In the good ol’ days, all you needed was a 401(k) or pension, a health insurance package, and maybe a Christmas party, and you were pretty much guaranteed to get lifelong employees who were committed to your company.
But nowadays, things have changed: Employees are expecting more than just compensation and the traditional benefits. They want flex time, remote work, an empathetic manager, cutting-edge technology, and, perhaps more than anything, better financial benefits.
Financial benefits? Isn’t a paycheck enough?
Truthfully, no. The sad reality is employees are drowning in medical bills, student loans, and credit card debt, and they’re looking for employers who will help them take control of their money.
If that’s your company, good work. If not—your retention is suffering.
How Does Financial Stress Lower Retention?
It seems counterintuitive, right? If an employee is stressed about money, wouldn’t they be more afraid to lose their source of income (aka their job) and more committed to their work?
Well, apparently not.
Salary Finance, for instance, found in their study of 10,000 American employees that employees under financial stress were twice as likely to look for a new job than those who felt financially stable. Pension Consultants, on the other hand, found that 40% of turnovers are related to problems with an employee’s finances.
How does financial stress lower an employee’s willingness to stay? Three big reasons:
1. Employees will look for financial benefits elsewhere.
The first reason is the most obvious: if you don’t help employees solve their financial problems, they’ll feel more inclined to find an employer who will.
A whopping 78% of employees said they were more likely to stay with their employer because of their benefits program, says Willis Tower Watson. Similarly, in their report on retention, Aflac found that 38% of employees who don’t feel their employer takes care of their needs will leave in the next twelve months.
What needs do they expect an employer to help with? The answer couldn’t be more clear: nearly half (49%) of employees who consider new employment do so because of financial concerns.
The absence of financial benefits, along with the persistent stress around money, makes employees feel less satisfied with their jobs. And, at that point, all it takes is one good offer for them to decide to clock out for the last time.
2. Employee dissatisfaction gives your company lousy press.
Failing to help employees with their money problems can affect your company’s reputation, too. One-star Glassdoor reviews, negative social media posts, and high turnover rates can make not only current employees disgruntled but potential employees pick another place to apply.
PwC agrees: in their special report on financial stress, they found that employees under financial stress were less likely to recommend their employer as a great place to work (66% versus 72% who are not stressed), while others were simply less proud to work for their employers (72% versus 77%).
Aside from negative press, turnover has psychological effects: if it’s known that employees are actively searching for a job with more financial security, it can make quitting a more viable option for those who are indecisive. And if those employees find a job with better benefits, well—you can expect them to spread the news to former colleagues.
3. Employees under financial stress are less engaged.
Job opportunities with better financial benefits and workplace disgruntlement may be the leading causes of turnover, but there’s another force at play: employees under financial stress are worn out.
It happens more often than you think: employees bring financial stress to work, which not only makes them more distracted, less productive, and more likely to call out sick but also erodes their emotional commitment to your organization.
Over time, this lack of enthusiasm, coupled with ongoing financial concerns, makes it easier for employees to leave your company. And trust us—if they find a job that makes them feel like their “old self” again, they will go.
Which Financial Benefits Lower Employee Turnover?
First off, keep in mind—the key to lowering turnover for your company is to find the right mix of financial benefits for your employees. The range of financial problems is vast—from student loan debt to mounting medical bills—so your first step is to understand what your employees are feeling.
That being said, some financial benefits are more popular than others. Here’s a list of five financial benefits employees are looking for in 2021.
1. Affordable health insurance.
These days affordable health insurance may sound more like an oxymoron than a reality. With premiums rising and Americans’ health being subpar, employers continue to pay a hefty cost to keep employees insured.
But it’s worth it. Fifty-six percent of U.S. employees with employer-sponsored health benefits said that their satisfaction with their health plans played a key role in their decision to stay at their current job, says a recent SHRM report.
So with health insurance being so important to employees, not to mention medical costs rising, what can you do to make your health benefits stand out?
