If you’re like 68% of benefits leaders recently surveyed by Mercer, you plan to support employees’ financial wellbeing in 2025. But to see a positive impact on employees’ financial lives and organizational ROI from the benefit, it’s critical that you first understand the financial challenges and barriers they need help overcoming.
More than 70% of employees live paycheck to paycheck and only 30% of Americans are financially healthy. For your frontline employees, the situation is even worse. As an employer, you cannot expect financial wellness solutions such as financial education, coaching, investment advice, and financial planning, to support financially ill employees; they aren’t designed to do that.
Here are seven telltale signs that a significant portion of your employees are financially unhealthy, so you can choose benefits designed to improve their financial health.
1. High healthcare costs
Financial stress is known to contribute to physical and mental health challenges, and it also drives healthcare costs higher for employers.
According to an analysis of a 107,000 employees at a Fortune 10 employer conducted by Willis Towers Watson (WTW), employees with high levels of financial stress had 40% higher medical costs than those with low financial stress. Ultimately, each financially unhealthy employee cost the employer an additional $1,100 in annual healthcare costs.
2. Absenteeism
In addition to health-related issues, financially ill employees often face hurdles related to transportation and housing that make it difficult, and at times, impossible to show up to work.
The WTW study found that financially unhealthy employees had twice the average unplanned absences compared to financially healthy employees.
3. Workplace safety issues
Financial stress doesn’t just affect attendance and healthcare costs; it can also impact workplace safety, particularly among frontline employees. Research conducted on short-haul truck drivers revealed that a one-standard-deviation increase in financial worry was associated with a 0.4% increase in the probability of a preventable accident, costing impacted employers more than $1.3 million per year.
4. High turnover rates
Financially ill employees have difficulty making ends meet from one paycheck to the next. Because most do not have emergency savings, any unexpected expense or life event can compromise their ability to get to and from work, maintain housing, and care for their physical and mental health. Attempting to rectify the situation, many will switch jobs, even for a nominal change in pay.
5. High engagement with earned wage access solutions
Many employers now offer earned wage access (EWA) as an employee benefit to ease financial struggles between paychecks and find it’s well-received. However, high engagement with EWA is a sign of persistent financial illness, much like a painkiller masks symptoms but never treats the root cause. Often, it leaves employees financially worse off than before.
6. Low retirement solution participation
Financially ill employees do not have the means to contribute to future retirement savings; they are focused on short-term expenses that may be days, weeks, or a few months out and on making ends meet from one paycheck to the next.
Low retirement plan participation can increase administrative costs, limit plan options, and increase overall workforce costs. Research shows that retirement-age employees who have to keep working because they are financially unable to retire increase an employer’s workforce costs by an estimated 1.5% annually.
7. Frequent 401(k) loans and hardship withdrawals
Employers who see employees taking 401(k) loans and hardship withdrawals should consider it a sign of financial distress. These can indicate that employees need emergency money, either because they experienced a financial shock, or have simply become unable to manage their financial demands from one paycheck to the next due to increased burdens such as high housing costs and debt.
Improving employee financial health with Financial Care
Most employers do not have a financial wellness problem; they have a financial illness problem. Amazon and other Fortune 500 employers have been able to address the root causes of their financially ill employees’ needs and drive tangible results including a 41% reduction in turnover, on average, reduced 401(k) hardship withdrawals, improved employee satisfaction, and nearly half of all employees building emergency savings – but it requires an approach beyond financial wellness or point solutions. We call it Financial Care.
To learn more about Brightside Financial Care and see why our model is uniquely built to treat financial illness and improve employees’ financial health while delivering measurable ROI for employers, click here.
