide a list of links that are useful in financial education.
Here are my picks:
- AICPA’s Feed the Pig. This site helps with budgeting, managing debt, and planning ahead.
- Bank of America and Khan Academy’s Better Money Habits. This online guide offers help with creating an emergency fund and managing money.
- CNN’s Money Essentials. These are online guides to such topics as starting to invest and buying a home.
- National Endowment for Financial Education’s Crash Course. This online program is geared to students but can be used by anyone to learn about real-life money.
Conclusion
It seems that today employers are acting in loco parentis (in the place of a parent) to provide an array of finances-related assistance in order to attract and retain the best employees. Some are helping employees pay off student debt; others are paying for retirement advice.
As a small business owner, understand the financial stress that some of your employees are feeling and do what your time and budget permits to help alleviate their concerns.
