Other notable findings included:

Breaking Down the Barriers to Financial Wellness

• 51% of employers surveyed saw an increase in employee wage garnishments
• 42% of employers surveyed saw an increase in employee emergency loans
• 34% employers surveyed saw an increase in employee requests for time off to deal with personal financial issues
• While 88% of employers provide retirement plan education, only 28% provide basic financial education on critical items such as budgeting, debt reduction and credit management.

One thing to focus on here is that 70% of survey respondents believe financial education is important and yet only 28% claim to offer a program.  What is the reason for this gap?

Employers surveyed cite cost, sacrificed work time to attend and higher priority competing items.  Let’s talk this through:

• Cost.  There has long been a misperception about the cost of financial wellness programs.  In our experience, companies can provide a financial wellness benefit for a cost equivalent to 1-2 employee lunches per year.  Not bad.
• Sacrificed work time.  A good financial wellness solution will offer online education (24/7 access), seminars and a financial coaching benefit.  All of these items can be made available to employees outside of normal work hours.  Even if these services are being used during work hours, it is likely far less than the time spent missing work and/or distracted on the job because of personal financial issues.
• Higher priority items.  While this one is hard to address without seeing the prioritized list, financial issues are likely one of the largest drains on productivity in organizations today.  A comprehensive financial wellness solution can produce an ROI to organizations of well over 3 to 1.

Retirement Plan Loans Symptomatic of Financial Health Issues

• During the second quarter, 62,000 participants initiated a hardship withdrawal, as compared to 45,000participants who initiated one during the prior quarter;
• 45% of participants who took hardship withdrawals one year prior also took a hardship withdrawal in the 12 month period ending in the second quarter of this year.

The primary reasons why participants are taking hardship withdrawals are to prevent foreclosure or eviction, pay for college, and to purchase a primary residence.

Fidelity expressed concern that many of these workers may not be fully educated about the consequences of these decisions.  And this may be true in many cases.  For instance, it would likely only take a few minutes for a financial advisor to convince an employee why paying for a child’s college education with your retirement money is a poor decision for most.  After all, your kid can get a loan for college, you won’t be able to get a loan for retirement.

But, for many dire situations, a 401(k) loan or withdrawal may be the only option.  And yes, it is important that employees understand the repercussions.  However, as Fidelity mentions, for most employees, a retirement account is really the only savings they have.  That’s the problem you have to solve if you want to keep employees out of the retirement cookie jar.

Your company financial wellness initiative should be comprehensive enough to solve both problems.  Explain the fees and show them those 30 year charts that illustrate the high opportunity cost of withdrawal.  But, you must also help struggling employees get above water and start saving for the types of emergencies that they’ve come to rely on their retirement savings for.  Do that and your sure to be rewarded with much more focused and productive employees.

When changing health plans, benefits communication can help focus on the positive.

Providers face rising health care costs but still must supply the legally required amount of care.  To do so, 63% of employers who are changing plan details have decided to raise the percentage that employees contribute to the premium, while 46% aim to raise out-of-pocket maximums.  Another 61% will be offering consumer-directed health plans, or CDHPs, which are a proven method of increasing consumer flexibility while cutting costs.

With so many benefits changing, it is important that employees thoroughly understand the developments and the reasons behind them.  The efforts that must be undertaken to get an employee to fully understand a CDHP are substantial and probably well telegraphed at this point.  If your strategy is to introduce this complex new benefit with a few vendor-provided brochures, you’ll likely end up with the status quo – single digit adoption rates.

Shifting a larger share of the cost to employees will likely be seen as a negative no matter what you do.   But, it’s never a good idea to let employees come to their own conclusions about those changes.  With effective benefits communication, you can provide context and position plan changes with your employees. Further, you can show them how to better utilize their plans and capture the cost-savings opportunities that are available to them.  Investing in benefits communication is perhaps the easiest and most cost-effective way to improve the perception that employees have about their benefits and about you as an employer, even in the wake of negative changes.

So, the natural question is why a credit score of all things would be used to evaluate a prospective employee?

One likely reason might be that employers worry that a poor credit score indicates a lack of responsibility that could ultimately translate into poor performance.

