Making Employee Financial Wellness a Key Focus of Your Benefits Plan
Offering raises to employees isn't always possible, but other measures to help ensure financial security should be.
Employee financial wellness may seem like an exceedingly personal subject — one with which the employer shouldn't interfere. And it's probably unwise to give your employees instructions on how to spend or invest their money. Research from ADP shows that financially secure employees are less stressed and more engaged at work, so employee finance is something you should take time to consider.
Of course, if you ask your employees what the best way to help their financial situation is, they'll likely say, "Give me a raise." While this would be nice, most businesses cannot afford to increase everyone's salary. Instead, here are some things you can do.
Make your 401(k) Work for Your Employees
Nobel Laureate Richard Thaler says employers should implement the following four things with their 401(k)s if they want to help their employees save and prepare for the future:
- Automatic enrollment
- Automatic escalation
- Good default low-cost investment options
- Providing access to help for individuals wishing to roll their 401(k) into an IRA when they change jobs
Automatic enrollment means that employees must "opt out" rather than "opt in" to a 401(k) plan. You have to specifically request not to participate, which means people are far more likely to save money.
Stop the "Volunteer" Gifts
"Boss's birthday is coming up! Everyone contribute $20, and we'll get her a great present!" These things can seem like no big deal if you're financially secure with a good cushion in your savings account. But if you're not, these things can lead to debt and frustration. People feel awkward not participating and sometimes do so at levels their budgets won't allow for. Try to avoid careless thinking along the lines of, 'Steve makes $75,000, so of course he can contribute $25 for the party.' You don't know Steve's financial obligations, and they are none of your business.
This also applies to any charity goals that demand 100 percent participation. Certainly your business can participate in any charity you'd like, but participation needs to be voluntary, with managers not following up if someone chooses not to participate.
Pay on Time and Accurately
Sometimes small businesses have cash flow issues, but this cannot cause cash flow problems for your employees. They need to be your top priority, or else you won't have much of a business. Don't short paychecks or make illegal deductions even if you feel they're justified. For instance, if an exempt employee leaves work two hours early, you cannot legally pay her less than her full salary, even though she only worked 38 hours that week.
Offer Access to Financial Counseling
Unless you were a trust fund baby, you probably didn't have your own financial advisor until you were well into adulthood. People often then don't even know where to begin. Many Employee Assistance Programs offer financial counseling at a free or reduced rate. Let your employees know this benefit is out there. It's critical, however, that you do not personally offer financial advice. Leave that to licensed professionals.
Offer Tax Saving Benefits
Everyone needs health insurance, but many people can benefit from Health Savings Accounts or Dependent Care Accounts. These allow you to use pre-tax dollars to pay medical and daycare expenses. This may yield huge savings for some of your employees.
Have Consistent Scheduling
If your employees are part-time and work different shifts every week, try your best to keep them at a minimum number of hours each week. If you hire someone for a 24-hour-a-week job and then regularly send them home early, you're messing with their budget. Offer the position with the number of hours you need to be filled. If necessary, explain that you can guarantee, say, 16 hours a week, but they can work up to 24 if there is additional need. That way they will know what their minimum paycheck should be.
Consider implementing some of these tips, and you'll be on the right track toward helping your employees with their finances without being nosy or stepping out of your role as a boss.
Read the Employee Retirement Readiness white paper to learn more.