What Should You Keep In Mind to Shape Better Employee Financial Well-being Plans?

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By Tom Kelly Last updated Sep 2, 2020

Financial distress in the American workforce is amongst the highest in the world. Employers recognize that their employees need help addressing their near-term financial stability. Otherwise workers can’t adequately focus on longer‑term life goals, including preparing for life after work. The question is, what is the best way to implement financial well-being programs so that they’re effective in meeting these needs?

As always, start with the analytics

Differences in the financial outlook employees face can vary drastically across demographic and generational groups, so when HR leaders look to develop or enhance their financial well-being plans, they need to align those plans with the current needs of their employees. For example, respondents to Buck’s 2020 Financial Well-being survey agree hourly employees and Millennials are top targets for financial support. Data shows these employees struggle unnecessarily to move up and have the highest levels of financial stress.

That’s why it’s important for organizations to conduct a workforce data analysis review. Employers can use demographics, 401k data, wage garnishments, stress-related claims, EAP data, employee listening, and even de-identified third-party data from credit bureaus.

Using this data and predictive analytics, employers can identify top financial stressors and create employee segment profiles or personas. This allows employers to build holistic financial well-being programs around these personas, setting their employees up for continued financial success, while at the same time advancing their own organizational goals.

Adopt a financial “roadmap”

In the past, many HR leaders simply focused on retirement readiness to address employee financial well-being. Buck’s 2020 survey shows priorities have changed. Budgeting, saving, credit card debt, and unexpected expenses were all ranked as top priorities. Only 38% of respondents listed “retire when ready” as their top financial well-being priority.

So to encourage long-term planning and address short-term barriers to financial success, the financial well-being plan should adopt an overarching roadmap.

Roadmaps make it easy for any employee to know where they are and what steps they should take next. Examples of steps in a roadmap may include:

Save a one-month emergency fund
Pay off bad debt
Grow emergency fund to cover 3-6 months
Contribute up to 15% of gross income to retirement
Save for children’s college
Build wealth and give

Implement personalized guidance

HR leaders acknowledge that poor short-term choices can have a lasting impact on financial health, including retirement. Moving employees from financial instability to stability and, ultimately, to enhanced financial well-being, requires removing short-term barriers such as student loan debt and paycheck-to-paycheck issues.

Yet only 17% of consumers use a financial advisor. Implementing financial advising and coaching in the plan gives employees the “doctors” and “personal trainers” that turn a generalized program into an employee’s personalized plan. However, traditional financial counseling tends to focus on retirement planning and doesn’t meet the needs of today’s younger and lower-paid employees. Impactful financial coaching models focus on behavior change, providing clear direction, encouragement, accountability, and even real products like paycheck-linked loans or bill negotiation to support a short-term crisis.

Complement internal programs with voluntary benefits

As with most benefits, an effective financial well-being program can’t simply be applied “off-the-shelf”. While standard financial literacy and coaching can help employees with basic budgeting and debt reduction needs, employers agree that new and evolving voluntary benefits help provide the flexibility and choice needed to overcome personal finance challenges. That’s why 91% of employers agree that voluntary benefits support financial well-being and nearly two-thirds plan to expand in the near future. Today’s menu of voluntary benefits is quite different than the past and includes programs like financial coaching, budgeting tools, early wage access, bill negotiation/pay services, emergency savings, short-term loans, college savings, unexpected medical protection, and professional credit counselling.

Get the right tech

Technology plays its role of course, but employers are looking at deploying it differently. Artificial intelligence and robotic technology can help anticipate the right mix of plan elements for an individual and help guide them to the appropriate selections. Even with education, making benefit choices is painful. Decision support platforms make personalized recommendations and help communicate financial benefits using basic terms to simplify the decision. This can help employees meet both short-term and long-term financial goals and remind them of opportunities to best use the programs they selected through the course of the year.

Be patient

Constructing a truly effective financial well-being program takes years – and as we’ve seen, over time situations change. Be patient. Select one solution at a time and make sure each one builds on the last. Avoid letting vendors suggest that their product alone solves the problem. Instead, learn how a solution works and decide if and how it fits into your overall vision. Continually assess program effectiveness, perform program and vendor audits, measure results, and refine the program.

Employers are now truly seeing how financial well-being is contributing to organizational effectiveness They see these broader, more targeted offerings as contributing to a stronger social contract with their employees. That in turn can encourage employees to come, stay, and be motivated to actively contribute to the organization’s success – with fewer impediments in work and life.