It’s much less costly to retain and engage existing employees than it is to replace them. It can cost between 150% and 400% of an annual salary to replace mid-level to high-level employees. So turnover can be a fiscal nightmare for any company, especially when costs are already so high. Financial costs are one thing, but the additional pressure on remaining staff can add to the strain on the team, and further increase the cost of employee attrition.
Employees leaving the company can also lower the morale of the entire group, especially if a few people are leaving at a time, or turnover is becoming more frequent. Some common reasons employees may leave include lack of opportunities to advance, poor culture, or low pay.
Other reasons employees may choose to leave a company include financial stress or the state of their mental and physical health. Finances, as well as mental and physical health challenges can put a strain on employees, especially if they feel they aren’t getting the support they need from their employer. Many companies have put benefits in place to help their teams manage their mental, physical and financial health, but are these benefits having the impact they should?
Here are three missed opportunities to reduce the risk of employee turnover caused by financial stress.
1. Underutilized benefits
According to The Hartford’s Future Benefits Study, 70% of employers believe their employees underutilize the services, benefits and programs they make available. It’s possible that employees aren’t realizing the full value of all the benefits your company has to offer. Many employers may focus on explaining benefits only during the hiring and onboarding process, which can cause employees to forget about any benefits they don’t use right away. It’s also possible that the benefits an employer has aren’t valuable in the eyes of the employees. It’s important to gather regular feedback about the value and usefulness of benefits so you don’t waste resources on things employees don’t care about or use.
It may also be that employers are inadvertently putting barriers between employees and their benefits. This is a common issue with optional retirement programs. Many people don’t start saving for retirement on their own until it’s too late, and they may hesitate to participate in a retirement savings program even with matched contributions from their employer. These programs are only helpful if employees are making use of them. Getting more employees using a matched RRSP program will help them. Consider automatic enrollment over opt-in enrollment with your group retirement savings plan. According to T. Rowe Price’s Reference Point, automatic enrollment shows an 85% participation rate, compared to 39% participation when enrollment requires an express opt-in by the employee.
Employees who are under financial stress and don’t get the most from their benefits are at very high risk of leaving. Employers can do a lot to avoid these three risks.
2. Gaps in financial wellness
Your employees cannot count on their financial institutions to provide them with everything they need to know about their personal finances. Employees want employers to help them access financial wellness programs so they can make better decisions. In fact, Eckler found that 80% of employees said they want some type of financial education in the workplace. But not all financial education programs are created equally. Most only cover retirement planning, or the specifics about existing products within the benefits plan. But employees need a lot more. What employees actually need is integrated tools so they can actually apply what they learn to their finances.
Employees need a more holistic approach from their companies to keep them engaged for the long term. Focusing on employee financial wellness can not only help with retention, it can also help with recruitment. More than half of employees are likely to be interested in leaving their current employer for one who cares about their financial health; it’s even worse for those who are stressed out by their finances. According to PwC’s 2023 Employee Financial Wellness survey, 73% of financially stressed employees say they would be attracted to another employer that cares more about their financial well-being compared to just 54% of non-financially stressed employees.
Putting a financial wellness program in place doesn’t mean the problem is solved. Employers must ensure that the program actually deals with the employees’ areas of financial stress. According to the BrightPlan 2023 Wellness Barometer Survey Report, 94% of leaders say their company offers financial wellness, but 74% of employees are not satisfied with those benefits. Why the massive disconnect here? A big part of the issue is that a majority of financial wellness programs only provide traditional retirement education and planning. While employees need to learn about planning for retirement, they can’t even use that education if they can’t find the money to put away in the first place. Most financial wellness programs lack crucial education and tools that employees can use to better manage their cash flow and debt.
In 2019, before inflation and interest rates got out of hand, PwC’s Employee Financial Wellness Survey noted that “failure to address some of the more immediate financial concerns [employees have] may actually undermine efforts to better prepare employees for retirement.” PwC also found that “many employer programs are still ineffective in addressing the key financial challenges employees are facing.”
If you have yet to implement a financial wellness program, or your current program isn’t having a measurable and meaningful impact, Real Life Money might be just what you need. Our program combines practical education along with tools that employees can use to immediately apply their new knowledge to their own finances. We have not shied away from the most stressful parts of money, like debt and cash flow management. Instead, that’s where our education starts. CacheFlo is a leading expert on cash flow and debt management, and is the main provider of education for financial professionals on these same topics. Your employees won’t be chastised or made to feel guilty about past financial decisions, rather they’ll be shown easy ways to make their next decision to help them move in the right direction based on their unique financial situation.
3. Making resources difficult to access
Many employers invest significant resources in the various benefits they provide. But too often, if employees have to dig too much to find the access point for the benefit, or they find it difficult to understand if what they are looking for is covered, they’ll just stop trying.
When you make it too much work to find what they need, or remember what they have, you’ll be wasting your precious resources on something that is drastically underutilized. When employees don’t make use of a benefit, they don’t perceive it has any value. This makes it easier for other organizations to attract your talent to their company. Employees are already under a lot of financial and time pressures. If they can’t or won’t make use of benefits, that strain has no hope of being eased.
So what can employers do about this? In many cases, your company already has some of what you need to help employees improve their financial health; you just need to change how it’s used and promoted. Double check. Ensure you regularly evaluate benefits by surveying employees and leadership, and make auto-enrollment the default. Be ruthless. Require that employee financial wellness programs provide real-world ideas, tools and education that your employees can actually use to relieve the most intense areas of financial stress. Cut financial employee health programs that don’t deal with debt and cash flow effectively. Be loud! Weave reminders of the benefits employees have access to into regular communications, and make those benefits easy to access and use.
CacheFlo is a financial education company that builds eLearning and tools to help financial professionals and individuals make behaviour-based changes, which allow them to get more life from their money. We want to make it easier for people to predict the impact of their financial choices before they make them.
About the Certified Cash Flow Specialist (CCS) program
CCS professionals go through enhanced cash flow-based training to develop the skill set to deliver behaviour-based cash flow advice. They start the financial planning process with a cash flow plan to genuinely help their clients get more life from their money.
About the Real Life Money program
An annual, digital, behaviour-based program that teaches employees everything they need to know and do to become financially capable. Our proven financial wellness program that combines online workshops, microlearning, and a powerful app called Winton that puts
financial capability, confidence and control into the hands of every employee. Learn more.