Employees, heads up. Your boss may be watching you.
Many employers are concerning themselves with employees’ financial wellness far more these days than they used to, going beyond simply providing a retirement plan and/or health care benefits and offering a number of workplace assists.
According to consulting firm Aon Hewitt, these can be in such areas as:
financial market basics
saving for life stages
health care planning
In fact, the trend is growing, with more employers than ever involving themselves in employee financial wellness.
Why should employers care how employees feel about their financial situations?
While 85 percent of employers in the Aon Hewitt study said “it’s the right thing to do,” there’s another reason that translates to dollars and cents: in a word, productivity.
According to voluntary benefit provider Purchasing Power, the effects of employees’ “financial flu” can be contagious — and take a toll on their employers’ bottom lines.
“When employees are distracted at work by their financial situation…. [it] doesn’t just affect the employee. It’s a big drain on the employer as well,” Christy Defrain, vice president, account management at Purchasing Power, said in a statement.
A Harris poll conducted for Purchasing Power indicated that the vast majority — 82 percent — of employees are under financial stress, with 34 percent having difficulty meeting monthly household expenses such as a mortgage or rent payment, car payments, cable bills, and credit card bills.
In addition, 40 percent of respondents said they don’t have at least $2,000 in emergency savings for unexpected expenses such as unexpected health emergencies, car or appliance repairs, or some other eventuality.
Purchasing Power has laid out five signs it says employers should be watching for that indicate employees are suffering from financial stress.
1. Withdrawing multiple loans against retirement savings.
Employees who take out multiple loans may not just be seeking to keep their heads above water with short-term financial solutions, they could also be endangering their retirement.
Consultant Mercer said that one question employers should be asking themselves about how well defined contribution plans meet their employees’ needs is whether retirement plan loans are actually deteriorating participants’ financial wellness.
Mercer also pointed out that, as bad as those loans may be for participants, the alternatives — such as payday loans or credit card debt — can be far more crippling.
And while plan leakage through defaults on such loans can amount to more than $6 billion annually, employers might want to consider some of those financial wellness options before turning off the loan tap.
2. Asking for payday advances.
If employees are looking for advances on their pay, it’s a pretty sure sign they’re in trouble.
And while employers might not like to act as a short-term banker, other options are pretty limited for employees who need cash immediately — payday loans, for instance, can come with finance charges at an annual percentage rate of 400 percent, according to the Consumer Financial Protection Bureau.