Financial Stress and Employee Performance: Retirement Savings to Boost Productivity

Financial Stress and Employee Performance: Retirement Savings to Boost Productivity

This article was updated on August 27, 2018.

Financial stress and employee performance are inextricably linked. HR leaders know well that employees who are worried about their finances bring a litany of problems into the workplace every day. According to PwC, a major part of that stress is related to saving for retirement, with only 43 percent feeling "confident they'll be able to retire when they want."

The report also indicated that stress is negatively affecting productivity, with 37 percent saying "that at work each week, they spend three hours or more thinking about or dealing with issues related to their personal finances," and 20 percent reporting that "issues with personal finances have been a distraction at work."

Benefits and Employee Satisfaction

According to the Society for Human Resource Management, 60 percent of employees rated benefits as a "very important" factor in job satisfaction. In addition, the study showed that benefits have been one of the "top five contributors to job satisfaction" for over a decade. In a landscape of delayed retirements for more financially unprepared employees, retirement benefits are quickly moving front and center as an invaluable engagement and retention tool.

Fuduciary Considerations

Although there will be upfront costs involved, providing retirement benefits ultimately helps you attract the best talent, retain your high-performers and foster a more productive work climate, where employees focus more on adding value and less on stressing about their finances.

The ADP Research Institute® white paper, Retirement Savings Trends, quotes a MetLife study that says: "52 percent of employees view retirement benefits as a driver of loyalty toward their employer. Additionally, "employers can leverage retirement benefits to enhance their ability to retain and motivate skilled workers," and "reduce the financial stressors that can depress performance."

Despite these findings, the report found that only half of all organizations surveyed offered retirement benefits of any kind.

Organizational and Employee Trends in Retirement Savings

The following trends in retirement savings from the ADP white paper highlight opportunities for organizations to better engage their talent:

1. Size matters

The report found that a direct correlation exists between the number of employees and an organization's likelihood to offer employee-engaging retirement benefits. For example, among small businesses with less than 20 employees, only a third of them offer a retirement savings plan, whereas 98 percent of companies with over 5,000 employees offer such plans. Moreover, the proportion of employees participating in such available plans, and saving for retirement, grows as the size of the company grows.

2. Age is not just number

Older employees save more money as they age, more employees participate in retirement savings plans as they get older and deferred savings rates also grow with age. For example, participating employees aged 20 to 24 years old defer just 4.6 percent of their salary, whereas employees over 55 years of age defer almost double that rate (8.5 percent). It's perhaps unsurprising that employees getting closer to retirement prioritize retirement savings, but younger employees are also increasingly cognizant that they must save for retirement.

3. Variations by industry

While overall only 50 percent of all organizations offer retirement benefits, that number can vary greatly depending on the industry. For example, 67 percent of manufacturing and 63 percent of IT firms offer retirement savings plans, but only 23 percent in the leisure and hospitality sector do so.

4. Simplify saving for retirement

Organizations seeking to boost employee productivity and remove productivity-inhibiting employee stress about retirement savings would do well to make it easier to save. "Employers of all sizes and across all industry sectors must seek to optimize plan participation," the report says, "via employee retirement savings education and tools such as auto-enrollment and auto-deductions."

According to the white paper, "the challenge for employers is clear: Balancing cost control and fiduciary risk mitigation with employee productivity, satisfaction and retention." With so many employees putting ever-more importance on retirement savings both to assuage financial stress and prepare for their future, organizations have an opportunity to leverage retirement benefit plans as a key tool to reduce employee stress and enhance productivity in one fell swoop.