Employers who help employees improve their overall financial wellness and reduce financial stress can reduce costs in a number of areas that positively impact the company bottom line, as well as improve employees’ retirement prospects, a study from Financial Finesse finds.
The study found that employees who suffer from overwhelming financial stress or struggle to maintain financial stability tend to incur both immediate and future financial costs for their employer in the form of absenteeism, garnishments, payroll taxes, and delayed retirement. As employee financial health improves these costs diminish.
For its 2016 ROI Special Report, Financial Finesse conducted a case study of a Fortune 100 company’s comprehensive workplace financial wellness program from 2009 to 2014. Depending on employer size, employers can save up to $433,007 in garnishments, up to $682,034 in flex spending/health savings, and up to $4,347,275 in absenteeism by improving the workforce’s financial wellness score from 4 to 5 on a 10-point scale. The savings is even greater when improving the workforce’s financial wellness score from 4 to 6.
Financial Finesse notes that higher rates of flexible spending and health savings account contributions occur among participants with higher wellness scores. As employees contribute more into pre-tax flexible spending and health savings accounts, employer FICA-tax expenses are reduced.
In addition, the study found higher financial wellness scores correlate to the ability and choice to make increased retirement saving deferrals. While employees overall were not saving the recommended 10% to 15% of their income for retirement, those with higher financial wellness levels made larger contributions on average.
An analysis of retirement plan contribution rates found that employees that improve their financial wellness score from 4 to 6 could potentially improve their retirement plan balance by more than 27%. NEXT: Addressing different stages of financial health