Part 1: Defining Employee Financial Wellness

Employee financial wellness has emerged as a critical component of modern workplace benefits, addressing the reality that financial health directly impacts both individual performance and organizational success.  To mitigate the harms, employers are more focused on adding financial wellness benefits as they look to help support employees in ways other than increasing compensation. 

• 96% of employers feel responsible for their employees’ financial wellness, only about 40% actually offer a formal financial wellness program

Financial Wellness is a broad term which can include a myriad of programs, some of which can exacerbate the existing challenges. What exactly do we mean when we speak of employee financial wellness, and why should HR leaders prioritize our services as part of their benefits strategy?

Employee financial wellness refers to the overall financial health and security of your workforce. It encompasses employees' ability to:

• Meet current financial obligations without stress
• Build emergency savings for unexpected expenses
• Plan and save for future goals like retirement or major purchases
• Make informed financial decisions with confidence
• Access financial resources and support when needed

“Offering comprehensive benefits and wellness programs can be critical for employers looking to reduce attrition, can empower employees to take control of their personal finances, and improve employee satisfaction,” said Lorna Sabbia, Head of Retirement and Personal Wealth Solutions at Bank of America.[source]

In the 1980’s, most employers offered defined benefit (DB) pension plans, with little need for individual financial planning. Financial education wasn’t prioritized—retirement was employer-managed. Few employees thought about long-term savings independently.

In the early 2000’s, the dot-com bust and Great Recession (2008) exposed the fragility of personal finances. Employers realized that financial stress = productivity loss, so HR departments began expanding the mandate of “benefits” beyond retirement. 

Beyond retirement planning included:

• Credit counseling
• Budgeting
• Debt management
• Student loan education
  
  

The modern view of financial wellness provides comprehensive financial care to meet employees in the moments they need support most, and help them plan for those moments before they occur. In the last decade, with increasing emergencies and stresses facing employees, from Covid-19 to natural disasters, financial security is an even bigger challenge. 

Financial wellness of today recognizes that employees face diverse financial challenges throughout their careers—from managing student loans and building credit to navigating major life transitions like marriage, parenthood, or career changes. Retirement advisors alone cannot provide the 1:1 support needed to meet each employee’s needs, so financial wellness solutions must now scale to meet the demand of the populations they serve. 

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