American Workers Are More Stressed Than Ever
Stressed about money, even when you go to work? If that sounds familiar, you're not alone. Research from workplace wellness consulting company Workplace Options shows that Americans are more worried about their finances than ever, and it's interfering with our ability to do our jobs.
A new survey of 500 working Americans conducted February 16-17 found that roughly 90% are worried about their or their family's finances. More than half said their stress level was either moderate or significant, a 7 percentage point jump from only a year ago.
Nearly seven in 10 said they worried about money while on the job multiple times a week, and 44% said financial concerns cause them stress on a daily basis.
More worrisome: Almost 70% of workers said they've had to deal with financial issues while at work, a jump of nearly 10 percentage points over a year ago. A little over a third said this happens either frequently or sometimes.
Although they spend less time at work, part-time employees said they're more likely to use their time on the clock to handle their finances. Perhaps unsurprisingly, they also think about and stress over money matters more often.
About half of respondents said things had gotten so bad, they've actually taken time off work to deal with a personal-finance headache, up from a little over a third who said the same last year. And 5% said they've had to take time off work to deal with financial matters several times.
How to encourage increased investment in financial well being
Financial wellness has come to the forefront of employers’ well being priorities. Looking back on previous years of participation in retirement savings programs such as 401(k)s, employers are not satisfied with participation, an Aon study shows.
As few as 15% of employers say they are satisfied with their workers’ current savings rate, according to a new report from Aon Hewitt. In response, employers are focused on increasing savings rates and will look to their advisers to help expand financial wellbeing programs.
Aon surveyed more than 250 U.S. employers representing nearly 9 million workers to determine their priorities and likely changes when it comes to retirement benefits. According to the report, employers plan to emphasize retirement readiness, focusing on financial wellbeing and refining automation as they aim to raise 401(k) savings rates for 2017.
Emphasizing retirement readiness
Nearly all employers, 90%, are concerned with their employees’ level of understanding about how much they need to save to achieve an adequate retirement savings. Those employers who said they were not satisfied with investment levels in past years, 87%, say they plan to take action this year to help workers reach their retirement goals.
“Employers are making retirement readiness one of the important parts of their financial wellbeing strategy by offering tools and modelers to help workers understand, realistically, how much they’re likely to need in order to retire,” says Rob Austin, director of retirement research at Aon Hewitt. “Some of these tools take it a step further and provide education on what specific actions workers can take to help close the savings gap and can help workers understand that even small changes, such as increasing 401(k) contributions by just two percentage points, can impact their long-term savings outlook.”
Focusing on financial wellbeing
While financial wellness has been a growing trend among employers recently, 60% of employers say its importance has increased over the past two years. This year, 92% of employers are likely to focus on the financial wellbeing of workers in a way that extends beyond retirement such as help with managing student loan debt, day-to-day budgeting and even physical and emotional wellbeing.
“Financial wellbeing programs have moved from being something that few leading-edge companies were offering to a more mainstream strategy”
Currently, 58% of employers have a tool available that covers at least one aspect of financial wellness, but by the end of 2017, that percentage is expected to reach 84%, according to the Aon Hewitt report.
“Financial wellbeing programs have moved from being something that few leading-edge companies were offering to a more mainstream strategy,” Austin says. “Employers realize that offering programs that address the overall wellbeing of their workers can solve for myriad challenges that impact people’s work lives and productivity, including their physical and emotional health, financial stressors and long-term retirement savings.”
The lessons learned from automatic enrollment are being utilized to increase savings rates. In a separate Aon Hewitt report, more than half of all employees under plans with automatic enrollment default had at or above the company match threshold. Employers are also adding contribution escalation features and enrolling workers who may not have been previously enrolled in the 401(k) plan.
“Employers realize that automatic 401(k) features can be very effective when it comes to increasing participation in the plan,” Austin says. “Now they are taking an automation 2.0 approach to make it easier for workers to save more and invest better.”
Overcoming roadblocks to transformational financial wellness programs
Financial wellness is all the rage, but leading industry observers caution producers to steer clear of the pitfalls.
The trouble with programs that focus on education and financial literacy is they fail to inspire or produce positive behavioral change, explains Carla Dearing, CEO of the SUM180 online financial planning service. She says “truly transformative” efforts share four key ingredients. They include adopting a comprehensive, personalized, private and arm’s length approach.
Between increased oversight of fiduciary responsibilities and growing demand for transparency, as well as employee debt and savings challenges, financial wellness programs are swimming upstream. And experts agree there’s plenty of room for improvement.
“Benefit brokers generally make underwhelming efforts when helping plan sponsors maximize the potential for their benefit programs to impact employee behavior and rank-and-file workers improve their financial wellness,” opines Tony Verheyen, executive director for the Plan Sponsor Council of America.