Credit score indicative of a poor performer?

But there may be another important reason…or, at least there should be.  The impact of poor employee financial health on corporate productivity has been well publicized in the wake of a troubled U.S. economy.  Many employers may feel that employees with poor credit are likely to spend significant time at work worrying about or dealing with their personal financial issues.  Or, worse yet, miss work entirely.

Whether or not a FICO score is a suitable barometer for a candidate’s future success, these results reveal that in the minds of many employers, there is an important link between control over personal finances and job performance.

But what about existing employees?

Employers might make more productive use of this link by introducing broad financial wellness education to current employees, rather than simply focusing on the credit histories of a few new hires – especially considering that credit reports are often explicable or simply inaccurate.

Many states are pushing to make the investigation of credit histories by prospective employers illegal. Employers will need to find a new tactic to ensure the financial health of their workforce.  A comprehensive financial wellness initiative can be a much more effective means towards this desired goal.

Benefits communication used to engage and retain employees as economy improves

Mercer recently announced the results of their Attraction and Retention Survey, covering over 320 employers this year. These are their most valuable findings:

Better economy means higher employee turnover. As the economy and job market continue to improve, 62% of companies think employee turnover will increase as well. When employees have more options, they are less likely to be loyal unless their company puts effort into keeping them.

Companies are expanding again. The economy is picking up and so is hiring. Nearly all companies surveyed are hiring. In fact, only 3% are reducing their workforce. Nearly one-third (27%) of companies are expanding, up from 12% shown in the 2009 Unprecedented Times Survey. This is a clear sign of companies’ confidence in the economy.

Companies are concentrating on engagement to retain employees. Employee engagement has increased in 47% of companies in the last 12-18 months, likely thanks to companies’ specific efforts. Engaged employees are less likely to stray and have higher performance levels, according to a Mercer principal. Retention is as important as expansion, when other employers can lure good talent away.

Benefits communication is the highest contributor to increasing employee engagement. Organizations have increased non-cash rewards as a means of retaining and engaging employees in the past 18 months. The reward most often used was benefits communication, which companies have used 27% more. Even as the economy improves, non-cash rewards serve as an important means of curbing turnover. Non-cash rewards are a good way of communicating confidence and appreciation for employees. It is also much cheaper to implement rewards programs than to hire new replacement employees. If employees don’t understand, value, or even know about these rewards then they won’t merit much. That’s why benefits communication has become such a vital resource for companies to keep employees engaged and loyal.

Benefits education proven effective for increasing employee satisfaction

Here are some highlights from the study:

• “What you say” is as important as “what you do.”When it comes to workplace satisfaction, the way that you communicate benefits may be just as important as the benefits themselves. In fact, those employers with poor quality benefits packages were able to improve workplace satisfaction ratings by 32 points with highly rated benefits education.
• Benefits Changes on the Rise; Quality of Benefits Education on the Decline. Roughly half (45%) of employees surveyed reported that they had seen changes in their benefits packages in 2009. And yet, the quality of benefits education declined sharply as 29% of workers gave their benefits education positive ratings in 2009 vs. 39% in 2008.
• Accommodate various learning styles. 70% of employees surveyed use web-based materials when available. Online videos and interactive tools are a great way to satisfy all three learning styles – visual, auditory and “hands on.”
• Effective benefits education helps retain talented employees.  In fact, 77% of employees who believed their company had good benefits education said they would stay with their employer even if they were offered the same pay and benefits elsewhere. As the job market improves, employees feel more comfortable looking elsewhere, so communicating the value of benefits is important.

Investments in benefits education can be a low-cost, high-impact way to affect worker satisfaction.  Even when paired with a below par benefits package, effective benefits education can be a cheap means to dramatically improve job satisfaction, employee engagement, loyalty and productivity.  Unlock the value of your benefits package with benefits education.

Benefits Communications for Delicate News

that medical care costs will once again rise at near double-digit rates in 2011.  According to PriceWaterhouseCoopers’ Health Research Institute, medical care costs are expected to increase by 9% in 2011, a slight deceleration from the 9.5% rise posted in 2010.

