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Four Ways to Help Employees Alleviate Debt and Financial Stress

Financial Health
the one minute takeaway
When employees have financial stress, their overall health and productivity are impacted. Voluntary benefit strategies can be integrated into your benefits package to help employees at little or no cost to the employer.

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By Heather Garbers 

These days, it’s the rule, not the exception. More American workers are living paycheck to paycheck than ever before, just making ends meet.

Today, nearly three-fourths of them have less than $1,000 saved; and 34 percent have nothing in savings. They haven’t budgeted for unexpected expenses and have greater financial exposure than ever before.

Among their greatest vulnerabilities? Medical expenses, for one. A significant percentage of Americans has trouble affording their premiums, deductibles, co-pays and prescription costs, and half would be challenged to pay an unexpected $500 medical bill.

Those who don’t have medical expenses may be saddled with student loan debt. It’s reached the $1.3 trillion level among some 44.2 million borrowers in the U.S. And, the financial stress to repay is significant, as 40 percent of borrowers are either already in default on their loans or more than 90 days past-due.

Employers are recognizing that their people are struggling financially – and that it is taking a toll not only on them personally, but also in the workplace. The financial stress can affect employees’ health as well as their presenteeism and productivity. This dilemma is making financial wellness an important added dimension of today’s evolving culture of wellbeing.

Four ways to strengthen the financial health of your employees

Now more than ever, there are innovative benefit options and strategies that employers can bring to the table to relieve the financial stress on employees -- offered as either affordable employee or employer-paid voluntary or group benefits:

  1. Student loan assistance. Today’s Millennials are challenged to get their lives going despite the crushing burden of student loan debt, and trust their employers for advice on how to manage it. Doing so will win the loyalty of this group of employees -- almost 90 percent would commit to their employer for at least five years in return for assistance in paying student loan debt. There are a lot of new vendors in this industry offering a variety of services that allow employers to customize programs to best fit everyone’s needs. As a voluntary benefit, employers can offer services that a) help analyze the loans and make repayment recommendations; b) refer employees to reputable resources for refinancing or taking out new loans if needed; or c) allow employers to make contributions to employees loan balances. Student loan debt can also keep Employees from participating in their employer’s retirement savings plans. Employers can demonstrate their value by offering a different solution -- matching employee contributions to an established student loan savings program.

  2. Employee Purchasing Programs (EPP). When people are experiencing financial stress and are confronted with unexpected expenses – say a refrigerator dies or their child needs a computer for homework – they may take on high interest credit card debt or a payday loan. Employee purchasing programs are a great way for them to avoid amassing high interest rate charges. Purchasing programs allow employees to make online purchases and pay for them through either paycheck deductions or monthly bank drafts over time for a number of brand name products, with no credit checks, hidden fees or interest charges. While product catalogues vary by vendor, items can range from furniture to electronics to major appliances. Employers are not liable for payments but rather serve as a trusted sponsor and conduit, giving employees a useful option to meet their needs.

  3. Low Interest Installment Loans and Credit. Another danger for financially stretched employees is the ease with which they can get payday loans or cash advances on their credit cards. The exorbitant interest rates only worsen the vicious cycle of debt. There are services, however, that underwrite low-interest rate installment loans well below the going rates. Employers can sponsor the service at no cost as a voluntary benefit. The credit lines have limits that are determined by employment status and the employee’s income level. And, there are no restrictions on how these funds are used by the employee. Paycheck deductions help the employee manage the repayment at a far more responsible level than the predatory schedules required by payday loan providers.

  4. Financial planning and wellness services.Whether offered as one-on-one, personal coaching or online resources with interactive money management tools, Millennials, GenXers and Boomers all appreciate when employers offer resources to help them understand how to repair or build their credit and better manage their money. Employers can occupy a position of trust and cement long-term employee loyalty by sponsoring these services to help empower employees with their personal financial management.

Putting strategies in place to address your employees’ financial stress today leads to a less stressed, more productive workforce and can help to increase their loyalty to you as an employer.

To learn more about these voluntary benefit options, contact your HUB employee benefits advisor today.