Their collective challenge is to overcome a lack of direction and quantifiable ROI, as well as confusion and apathy, he says. One suggestion is to incorporate Gallup’s research on holistic wellbeing and identification of financial wellness as an essential component to overall wellness. Another is to integrate health savings accounts into a larger discussion about budgeting for daily and annual expenses, debt and credit management and retirement planning.
"The thinking behind customized recommendations is that they will go a long way toward helping engage participants. 'We’ve got to find better ways to get at the heart of the issue and give relevant, right sized advice,' Dearing insists. "
“At a time when broker compensation is being compressed, the imaginative broker will thrive by becoming a solid contributor to the effective development of workplace financial wellness programs,” Verheyen observes.
What’s important is to uncover “the burning issue” that resonates with plan participants, explains Neil Lloyd, head of U.S. defined contribution and financial wellness research at Mercer. With younger workforces, for example, he says that could be budgeting or student loans. Programs also need to help participants develop the financial confidence or courage to make better choices, according to Lloyd.
A Holistic View
Piecemeal solutions that only involve 401(k) plans or student loan repayment programs must be replaced by a holistic view that’s not intimidating, Dearing suggests. Also, scrubbing programs of any lecturing tone will enable employees to address their financial issues without fear of judgment or self-consciousness, she notes. Still, there are caveats to consider. “Don’t make it so comprehensive that the person has to spend 15 to 20 minutes filling out a whole lot of forms,” Lloyd warns. “They’re never going to do any of it.”
Privacy is also paramount. That’s because “money is a highly sensitive, emotionally charged subject that is hard to discuss even with our closest friends and family, much less in an employer-sponsored group setting,” according to Dearing.
“No one wants their HR manager to know they’re deeply in debt,” adds Liz Davidson, founder and CEO of Financial Finesse. Within this context, establishing a sense of trust can help employees overcome any anxiety. “If people trust their employers to give them a good program and not to look at all their personal details, that can be a very positive experience,” Lloyd says.
Given the need for an arm’s length commitment to securing private information in this intensely scrutinized fiduciary climate, Dearing suggests that participant details be confined to third-party servers and only aggregated data be reported.
It’s critical that employee education and communication be developed and delivered by unbiased certified financial planners who aren’t trying to sell anything, Davidson notes. In addition, she says financial wellness should be made available to all employees, regardless of age, income, gender, location, the type of work they do, etc.
Having insightful metrics also will enable plan sponsors and their advisers measure the results of their financial wellness programs in a more meaningful way from beginning to end, Lloyd notes. “If people aren’t engaging, you don’t waste six months to change it,” he says.
It all comes down to behavioral modification, Dearing believes, adding: “If you really get into the issue of how to help employees with their finances, it is way more like Weight Watchers than it is 401(k) education.”
Addressing the root issues of financial illiteracy
Two root issues that should be held in high priority by employers: stress caused by employee personal finances, and the employer’s bottom line. If the first issue of stressful personal finance problems of employees is adequately addressed, then the second issue concerning the bottom line of the company will be positively impacted. To help decrease employee stressors and improve the chances of achieving retirement success, these two root issues must be tackled.
Employee personal finances
Financial worries affect a large percentage of the American workforce. Harris Interactive and Purchasing Power conducted a survey that revealed 44% of full-time employees in the United States are involved in worrying about personal financial issues while on the job. Additionally, 46% of the workers surveyed admitted to spending from two to three hours each week on average engaged in activities concerning their personal finances while on the job. The PwC 2014 survey places that number slightly higher, at between 12-20 hours lost per month, per employee.
It is easy to see how stress from personal finance issues can impact business when nearly 50% of the American workforce is adversely affected. Such stress takes a mental as well as a physical toll on employees, which directly affects both productivity and healthcare costs. Personal problems resulting from financial difficulties can therefore be considered the employer’s problem as well. When employers play an active role in producing financial wellness in their workforce, employees experience financial relief, and their stress is lessened while on the job.
Employer bottom line
The absolute “bottom line” of any company is to produce revenue sufficient to run and even expand operations while turning a profit. To achieve a healthy bottom line, companies must also have a healthy and productive workforce. If their employees are not performing well, then the entire business plan suffers. Diversion from job duties over personal finance worries, accidents and sickness caused by stress and time off to deal with financial problems all contribute to the losses of a company’s bottom line.
A low-stress workforce should therefore be a key target for employers. Not only should a low-stress environment be the goal for production or manufacturing crews, but it must also exist in other operational departments, including administration, marketing, shipping and all levels of management. Any one of these areas can become the weak link if stress is allowed to run amok over personal finance and savings problems.
