This article presents an overview of the need for financial well-being benefits and the value of those benefits to an organization. It also explains the best way for employers to get a handle on how well their current benefit programs deal with their workers’ financial stress: a scorecard.

The need for financial well-being benefits

Everyone is on their own path toward achieving financial security. For American workers, gone are the days of a paycheck, a mortgage and retiring with a pension at age 65. Over the past 40 years, Americans’ financial lives have become increasingly complex.

It’s time for employer-sponsored financial benefits to evolve as well. Offering a defined contribution retirement plan with an employer match is no longer enough — workers need financial benefits that are as dynamic as their financial lives. The shift has already begun. When asked in the 2023 Bank of America Workplace Benefits Report, 76 percent of employees agreed that employers have a responsibility to make sure employees are financially well, and 96 percent of employers agreed.

Even as the number of companies adopting financial well-being programs slowly grows, many employers remain hesitant to fully invest in their people’s financial well-being. These organizations aren’t indifferent to their people’s financial struggles; they simply haven’t figured out how to support the unique needs of their people without busting their benefits budget.

Why consider financial well-being benefits

Since employer-sponsored financial well-being products first appeared in the marketplace, shrewd employers’ first question has been “How does this help my company’s bottom line?” Financial well-being benefits can add value to an organization. There are two aspects of the return on the investment (ROI): mitigation of costly employee stress and alignment of employee outcomes with business goals.

There has been considerable research on the ROI of financial well-being benefits. The hard-dollar return that interests CFOs is primarily tied to the harmful effects of financial stress. In a special report from Lincoln Financial Group’s Consumer Sentiment Research from March 2023, workers reported experiencing negative impacts due to stress, in the past 90 days, in the following areas:

• Ability to focus on improving or maintaining their health and wellbeing (32 percent).
• The degree to which they procrastinate (31 percent).
• Interactions with others (29 percent).
• Performance at work (25 percent).

Although these consequences aren’t as obvious as healthcare or workers’ compensation claims, they have a very real dollar impact on a company’s bottom line. In fact, employee financial stress costs employers an additional 13–18 percent of their payroll each year, according to a report from Salary Finance.

Moreover, financial stress and stress in general can be self-perpetuating since a person’s financial, mental and physical well-being are all interconnected. Individuals with elevated stress levels are twice as likely to have a heart attack, get migraines three times more often, and suffer from depression six times and anxiety seven times more often. These serious ailments lead to higher healthcare costs, more financial strain and, in turn, more health complications — a vicious cycle that keeps financially struggling Americans mentally and physically sick.

In addition to the bottom-line benefits of employer-sponsored financial well-being programs, sponsors can position the program to support their business goals:

• Engage key employees. Target and retain business-critical workers.
• Support DEI initiatives. Ensure your total rewards are equitable and address the financial challenges of your diverse employee population.
• Differentiate through benefits. Win the war for talent against competitors and become an employer of choice.
• Plan for the future of your workforce. Help people retire when they’re ready and provide space for the next generation of leaders.
• Foster goodwill. Cultivate loyalty and a positive company culture.

How to build a financial well-being program

Having addressed the “why?” of financial well-being benefits, the logical next question is “how?” This is the question that tends to stump potential sponsors; even seasoned benefits professionals struggle to navigate a nascent financial well-being marketplace that has been flooded with new products.

Finding the most reasonable and effective course of action begins with identifying the intersection of business and people needs. Employees’ financial realities, which can be determined through demographic and benefits data analysis, filtered through the lens of enterprise goals, illuminates the path to a financial well-being program that works for the business and its people.

Of course, this is easier said than done. Knowing where to allocate benefits dollars requires understanding which business and people needs aren’t being met. For employers to attain this understanding, they need to create a robust financial well-being scorecard.

A scorecard allows employers to take a snapshot of the efficacy of their current employee financial well-being program. If there is no current program, it shows how employees’ financial situations impact the business. Identifying shortcomings and areas of concern allows an organization to improve financial well-being program outcomes and mitigate the costs of employee financial stress. By reevaluating the program periodically, stakeholders can quantify how program outcomes have improved as adjustments are made.

What’s in a scorecard?

An effective scorecard doesn’t center around traditional retirement plan metrics, such as benefit utilization rates and account balances. While these can be useful table-stakes measures, they don’t offer any true insight into the financial well-being of populations. For example, high retirement plan-level participation statistics may give the impression that nearly all workers are maximizing the value of the plan. However, a closer look at non-participants might uncover a demographic pattern. By analyzing employee-level benefits and demographic data, it’s become clear that the current financial benefits are only effective for some people and not working for others.

Really understanding the ROI is notoriously difficult (and a major reason many employers have been hesitant to embrace financial well-being programs). The HR benefits industry now understands the potential upside conceptually, but it remains a challenge to measure in practice. The key is to think beyond traditional statistics by scoring financial well-being programs in terms of the outcome-oriented metrics that really matter, like financial stress levels, benefits satisfaction and retirement confidence.

What’s next?

With the myriad of concerns and choices around employee financial well-being benefits, it can be intimidating for decision makers to commit to a course of action. A scorecard uncovers how financial well-being impacts a business and its people, allowing employers to address the quagmire of employee financial well-being in a disciplined fashion.

By using a scorecard to guide the way, sponsors can invest in their employees with confidence, knowing that they’re offering a program that addresses their people’s challenges and soothes any operational pain points.

What’s your organization’s financial well-being score?

Taking Segal’s five-minute self-assessment is your first step to finding out!