To Measure Financial Wellness Program ROI, Measure Engagement
September 29, 2017


The potential costs to businesses of employees’ financial stress spilling over into the workplace has been widely studied and documented: Nearly a third of workers find themselves distracted by personal financial issues while on the job, and over half of these people say they would be more productive at work were it not for their personal financial worries, reports the Employee Benefit Research Institute in its 2017 Retirement Confidence Survey.

Pricewaterhouse Coopers also studied the issue, and also found that employee financial stress was sapping employers of productivity, profit, and precious bodily fluids. In their 2017 report, PwC found that 53 percent of employees surveyed were experiencing significant financial stress. Among younger workers – those in the Millennial generation, aged about 30 and below, the stress rate was as high as 65 percent. But all generations surveyed, Millennials, Generation Xers and Baby Boomers, finances were listed as the top cause of personal stress.

Nearly half – 47 percent, reported that financial stress has been on the increase over the previous year. Almost exactly the same fraction – 46 percent – spend three hours or more of work time dealing with personal financial issues rather than their assigned duties.

Measuring the ROI of Workplace Financial Wellness Programs

But what is the best, most cost-efficient way for employers to address the problem – in such a way that the cost of addressing it does not outweigh the benefits of doing so? That’s been an elusive question for years. The Consumer Financial Protection Bureau, a federal watchdog agency, estimates that employers typically see an ROI of 3 dollars for every one dollar they invest in a financial wellness program. But proving that ROI is very difficult and relies on a lot of assumptions, and takes place in a cloud of statistical noise.

The solution: Measure engagement. That’s the recommendation from Ernst & Young, authors of the study How Do You Know If Financial Wellness is Paying Off For You and Your People? — Understanding the ROI of Employee Financial Wellness. 

To maximize engagement, of course, employers must overcome a couple of hurdles: Make sure employees know the financial wellness program even exists in the first place, and making sure they feel welcomed and encouraged to make use of it.

That requires support and buy in throughout the management chain of command, from the senior-most executives through direct supervisors, as well as a diligent communications effort from middle managers and HR executives.

For their part, Ernst & Young found that there is a direct and significant correlation between employee retention, health and productivity on one hand and offering a workplace wellness program on the other. 56 percent of employers reported positive results from a financial wellness program when it came to retention, 50 percent said they saw benefits when it came to employee health, and 45 percent say their workplace financial wellness programs benefitted employee productivity.

Among their identified best practices:

Think beyond the workplace retirement guru, and get someone thinking in terms of a broader spectrum. Not everyone in the company is in a position to make big 401(k) contributions. Many people need help with basic budgeting and cash flow management principles, and desperately need the help of a credit counseling professional much more than they need a 401(k) expert. Other individuals may be struggling with huge student loan payments that inhibit their ability to participate in workplace happy hours with other employees — much less commit 15 percent of their compensation to the retirement plan.

Concentrating too much on specific “silos” such as retirement, insurance benefits and education can result in gaps in your financial wellness and outreach programs that wind up leaving people out. The retirement plan administrator can’t carry the whole load.

EY’s analysts recommend an “integrated, multi-channel program that is objective, easy to use, well-publicized and personalized. 

From the Ernst & Young report:

“Each touch point of a comprehensive, integrated program should include handoffs from one action to the next to minimize interruption of the financial planning process. For instance, a group learning session should introduce a related learning tool, video or invitation to speak with a financial planner. This approach teases out a continuous learning experience, vs. the start and stop of siloed activities, and yields stronger metrics of interaction.”

Generally, the higher the percentage of employees actively participating, the better the ROI is going to be. The exact ROI is still very difficult to narrow down, but where employers commit reasonable resources compared to the number of employees, a strong employee response should soon result in detectable improvements in absenteeism, presenteeism, garnishments and retention.

Implementation and best practices

Financial Finesse, a wellness program consultancy firm, has identified some specific measures employers can take:

Survey employees. Find out their situations. The survey can be anonymous – the goal is to identify how many employees are financially secure, sustaining, stabilizing, under stress, or absolutely drowning in financial problems that seem to them overwhelming. Then implement solutions designed to meet employees where they actually are on the scale, and help them move up the ladder.

For example, employers with workers undergoing the most significant financial stress can take these steps:

  • Require employees to undergo financial counseling if they get wages garnished, request a hardship withdrawal from a retirement plan or take out a 401(k) loan. Employees that receive financial counseling at the time of requesting a loan or hardship withdrawal are 35-50 percent less likely to request a subsequent loan or hardship withdrawal compared to the average rate of recidivism, reports Financial Finesse.
  • Pay for credit counseling services for any employee who wants them… anonymously.
  • Bring a credit and debt counselor into the worksite to hold workshops and schedule 1:1 counseling.

Companies could create another track for employees who are not struggling as much as the group above, but who are still having trouble getting ahead. Measures appropriate for this group may include:

  • Promoting financial planning services and benefits in company communications.
  • Creating peer-to-peer financial networks for mutual assistance, support and learning.
  • Making unbiased financial professionals available in the workplace to conduct objective portfolio reviews and provide basic financial planning advice.