Business Owners: Is Your Employees' Financial Health Harming Your Business?

According to a recent study, about 50% of employees are ‘concerned, anxious or fearful about their current financial well being’.

AND

Over 40% of employees are ‘looking to their employer for financial support’.

Are your employees among those who are uneasy about their finances? Whether you like it or not, they’re looking to you for help. Even if your workforce is highly educated they still might have little to no personal financial acumen.

Here are 3 ways you can help your employees with financial wellness to make them happier and in turn, better employees.

 

MONITOR AND ENCOURAGE 401K PARTICIPATION

If you already have a 401k plan in place, you should be able to monitor how many of your employees are participating and the percent of pay they contribute. If 30% or more of your employees aren’t participating, you are below the average and need to address the reason for this. Is the process to sign up too complicated or outdated? Do the employees understand the investment options? Do they understand how much they could be saving in taxes? Do they understand compound interest?

Your 401k provider should provide education and guidance to your employees on how to manage their plan. Many providers offer a simple, yet robust online portal to make these selections. On-site presentations to engage your employees and answer individual questions should be expected from your provider.

In the last few years, administration costs and investment expenses within 401ks have reduced drastically. If the mutual funds in your plan have expense ratios >.50%, it’s time to reevaluate the plan. Those high costs are hurting you and your employees’ retirement balances.

THINK ABOUT THE CULTURE YOU CREATE

I’ve worked in places where it seemed everyone around me had money to burn. My coworkers wore expensive clothes, drove nice cars and seemed to be living the high life. Is it an expectation that employees go out frequently for lunch on their own dime in order to elevate their status within the company? If these things are the norm at your company, many employees may be stressing themselves financially to keep up with the culture.

They might feel like they need to portray a certain image to move up the ladder at your company. Employees on this hamster wheel will inevitably burn out and look for an environment where they can be themselves.

As the owner, you know what people earn. Do your employees’ visible choices seem to line up with their pay levels? If not, you may want to reflect on why. Are you creating a culture where people need to maintain an appearance to keep up? That could be hurting them financially.

BRING IN AN EXPERT

The thought of making sure your staff’s personal finances are in order might seem daunting. Lean on someone who specializes in helping with finances to take this off your plate. You likely already have a professional in your life that you could leverage to handle this:

  • Your 401k provider (if don’t have a 401k, start by adding one!) should provide some level of education to your employees. Many have online tools and the really good ones provide an expert that will come onsite annually to present and talk with your staff one on one.
  • If you have your own financial planner, it’s not unreasonable to see if they would be willing to offer some time to speak with your employees. It could be a win for them as well. If that’s not an option you could also see if they would be willing to work hourly for your employees to meet with them one on one.
  • Offer to pay for a personal finance class at a community college or offer to pay for the cost of a program like You Need a Budget.

Most people’s financial issues stem from simply living beyond their means. They also don’t leave much room for error by not have an emergency fund. If your employees are living paycheck to paycheck, it’s hurting you both. If you bring in a financial planner, make sure that cash flow coaching, importance of an emergency fund and avoidance of expensive debt is on the topic list.

The biggest thing to remember is that you and your staff have common goals. When your employees are financially healthy they are stronger employees and your company will be stronger. Be thoughtful about investing in the financial wellness of your team.

 

ABOUT THE AUTHOR: Andrew Mohrmann is a CERTIFIED FINANCIAL PLANNER and founder of Modern Dollar Planning, a fee only planning and investment firm serving St. Louis business owners. Andrew is a St. Louis native, 3rd generation entrepreneur and MBA graduate of Olin Business School at Washington University.