Employee morale and financial health: What employers need to understand

COVID-19 has reshaped labor markets in ways that are testing what employers know—and don't know—about their workforces.

Take the restaurant industry, where NPR reports employees are leaving at a record rate. Pay is only part of it. A lack of benefits weighs on their minds, too. As does the rudeness from customers.

That combination of reasons—low pay, lack of benefits, rude customers—shows employees are thinking more holistically about their health, creating two new realities for employers.

First, employees want to work for employers who understand their stress. The pandemic has taught employees they need more than a paycheck. They also need benefits that help reduce the stress in their lives–and for hourly workers, that stress often starts and ends with money.

Second, improving financial health will drive more impact to employee morale than improving their physical or mental health (but you should still support all three). That's because financial health is at the bottom of employees' hierarchy of needs: it creates more knock-on effects to physical and mental health than the other way around.

Financial health is a predictor of employee morale and productivity

Poor financial health drags down employees' physical and mental health, creating an ever-present obstacle to feeling good in general, let alone at work. Employers feel the effects of employees' financial stress as productivity losses, absenteeism, and turnover. And yet, employees are vocal that they'd reward employers with stronger loyalty—if employers helped relieve their financial stress.

According to the non-profit Commonwealth, 65% of employees say employers should do more to address financial insecurity. On top of that, 74% say they would prefer to work for an employer who offers financial planning, budgeting, and automated savings tools over one that does not, according to The Workforce Institute at UKG.

So if employers offer those financial tools, would the boost to morale be worth the cost? Consider that businesses lose an estimated $250 billion in productivity each year due to employee stress, and that financial stress is employees' top distraction—to the point they miss work to deal with it. PwC's "Special report: Financial stress and the bottom line" found 12% of employees admit missing work due to financial stress, costing an employer with 10,000 employees $166,000 annually.

For businesses with large hourly workforces, spending $100,000 per year on financial benefits such as on-demand pay and emergency savings could recoup millions of dollars. Employees would be empowered to solve emergencies with their own money instead of, say, a payday loan. Less financial stress means less distraction, so employees work with greater focus. That's a boon to productivity, and the pop of morale that comes with it drives greater retention.

To maximize morale, take employees' financial health as seriously as their physical and mental health

Financial health is what determines if employees can meet their physical and mental health needs. Offering great health insurance doesn't matter if employees feel so financially insecure that they don't feel confident affording it. That's why employers need to invest in employees' financial health. It creates more positive knock-on effects to physical and mental health than the other way around.

A more blunt way to put it: High morale is impossible without strong employee financial health. Each day mentally exhausts the 56% of Americans living paycheck to paycheck. That's more than 160 million people whose mental health is at risk due to ongoing financial stress. Anxiety, depression, sleeplessness, memory problems and more can all be linked to financial stress, according to Wellmark Blue Cross and Blue Shield.

Physical health suffers, too, when employees have low financial health. Financially stressed employees are more likely to skip doctor appointments, cut back on fresh groceries for cheaper (and less healthy) processed foods, and view mental health counseling as a luxury they can't afford. Without good financial health, employees are inundated with stress. There's not much room left for morale.

But the good news: This is all addressable. What matters most is employers understand that improving employees' financial health takes a holistic approach, one that makes sure the right benefit is in place when employees need it.

Put benefits in place that build financial health, and higher employee morale will follow

For employees to climb the financial ladder, they need the right tools at the right time. Offering hourly employees a 401(k) is a nice gesture, but realistically, is retirement planning the top concern of your hourly workforce? Given that the billion-dollar payday loan industry has posted record profits during the pandemic, it's more likely your hourly employees need help building financial resilience so they can bounce back from short-term emergencies without taking on debt.

That's a big part of what's driving demand for earned wage access, also known as EWA or on-demand pay. But while EWA empowers employees to relieve cash-flow bottlenecks with their money, it can't build financial health on its own. No single financial benefit can. Instead, employers need to offer a suite of financial tools so employees have support at every stage of their financial journey.

Let's say you survey your hourly employees and find they're interested in benefits like retirement and stock purchasing, but they have way too much financial unpredictability to participate. To help them achieve that predictability, you could roll out a platform of financial benefits designed to incrementally build financial stability. That might look something like:

• On-demand pay so employees can solve cash-flow emergencies without taking on debt like a payday loan or high-interest credit card.
• Automatic budgeting so employees plan for bills and know what's okay to spend.
• Emergency savings so employees protect borrowing from the future.
• Real-time pay projection so employees can plan ahead when hours fluctuate.

When employers approach financial benefits holistically like this, their employees go from financially stressed to financially empowered. These benefits create a win-win for both sides. Employers get happier, more engaged employees who aren't constantly distracted by financial stress. And for employees, they get the confidence that they're working for an employer who looks out for them, making them likely stick around longer and work with greater focus.

 

This article was written by Emily Payne from BenefitsPro and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.