The financial wellness of U.S. employees has declined by 10% since 2021, according to the 2023 Workplace Benefits Report from Bank of America. Factors such as rising interest rates, inflation, economic uncertainty and stagnant wages have all taken a toll. But who’s responsible for helping employees bounce back?
Most employers (96%) and employees (76%) agree that the responsibility falls on employers. Relief, however, doesn’t have to come in the form of pay increases. Financial wellness benefits are growing in popularity as an additional way to attract, retain and deliver value to employees.
Financial Wellness Benefits Are Poised for Growth
Financial wellness benefits made a comeback this year, according to Wellable’s 2023 Employee Wellness Industry Trends Report. The majority of employers (65%) said they planned to increase their investments in financial wellness programs. Large organizations were the most likely to do so (72% planned on it), followed by 68% of medium-sized companies and 50% of small employers.
“Understanding the financial stress employees face and its impact on their overall well-being, more and more organizations are embracing financial wellness programs as part of their employee benefits packages,” says Andrew Pickett, lead trial attorney and founder at Andrew Pickett Law in Melbourne, Florida.
Looking beyond this year, the U.S. financial wellness benefits market is expected to grow at a compound annual growth rate of 20.4% from 2022 to 2028, according to Research and Market’s Industry Outlook and Forecast report. At that pace, the market will increase from $0.62 billion to $1.89 billion by 2028.
“The reason behind this growth is simple — employers have realized that financial stress affects not just the employee’s personal life but also their job performance and productivity. By offering financial wellness benefits, employers invest in their employees’ overall well-being and create a positive work environment,” Pickett says.
[Related:How to Manage Money Stress]
What Financial Wellness Benefits Are Employers Offering?
Employers are offering a variety of financial wellness benefits that suit employees in different situations.
“A multi-generational workforce has a wide range of financial challenges. Employees are facing student loans, child care costs, children in college, retirement, medical bills and caring for elderly parents. Many times, employees manage more than one of these challenges on top of a mortgage or rent and inflation,” says Amy Marcum, manager of HR services at Insperity.
Here are a five financial wellness benefits leading the way:
1. Employer-Sponsored Retirement Plans
Employer-sponsored retirement plans can help to ease the financial stress that stems from retirement planning. The majority of employees (61%) say they feel somewhat or extremely confident that investing in an employer 401(k) plan and other retirement savings accounts will help them build enough savings to reach their retirement goals, according to the Bank of America report. And good news — they’re widely available.
[Read: How to Maximize Your 401(k) Match.]
More than nine in 10 employers offer a defined contribution retirement plan and 84% offer to match contributions, according to SHRM’s 2023 Employee Benefits Survey.
Defined contribution retirement accounts, such as 401(k), 457(b) and 403(b) plans, let employees contribute pretax dollars that grow tax-deferred until retirement. 401(k) plans, in particular, have become expected by many. In a recent study by Charles Schwab, 88% of employees say it’s a must-have benefit, while 75% of those respondents would actually refuse a job if it wasn’t offered.
Post-tax employer-sponsored retirement plans like Roth 401(k)s are gaining popularity as well. They’re offered by 71% of employers and 74% of those match contributions, according to SHRM.
A portion of the Secure 2.0 Act, which takes effect Jan. 1, 2024, will also allow employers to treat qualified student loan payments as elective deferrals for the purpose of matching contributions,” Marcum says.
She adds that now employees won’t need to make the decision regarding whether to contribute to their 401(k)s or make student loan payments. Employers can make matching contributions based on the amount of money an employee pays toward their student loan.
[READ: Jobs That Still Offer Traditional Pensions]
2. Safety Net Insurance
Life and disability insurance policies, also known as safety net insurance, can help to grant employees peace of mind and financial security.
Life insurance helps employees leave behind a death benefit to loved ones when they pass away, while disability insurance provides financial benefits in the event the the employee becomes disabled.
The majority of employers (89%) offer this coverage to all employees, according to a report by SHRM and Morgan Stanley, and 54% of working Americans say it’s one of the most important employee financial wellness benefits.
3. Emergency Expense Help
While fewer employers offer emergency expense benefits, they can be helpful for the many employees who don’t have an adequate emergency fund.
Only 63% of U.S. adults say they can cover a $400 expense using cash or its equivalent, according to the Federal Reserve’s 2022-2023 Report on the Economic Well-Being of U.S. Households. The remaining 37% would have to borrow or sell something to cover it.
Emergency expense financial benefits like emergency savings accounts (ESAs) and payroll advances help employees bridge financial gaps. With ESAs, employers help employees build emergency funds through automatic deposits from their paychecks. Payroll advances, on the other hand, give employees on-demand access to their earned wages before payday — often for a small flat fee.
4. Financial Education and Planning
Employers are also making financial education and planning services available to employees. The majority of employees (74%) seek financial guidance when making financial decisions or dealing with crises or life events, according to PwC’s 2023 Employee Financial Wellness Survey, and 68% say they use their employer’s financial wellness services such as coaching, workshops or online tools.
“Financial planning is a vital workplace benefit option as our overall well-being concerns more than only our physical health. And with increasing inflation, financial planning and wellness resources should be accessible to individuals of all income levels, not just the wealthy,” says Seth Besse, CEO of Undivided, a caregiver support platform.
5. Help With Other Living Expenses
There are many other benefits that can help reduce an employee’s cost of living in different ways.
Employers may, for example, offer a health savings account (HSA), caregiver support, day care subsidies, legal assistance, college fund assistance or funds to pay off student loans.
If you’re in the market for a new job, be sure to review and compare the benefits packages carefully, as they can add considerable value to your compensation package.
“The best advice I can give employees is to take advantage of these benefits and actively engage with them. Financial wellness benefits are designed to educate and empower individuals to make informed financial decisions, which can ultimately lead to improved financial health,” Pickett says.
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