Traditional notions of the “employee benefits package” are changing as the field experiences a rapid expansion in both the number and diversity of financial wellness programs (FWP) marketed for the workplace. It is no secret that even as the economy continues to improve after the Great Recession, American workers still face significant financial insecurity and stress. It is estimated that one in four adults has no money saved for an emergency and nearly one in three is not saving for retirement. There are a variety of factors that contribute to this – several of which involve conditions at work. This has not escaped the attention of many employers who are looking for new ways to improve financial stability for their employees.
FWPs have not just gained popularity among employers but also researchers and practitioners in the asset-building community. The workplace is seen as a more scalable and sustainable solution to financial insecurity, particularly for low- and moderate-income workers. After all, the workplace is where money is earned and distributed, creating a natural environment to manage and appropriate funds before it walks out the door.
The Changing Landscape of Financial Wellness
However, the definition of financial wellness and more specifically what constitutes a financial wellness program is not always clear. Researchers and providers of FWPs take an expansive view of financial wellness as a person’s “overall financial health” and define a financial wellness program as one that both “assesses and supports” a person’s complete financial position. But when employers and employees – consumers of these products – are asked to define these terms, they use a narrower definition often including any benefit related to finances like retirement plans and direct deposit. Even employers already offering FWPs do not always understand the full scope of services they are providing and actual usage among employees is inconsistent across products.
This disconnect may be occurring because the financial services available to employers today are more complex and diversified than familiar predecessors like standalone financial education workshops. Modern FWPs offer a wide variety of services and products that can be blended to create a customized program designed to address financial needs specific to a particular workforce.
These services and products broadly include:
- Financial counseling/coaching for employees, who meet (in-person, by telephone, or online) with trained counselors to discuss financial issues
- Debt management services help employees manage or repay outstanding loans
- Savings products/services help employees meet short- or long-term goals like education or retirement
- Short-term loans and accrued wage advances, lower-interest credit options or cash available through the workplace
- Online financial management tools to help employees manage and/or automate finances through a website or mobile app
- Financial education classes and seminars, including courses or workshops from a financial professional offered through the workplace
FWP providers are also making use of technology to develop new ways to deliver financial services in the workplace. As personal finances become increasingly digitized, workplace FWPs can integrate services into online platforms and mobile apps allowing for better data tracking and customization of services to meet a range of financial needs within a diverse workforce.
Uncharted Territory: What We Know…and What We Don’t
FWPs’ unique marriage of traditional and non-traditional benefits is generating excitement among financial wellness advocates, but so far FWPs have not been as well studied as traditional interventions (which, themselves, have mixed results of benefits to employers and employees). Research has been inconsistent as the field rapidly evolves to include new services and modes of delivery. Recently, at the Center for Social Development, we conducted a large mixed methods study to bring some clarity around usage, motivation, and the effectiveness of FWPs as perceived by employers and employees. Key findings include:
- Utilization was low overall but varied by population. The vast majority of employees reported that they did not use a FWP other than direct deposit. The most common service was financial education, but it was prone to low attendance. Lower-paid workers were less likely to use a FWP than higher-paid workers although those reporting greater financial challenges were more likely to use higher-touch services like payroll advances and financial coaching, while those with fewer challenges preferred direct deposit and online financial tools.
- Employees and employers were skeptical of FWPs, but those who used them felt they were helpful. Employers liked the idea of offering a FWP but worried about cost, administrative burden, and employee interest. Employees worried about the utility of services, confidentiality, and potential stigma. Employees who used FWPs, however, reported experiencing at least one financial benefit from it and employers felt that employees who used their FWP demonstrated greater job satisfaction, loyalty, and productivity.
- Service delivery varied. Employers often relied on technology and/or third party vendors like Employee Assistance Programs or credit unions to deliver services.
- Services were used for different reasons. Needs assessments, whether formal or informal, helped employers decide whether to offer a FWP, but only a few employers had conducted them. Employers were interested in FWPs mostly out of concern for their employees’ financial well-being but were also interested in boosting employee performance and reducing absenteeism.
What’s Next for the Field
FWPs offered in the workplace show promise as a new method to help America’s workers achieve financial security but questions about their scalability and effectiveness still loom large. As the field continues to expand, it will become even more important to turn inward to closely examine the utility of FWPs and demonstrate clear returns for employers and employees.
Meredith Covington is the project director at the Center for Social Development.
The views and opinions of the author are her own and do not necessarily reflect the view of the Aspen Institute Financial Security Program or its funders.