A recent Bank of America survey found that many employees are feeling financially stressed and are “looking for more employer resources on financial wellness, emergency savings and debt.” Here’s a closer look at what the survey revealed and how you can take action to help your employees.
What employees are feeling and what employers are doing
According to the survey, only about one third (32%) of small companies offer financial wellness programs. This compares with more than half (54%) of large employers. Yet, workplace benefits in this area are increasingly a factor in retaining talent, with the survey finding that nearly a quarter (24%) of employees said they recently left or have considered leaving their company because their workplace benefits are lacking, up from 15% in 2023.
Employees are financially stressed:
- 56% have credit card debt
- 24% have student loans
- 45% lack emergency savings
What’s more, only 67% of employees feel confident they are financially prepared for retirement.
What can small employers do?
A question I posed in an earlier blog is whether employers should act in loco parentis (a Latin phrase meaning in the place of the parent) to see to employees’ financial wellness? As a practical matter, the answer is yes if they want to improve productivity, reduce absenteeism, avoid accidents, and retain valued employees. The following is adapted from that previous blog:
1. Provide ways for employees to get immediate cash
According to Bankrate.com, only 46% of U.S. adults have 3 months of emergency savings; 24% have no emergency savings. The lack of funds to cover unexpected costs—car repair, home repair, pet care, etc.—contributes to employees’ financial stress. Employers can do something about this:
- Offer earned wage access programs. Federal law doesn’t require any set frequency for paying workers, and state laws, which vary, usually only require weekly, bi-weekly, or twice a month (check with your state). Unfortunately, many employees can’t wait until payday. On-demand access for wages already earned can be handled through earned wage access (EWA) programs. A company contracts with a fintech provider to enable workers to claim their wages before payday. HiPeople listed the 5 best earned wage access providers and platforms for 2025. Caution: Having an EWA program may affect your payroll tax deposits and require you to revamp your payroll systems.
- Offer pension-linked emergency savings accounts (PLESAs). If your company has a 401(k), you can add a PLESA to enable the creation of a modest savings account that can be tapped penalty free. Funds can be drawn on a monthly basis. The DOL has FAQs on PLESAs.
2. Provide for employees’ health coverage
We all know how much health care services cost; insurance is essential for employees’ financial wellness. Small employers aren’t required by federal law to offer health coverage, but may want to do so. The cost of a group plan in the small group market may be pricey, but there are a number of other options to see that employees have health coverage.
- High-deductible health plans (HDHPs). These plans are considerably less costly than regular group plans. What’s more they can be combined with Health Savings Accounts (HSAs) that can be funded in whole or in part by employees.
- Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) are plans in which employers gives employees tax-free money to use for personal health insurance premiums; the reimbursements are tax deductible by the employer.
- Individual Coverage Health Reimbursement Arrangements (ICHRAs) Like QSEHRAs, these plans enable employees to buy their own coverage with tax-free dollars from employers.
- Claim a tax credit. If the company pays at least half the cost of coverage, the employer may be eligible a tax credit of 50% of premiums.
3. Help employees save for retirement
Many employees believe they’ll never have the financial wherewithal to retire because they can’t save enough money on their own. So, an employer’s qualified retirement plan is a big help in creating a secure financial future. Small businesses have many retirement plan options. Employers can contribute to plans, such as with matching contributions, to incentivize employees to make their own contributions.
4. Help employees pay for some things they want
Employees may not have the discipline needed to put money toward things they want or need. Employers can help by offering various payroll deduction options. The money is coming from employees’ paychecks; the employer is simply facilitating the payments. For example, pet insurance is being touted as “the next big win for employee benefits.”
5. Provide access to financial wellness programs
A financial wellness program educates employees about how to better manage their personal finances, including budgeting, paying off debt, building credit, and creating an emergency fund. Helping employees get a better grip on their money by improving their financial literacy can ease stress and anxiety, which in turn can make them healthier and better able to perform on the job. Paychex has extensive information on financial wellness programs.
Final thought
Helping to relieve employees’ financial stress can pay off big time for small employers:
- Reduced turnover. Workers are less likely to seek a new job.
- Improved productivity. Workers are less distracted by their personal money woes.
- Less absenteeism. Chronic stress can produce anxiety, depression, and physical health problems (e.g., hypertension). By easing financial stress, it makes sense that these issues can be minimized or avoided.
- Fewer workers’ comp claims. Employees who are stressed are more prone to accidents, so less stress means fewer incidents.
- Greater workplace moral. If employees feel supported by their company, they’ll have a more positive attitude and the company’s brand can be enhanced.
Check your budget and work with experts to craft a benefits program that enhances employees’ financial wellness and helps your company.
More about employees’ financial wellness can be found in this list of blogs.
