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Financial Well-being: A Growing Global Concern for Employers

Dec.  8, 2011 — Scottsdale, Ariz. — There is growing evidence that more and more people lack the financial skills necessary to make appropriate decisions for they and their families, whether that be regarding which health-care plan to select, what retirement funds to invest in, how to budget properly, how to manage their debt and other expenses, or simply what  benefits they should secure, whether through their employer or on their own.   In addition, we know that many companies are shifting more responsibility and risk to employees, and subsequently that requires more financial education. 

The lack of financial acumen is widespread globally and many individuals are not sufficiently committed to their own financial well-being.  In many respects, it is a case of “paralysis,” as people know what they should do, but don’t know how to get there and stay on track.  The concerns of financial well-being were even more highlighted in recent years as the recession took hold.  Worries over loss/reduced income and employee benefits, concerns over reduced housing values and reduced investment returns, all culminated in increased financial stress and anxieties for people.

Fortunately, many employers stepped up to the plate to assist their workforces in this regards, providing avenues for increased financial education, and offering approaches towards more holistic “financial wellness.”  Since there is growing evidence that financial distress has a direct impact on employee health and well-being which can reduce worker productivity and increase absenteeism, the business case for offering financial wellness programs seems clear.  Recognizing the negative impact of financial distress on organizational objectives, including the impact that such employee concerns and worries can have on employee health & productivity, many companies began taking actions to improve the financial wellness of their employees. 

This is certainly not only a concern for U.S. employers, as many multinational firms must address the financial concerns of their employees worldwide.  For example, the recent financial crisis and significant changes in pensions systems across the world have left individual people with fewer guarantees for retirement and greater responsibility for financial decision-making.   Multinational companies must, also, take into consideration with their approach to financial wellness various government provisions and cultural variations in the different countries where they operate.  While a company may have a global financial wellness program, such a program must be adapted to local culture, needs, and preferences.

In a recent white paper The MetLife Study of Financial Wellness Across the Globe, the efforts and initiatives of two multinational firms, American Express and EMC, are reported.  In coordination with the Boston College Center for Work & Family, MetLife examined how these two large multinational firms have taken strategic measures to address the financial wellness of their employees. The study looks at the specific steps these companies took to enhance their employees' financial wellness that satisfied both business and employee needs.

The American Express Company instituted the Smart Saving program to provide their workforce with financial education and financial planning services that include one-on-one financial counseling sessions, at no cost to employees.  EMC developed the WealthLink program with the objective to increase their employees' financial acumen, providing them with personalized and action-based tools to understand and optimize their total compensation.

Some key findings from the report include the following:

  • Financial challenges can have a negative effect on worker productivity.  When financial education programs are designed and executed properly, such programs can have a beneficial effect on employee wellness.  Financial education programs have the potential to lower financial stress, reduce absenteeism, increase productivity and lead to a more loyal workforce.
  •  Cultural differences regarding financial education are significant.  The amount and type of financial education as provided by employers varies from one country to another. There are cross-cultural differences regarding general level of financial literacy, attitudes towards retirement, wealth, and risk; as well as expectations regarding employer involvement in the field of financial wellness.                                                                                                           
  • Return on Investment (ROI) may not be the best measure of financial wellness programs.  The companies interviewed saw a clear connection between financial well-being and the work they are doing to proactively improve employee health and wellness. They believe that financial stress has a negative impact on productivity even if it is difficult to measure directly through return-on-investment calculations. They are using participation measures and metrics that evaluate changes in behaviors to determine the success of their efforts.

Some best practices considerations for employers when implementing a global financial wellness program, include the following:

  • Set a target and measure the results.  Think about what the company’s objectives are with the program, and based on these desired outcomes, a formal assessment of the outcome of a program may be designed.
  • Craft a message relevant for the target audience.  People vary in their financial needs and literacy depending on a variety of factors.  These considerations, along with recognition of cultural, generational and gender differences in financial literacy, differences in retirement attitudes, etc. will help to make messages relevant for each target group and increase the probability of program success.
  • Use creativity to gain participation.   Since people tend to not take action for a variety of reasons, from lack of time to lack of money or interest, it is critical to make the need for financial education real and relatable for employees through creative communications and delivery channels.

Financial stress is an issue for everyone, and is a growing global concern for employers.  How are you assisting your employees to achieve financial health?

The opinions expressed are solely those of the author and do not necessarily represent those of WorldatWork.

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Thu December 8, 2011 5:37 PMReport Abuse
E Brennan
Senior Associate
Member Since: 4/19/1979
Comments: 589
 

We make a personal financial counselor available to every employee and offer eight free online courses on those personal financial categories for self-education. 

 
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