First off, don’t raise premiums, copayments, or deductibles. Research has shown that increasing these costs disincentivize employees from getting the medical care and treatments they need, which can quickly turn preventable illnesses into long-term, expensive problems. Instead, seek to understand the health problems that plague your employees. With surveys and data, you can equip your insurance broker to potentially find more affordable health insurance somewhere else.
Consider, too, looking into virtual health coaching and telehealth, both of which use digital technology to monitor chronic health conditions. Telehealth technology can stop employees from going into the hospital or ER for non-emergencies, saving them loads of money in the long run.
2. Student loan repayment.
Student loans continue to afflict Americans: the Federal Reserve estimates that in the third quarter of 2020, Americans owed more than $1.7 trillion in student loan debt, which was about 102% higher than what they owed in 2010 ($842 billion).
To give you some perspective, only 16 countries in the world have a GDP that’s higher than $1 trillion.
Because of this, employers are beginning to offer one of the most coveted benefits out there: student loan repayment assistance.
Program structures vary, but they all seek to pay off a significant amount of employees’ student debt. Some companies match employees’ payments up to a certain maximum. Other companies pay a lump sum per year until the loan is paid off. While still others will give a specific amount per month until the loan is gone.
A student loan assistance can give you a competitive advantage: Only 8% of employers offer one, according to SHRM. And with the federal government now giving employers a tax break if they pay off employees’ student loans (up to $5,250 a year), this could be an advantage for you, too.
3. Salary-linked loans.
An easy benefit you can implement today is a salary-linked loan. Basically, you give employees the option of borrowing against their future paychecks. If they need to cover emergencies, they can take out this money, then pay it back with payroll deductions.
But wait—isn’t debt terrible?
Not necessarily. In fact, safe lending options can help Americans solve short-term problems without causing long-term financial consequences.
Here’s the thing: Most Americans don’t have enough to cover an emergency (nearly 25% have no emergency funds, according to Market Watch). Not only is this causing financial stress, but it’s also causing employees to dig into their 401(k)s, or, worse—turn to high-APR loans that can really lead to trouble.
A salary-linked loan can help employees deal with emergencies when they happen. And it can have a high impact on employee well-being. For instance, Rhino Foods Foundation recently provided an income-advance loan to a portion of its employees. Not only did 401(k) hardship withdrawals drop from four or five to zero, but annual retention increased from 65 to 85 percent.
4. Expert financial advice.
For employees who want a more personal touch to their finances, offering sessions with a financial advisor—whether virtual or in-person—can help employees make a financial plan, set goals, and prepare for retirement. Three out of 4 employees surveyed by Human Resource Executives, in fact, claimed they would seek help from an advisor if their company provided one.
5. Financial wellness programs.
Lastly, consider implementing a financial wellness program. While these programs aren’t the universal cure for financial stress that program providers have led us to believe (they have their shortcomings), they can effectively teach broad financial principles to the most people possible. Some companies, in fact, have seen retention rates improved by 42% just by setting up a financial wellness program.
How Stately Credit Can Help Reduce Your Employee Turnover
Employees aren’t just stressed about money. They’re overwhelmed.
PwC, for instance, tells us that over half of employees name financial challenges as the number one stressor in their life. For some perspective, that’s three times higher than the number two stressor: their jobs. Similarly, Bank of America warns us that the number of employees who say their finances are in good health is declining: 61% in 2018 to 49% in 2020.
What’s worse—employees can’t cover emergencies. Just 4 in 10 people have enough savings to cover an unexpected $1,000 emergency, a recent survey from Bankrate tells us. The majority of those who can’t cover the emergency will turn to credit cards and personal loans, most of which will put them further into debt with high-interest rates and late fees.
But look—it doesn’t have to be this way. We believe there’s a better way to borrow money, one that helps your employees stay afloat without putting them deeper into debt.
We offer salary-linked loans with low-interest rates and no fees. Our goal is to give employees a better borrowing option, one that helps them cover emergencies and unexpected expenses without taking advantage of their situations.
Giving your employees the option of borrowing against their paychecks not only helps them find financial relief: it increases trust between you and them, which, in the long-run, can have a major impact on retention rates. Reach out to us, and we can help you implement this no-cost benefit today.