Cost sharing has become a critical tool to help keep medical care costs affordable for both employer and employee.  2011 will be no different.  Here are the key findings of the PwC report:

• 42% of employers intend to increase employee contributions for health insurance coverage
• 41% plan to increase medical cost-sharing, including higher-deductibles and co-pays
• 26% expect to increase prescription drug cost-sharing
• 67% of employers will most likely expand or improve wellness programs

In addition, many employers will add high-deductible health plans in the coming year to help ease the cost burden.

Those employers with a Fall Open Enrollment are heading into a critical time.  Important decisions will be made that will have a significant impact on the cost of benefits for employees and their families.  Careful thought, consideration and resources will go into making plan decisions and yet too little thought and preparation will go into communicating the changes.

With so much at stake, what is your plan for communicating this delicate information?  How will you deliver the news that your employees are once again being asked to shoulder a larger share of the cost burden?  How will you drive enrollment in that new and very complex high deductible health plan?

Rethink the lengthy and ineffective emails, brochures and web pages. You know that employees and family decision makers aren’t reading them – no matter how pretty they are.  And employees who operate in the absence of information are likely to come to the wrong conclusions about plan changes.  They are likely to avoid newer health plans in favor of the ones that feel familiar.

This Open Enrollment period, don’t let your communications strategy go by the wayside.  Demonstrating transparency and carefully communicating the difficult changes that are being made to benefits are nearly as important as the changes themselves.  Remember that introducing a high deductible health plan only saves the company money if you can convince an employee to adopt it (assuming they have alternatives).

For tips on communicating effectively, please see our March post:   Benefits Communications for Today’s Employee.

Financial Wellness ROI

who “tough it out” and come to work but operate far below normal productivity. But, there are many types of presenteeism.  There could be any number of reasons why an employee checks out and productivity suffers.  And, while presenteeism is a relatively new term, you likely have some established policies in place for helping employees stay focused at work.  For instance, over half of US companies have blocked access to Facebook, Twitter and MySpace.  Presenteeism, in its entirety, is a huge productivity issue that far exceeds that of absenteeism.

To say that presenteeism is an ambiguous problem is certainly an understatement.  It’s impossible to measure, difficult to address and simply acknowledging that presenteeism is an issue at your organization tends to imply that the company is not well run.

But, you may find that you can take steps to address the core drivers associated with presenteeism.  And by taking steps to proactively address those core employee issues, you can solve a large portion of the problem.  Similar to the issue of employee stress, recent studies show that employee money issues are a major root cause driver of presenteeism.

Think about it for a moment.  If you were in debt trouble, on the verge of losing your home or had your retirement cut in half due to the recession, wouldn’t you spend time at work dealing with these issues? Even the model corporate citizen would have trouble answering “no” to this question.

But just how big is the problem?  Well, the Personal Finance Employee Education Foundation recently did some studies on personal financial distractions in the workplace.  You can estimate the annual cost of financial distractions at your organization with this calculation:

1. Employees in your organization: ______________
2. Divide by 4 (1 in 4 employees is in financial distress on average)
3. Multiple by 16 hours (distressed employees spend 12-20 hours per week at work on money issues)
4. Multiply by 12 months in a year
5. Multiply by average hourly wage of your employees:__________

For example, an organization of 1,000 employees has approximately 250 financially distressed employees.  The company loses 16 hours of productivity per month for each of these employees which results in 48,000 hours of total lost productivity per year.  Assuming an average annual salary of $50,000/year, this company incurs $1,200,000 per year in lost productivity from financial distractions.

This is just one of several important issues that drive the need for financial wellness in the workplace.  If you take the time to sit down with the numbers, you will likely find that introducing these types of programs may be one of the higher ROI initiatives you have available to you.

Achieving Wellbeing

But what does that term wellness really mean?  What are the determinants?  How do you measure employee wellbeing and what sort of programs can you put in place to improve it?

These are not easy questions to answer but certainly relevant if the goal of your benefits program is ultimately employee wellness.