"Every dollar spent by corporations on effective financial literacy programs provides a return of $2.80, which is a significant ROI. As financial literacy improves, money behaviors are changed for the better, which lessens employee stress, increases job duty focus, and boosts the company’s bottom line."
If according to the above Harris Interactive and Purchasing Power survey, 44% of the entire U.S. workforce admits to suffering stress over personal finances at their places of employment, then that is a good place to begin making changes. Employers can actively improve their overall bottom line by offering programs that focus on financial education and wellness.
It has been proven that low-stress employees are healthier, happier and more productive. According to a 2009 PFEEF study, every dollar spent by corporations on effective financial literacy programs provides a return of $2.80, which is a significant ROI. As financial literacy improves, money behaviors are changed for the better, which lessens employee stress, increases job duty focus, and boosts the company’s bottom line. It is a win-win situation for both the employer and their employees.
Impact of Employee Financial Stress May Be Higher Than Thought
Financial pressures are impeding the job performance of nearly one out of four employees by their own admission, and almost as many employers report substantial losses in productivity as a result.
As many as 24% of American workers say they experience distractions at their jobs due to personal financial issues, according to a 2014 PricewaterhouseCoopers survey on Employee Financial Wellness. Even more worrisome, stress over finances at the workplace affects 60% of younger millennial workers—those born in the early 1980s through the early 2000s. High-earning individuals making $100,000 a year or more also report experiencing financial stress at work, busting the myth that such problems are only experienced by low-income, unskilled employees.
Cost to employers
Employees that are distracted by financial pressures end up costing companies in several ways, and the impact on business revenue can be quite severe. Heightened levels of anxiety hurt morale and prevent workers from producing at maximum efficiency. Medical expenses and time off for injuries or illnesses due to financial stress are another major drain on a business’ bottom line, as are the costs of the various programs that help employees address these issues.
Absenteeism due to financial problems is another costly issue. Approximately one out of five workers report that they have left the job early or missed work altogether in order to attend to personal financial problems. In a survey conducted by Glassdoor and Red Bull, nearly half (48%) of the respondents admitted to being overly fatigued, causing them to be distracted and mistakes during working hours.
"Close to one out of four (22%) of line supervisors and HR officers report that the personal financial concerns of their employees have taken a significant toll on production."
So how big is the impact? Close to one out of four (22%) of line supervisors and HR officers report that the personal financial concerns of their employees have taken a significant toll on production. To try and help remedy this, some 50% of employers have made efforts to provide retirement savings assistance and financial educational programs. Yet only a meager 6% of employees polled by Gallup say they feel that their employers are providing them with sufficient help to effectively manage their finances.
Unfortunately, the trend is clear enough: The number of employed Americans suffering some form of financial stress is large and growing, and this is detracting from their job performance and hurting their employers bottom line.
Will 2016 Be the Year of Financial Wellbeing?
Financial stress is taking a toll on employees. As a new year starts, many workers are evaluating how to best secure their financial future – providing an opportunity for employers to step up to the plate.
A number of large employers are already planning to do so, according to Aon Hewitt’s annual Hot Topics in Retirement and Financial Well-Being survey, with many planning to expand the depth and breadth of their current financial well-being programs in the year ahead.
A new Gallup study shows roughly half of the American population today believes they do not have enough money on hand for major expenses such as home repairs or the purchase of a new car. And numerous reports have been published noting a cloudy retirement forecast for many who aren’t saving enough in their 401(k) accounts.
“Workers have a wide variety of financial needs and challenges,” says Rob Austin, director of retirement research at Aon Hewitt.
“Employers are realizing that they need to provide a range of financial well-being tools and resources to help this diverse workforce and to truly make an impact on workers’ long and short-term savings goals.”
Currently a little more than half (55%) of employers surveyed admit to having at least one program in place to help employees improve their financial wellness – such as budgeting, debt management or assistance on the financial aspects of healthcare. In addition, 38% say they offer at least three programs.
The good news, the Aon study shows, is that those numbers are expected to go up. Seventy-seven percent of employers say they will have at least one financial well-being program by the end of 2016 and 52% say they will have at least three.
“Workers say they want their employer to provide them with the resources to help them obtain a more secure financial future, and it seems that employers are stepping up to this request. In 2016, financial well-being programs will cement themselves as part of most employers’ total benefits package.”
Further, Aon’s study notes a majority of employers (85%) say they are creating and adding these well-being programs because it is “the right thing to do.” Another 80% of employers report that their programs are designed to also improve employee engagement.
Saving more, spending less and paying off debt were cited by Americans as their top three financial resolutions in 2016, according to Fidelity Investments’ seventh annual New Year Financial Resolutions Study.