Although several positive economic developments have occurred recently, from job growth to falling inflation, employees still face various financial challenges, such as wage stagnation, reduced savings, and high debt levels. There has also been a shift in expectations around these challenges; employees increasingly want companies to help them manage and improve their finances.
There have never been more ways for HR teams to provide the financial support employees are demanding. They can offer financial guidance (retirement planning and debt management, for instance), 401(k) matches and other investment programs, and benefits such as convertible PTO, which allow employees to put the value of their time off toward their financial priorities. These services won’t just put employees in a stronger financial position – they also improve employee productivity, retention, and engagement.
When employees are distracted by their bank accounts, overdue bills, and looming debts, they can’t focus. Financial anxiety among employees has become a major driver of workplace stress and poor performance, which will continue to be the case in 2024. Companies have all the resources they need to address this anxiety, improving employees’ well-being and ensuring they’re fully engaged at work.
Why Employees are Asking for Financial Support
Employees face a long list of daunting financial challenges, which are taking a toll on their psychological health. According to a recent Bank of America survey, just 42 percent of employees rate their financial wellness as good or excellent – the lowest proportion since 2010. As employee stress reaches record highs, 57 percent say finances are the top cause of stress. Meanwhile, 58 percent of employees say their jobs are the main source of their mental health challenges.
To make matters worse, we’re rapidly coming up on tax season. In 2023, nearly a quarter of tax filers feared that they made a mistake and would be audited by the IRS, while 14 percent were stressed about not receiving enough money. At the end of 2023, household debt in the United States reached $17.5 trillion, including $1.13 trillion in credit card balances. A PwC survey found that 44 percent of employees with credit card balances struggle to make minimum monthly payments on time, which rose from 37 percent in 2022. Twenty-eight percent of employees report that they “often or always run out of money between paychecks,” including 15 percent who earn $100,000 or more.
Many warning signs are flashing red for employees’ financial health, and HR teams have a responsibility to step in and help.
Employee Financial Stress Has Severe Consequences for Companies
The cost of neglecting financial stress among your employees is extremely high. When employees are worried about their finances, a significant proportion say it affects their sleep, mental health, self-esteem, physical health, and relationships at home. These employees are almost five times as likely to say their finances are a distraction at work, and they’re significantly less likely to say that they feel energized or like they belong, their values align with the company; they would recommend the company as a great place to work; or they’re proud to work there.
Companies already suffer from an engagement crisis – less than a quarter of employees feel engaged at work. At the same time, nearly 60 percent are “quiet quitting” (which refers to psychological detachment). Many other employees are literally quitting due to growing financial anxiety. While 69 percent of employees who aren’t stressed about their finances feel there is a promising future at their current companies, this proportion collapses to 54 percent among employees who are stressed.
The top reason employees cite for leaving their current company is burnout – a phenomenon directly tied to stress and engagement—exacerbated by financial pressure. HR teams can immediately improve this situation by providing resources to help employees address their immediate financial concerns and plan for the future.
How to Improve the Financial Health of Your Workforce
While companies have long offered financial benefits such as retirement accounts, it’s time for HR teams to develop new and more innovative ways to support their employees. A remarkable 74 percent of employees say they seek financial guidance from their companies, while the proportion of employees using financial wellness benefits has steadily risen in recent years. Although 96 percent of employers say they are responsible for the financial well-being of the workforce, just two out of five offer financial wellness services.
Beyond providing benefits such as financial literacy workshops and 401(k) matching, HR teams should consider whether their existing benefits budgets are being put to good use. For example, PTO Exchange recently published a report about how HR teams can use PTO conversion programs to offer financial support to employees. This will simultaneously allow companies to repurpose benefits dollars that are going to waste, reduce the balance sheet liabilities caused by large amounts of unpaid PTO, and give employees the robust financial assistance they need.
PTO is one of the most common benefits companies offer but is widely underused. Pew reports that less than half of employees take all the PTO offered, and almost a third of employees say their unused PTO doesn’t roll into the next year. Convertible PTO allows employees to use the accrued value of their PTO for other financial goals, such as retirement contributions, student loan payments, and emergency savings funds.
By providing much greater flexibility for each employee, convertible PTO also helps companies meet the financial needs of diverse workforces. PTO Exchange has found that variables such as income, gender, and race significantly impact the financial benefits employees choose, which is why HR teams should focus on benefits that can meet a broader range of priorities. This is one of many reasons why 90 percent of employees say benefits like convertible PTO would make them more likely to stay with their employers. At a time when employees are under increasing financial strain, overall stress is on the rise, and engagement is far too low, HR teams must focus on benefits that will provide as much financial support as possible.
Rob Whalen is co-founder and CEO of PTO Exchange.