A recent study by Gallup, in partnership with leading economists, psychologists and other acclaimed scientists uncovered the common elements of wellbeing that transcend countries and cultures.  In Gallup’s initial research, they asked people what “the best possible future” for them would look like. They found that when evaluating their lives, people often give disproportionate weight to income and health: across the groups Gallup surveyed, “good health” and “wealth” were two of the most common responses.

After completing a broader study, Gallup’s research revealed the universal elements of wellbeing that differentiate a thriving life from one spent suffering. They represent five broad categories that are essential to most people:

1. Career Wellbeing: how you occupy your time — or simply liking what you do every day
2. Social Wellbeing: having strong relationships and love in your life
3. Financial Wellbeing: effectively managing your economic life
4. Physical Wellbeing: having good health and enough energy to get things done on a daily basis
5. Community Wellbeing: the sense of engagement you have with the area where you live

The study goes on to point out that if we’re struggling in any one of these domains, as most of us are, it damages our wellbeing and wears on our daily life.  Unfortunately, only about 7% of people surveyed are thriving in all 5 areas.

As an employer, you probably offer programs in a number of these areas.  For instance, you likely have a talent management system that helps employees manage their career growth and job satisfaction.  As a part of your benefits offering, you may provide wellness programs dedicated to improving employee physical and mental health.  You may even have initiatives that promote community involvement.

But what are you doing to address employee financial wellbeing?  What programs do you have in place that help employees truly solve their financial issues and improve their financial health?  Given the economic volatility that has plagued the last few years, shouldn’t this be an area of focus?  Interestingly, the financial wellbeing component, while arguably one of the more important aspects, has been largely underserved by employers.

Financial Wellness is the logical next phase when it comes to ensuring the wellbeing of employees.  In fact, research and evidence suggests that it is employer investments here that will ultimately be the most productive.

Employee financial issues a central theme in this year's survey

years, the themes of employee financial security and benefits communications played a more prominent role than ever before.  This was a natural emphasis given the backdrop of economic volatility and a renewed employer focus on benefits cost control.

We wanted to highlight and provide my perspective on three key points that came out of this year’s study:

There is a Health-Wealth Connection.  MetLife’s survey work, which is consistent with other studies we’ve seen, revealed a connection between an employee’s physical and financial health.  Put simply, those employees who assessed their medical health as “fair to poor,” were much more likely to report financial concerns.  MetLife therefore concluded that an employee’s health status impacts an employee’s financial situation.  Our conclusion would be a different one.  Given our experience with employee financial stress and the studies that have been done in this area, we believe strongly that it is an employee’s money issues that leads to poor health and NOT the other way around.  Stress has long been referred to as America’s #1 health problem and virtually every study you read points to money issues as the leading cause of stress (and it’s not close).

Benefits Communications Effectiveness on the Decline.  Each year, MetLife surveys employers and employees on their perception of benefits communication effectiveness.  This is one of those areas of true disconnect.  Over the past three years, employers believe they have made slight improvements to their benefits communications.  Employees, on the other hand, rate benefits communications as less effective than the year before.  In fact, this year only a third of employees rated their benefits communications as effective vs. 40% in 2007.  Just in the last three years, there have been such dramatic changes in the way that employees access information and learn.  And yet, too many employers have stuck to dated and ineffective forms of communications that have been in place for decades.

Personal Financial Distractions Drain Productivity.  In the past 12 months, 12% of employees surveyed took unexpected time off to deal with a financial issue and 17% reported that they spend more time at work on personal financial issues than they think they should.  Personal financial distractions are and have been an expensive problem for some time now.  What is encouraging, is that almost two-thirds of employers have now recognized personal financial issues as a drain on productivity and 45% acknowledge financial education as an effective solution.

Key takeaways:

• The financial health of employees may be one of the largest determinants of their medical health.  Your health wellness strategy should include a financial wellness component.
• You can improve employee understanding of benefits but you need a modern approach to the way that you communicate them.  This does not need to be an expensive undertaking – improving benefits communications will cost you a tiny fraction of the benefits themselves.
• Employee money issues cost your company each day.  Providing your employees with programs that help them help themselves will increase productivity and employee loyalty.