Employee Financial Wellness
Most people or employees think that having more or a salary at the end of the month is enough to be financially healthy.
However, the World Health Organization (WHO) defines health as a “not merely the absence of disease, but a state of completeness in terms of the mental, physical and social well-being.”
Therefore, these sets of complex of environmental and psychological stress factors may influence behavior and productivity at the workplace.
What people think about Financial Wellness in the Work Place
In one of our most recent roundtable HR discussions in Florida, the issue of employee financial wellness sparked so much debate.
However, from the responses of the participants, it was evident that the issue of employee financial wellness has not been adequately addressed.
Consider a sample of the answers of the participants who were asked to define or comment about the issue.
Maggie’s response “as long as employees are well remunerated, they are financially healthy and motivated to work.”
Adam’s response “the employer’s responsibility is to pay their employees, but the burden of managing their finances is their business.”
Mary’s response “an employee’s financial wellness does not have any relationship with the employer because everyone knows their boundaries.”
Costs of Employee Financial Wellness
From the responses above, it is clear that people have different views about employee financial wellness.
However, it’s fundamental to understand that, employees’ personal financial problems manifests in various magnitudes to the organization.
Some of the associated costs of financial problems include absenteeism, low morale, stress related conditions, and poor quality of work output.
Furthermore, the lack of employee financial wellness can have both direct and indirect productivity consequences. Besides, it can affect the family, marital relationships, physical and emotional health.
Research Studies on Employee Financial Wellness
In a recent study carried out in Florida State by Garman, Leech and Grable found that, approximately 35% of employees have personal financial problems that negatively impacts on their productivity at work.
This is because most employees have been pushed into debts, forcing them to work for long and additional hours to ensure that they earn overtime payments.
In addition, the soaring interest rates, high mortgage loans, and the ever increasing costs of fuel, food and education have resulted in increased demands for upward salary adjustments.
35% of employees have personal financial problems that negatively impacts on their productivity at work
In 2012, a study commissioned by the automotive industry in California found that 25% of the industry’s net pay was absorbed by financial service providers such as insurance companies, banks and others.
In the study, 60% of the participants affirmatively responded that the lack of financial knowledge was the primary cause of their debt.
Interestingly enough, 70% of the respondents cited personal financial problems were the result of living beyond their means.
In view of the above studies, it is evident that the absence of employee financial wellness negatively impacts on production.
However, it is quite appalling that most organizations adopt the “Ostrich approach” in addressing the employees’ financial problems.
Since most employers “stick their heads in the sand” hoping that workers will sort themselves out, the bleeding goes on as manifested in low productivity, absenteeism and high cases of turnover.
Most employees are reluctant to ask personal financial questions
Most organizations have tried to use the “training approach” to address their employees’ financial challenges.
These include organizing for seminars, workshops and partnering with other relevant institutions that offer financial trainings.
Although, significant progress has been recorded, it has been noted that the short training sessions do not have adequate content to address the impending challenges wholesomely.
In 2009, the training conducted by a leading financial institution called Ernest and Young in South Africa; found that most employees were reluctant to ask personal financial questions.
Besides, the training approach was rigid, lacked systematic monitoring and evaluation systems, hence making it difficult to know and solve financial problems.
The Remedy – A Comprehensive Financial Wellness Programme
One of the best tried and tested ways of addressing the problems of employee financial problems is the use of a comprehensive wellness programme.
This approach makes use of Procare Psychosocial services and a wellness provider.
In 2008, the German Development Cooperation partnered with the University of Pretoria and applied the Comprehensive Financial Wellness Programme to 200 employees at BMW.
This involved spending an average of 5-6 financial counseling sessions (70-100minutes) on each employee.
Over a two year period, employees who were involved in the programme achieved a total debt reduction rate of 60% and 65% in the number of creditors.
Therefore, from the HR perspective, a financial wellness programme should be individualized and customized to suit the unique needs of each employee.
This is because a training approach based on education alone may not be sufficient to change financial behavior.
For this reason, a one-on-one counseling to develop financial life skills is an essential part of the programme, which is likely to produce a return on investment or more in increased productivity and reduced costs.