Employers Are Taking Note Of Financial Wellbeing

We continue to hear about how employees struggle with stress, both at work and in their personal lives. Based on results from Canada’s employee assistance providers, on average, one in ten employees will feel the need at some point in the year to reach out for assistance. And increasingly the reason for them to reach out for assistance is around financial stress – how to plan for retirement, pay down credit card debt or student loans, create a budget, simply manage monthly expenses, etc.

So why should an employer care?  Based on a recent study by PricewaterhouseCoopers, it is estimated that 50% of employees are distracted by their personal finances at work and, for those that are distracted, they spend on average about 3 hours per week dealing with their finances.  So, not only is financial stress a personal issue for individuals, it is also a significant business issue given the significant loss in workplace productivity.

Based on some recent work at ZLC Financial, here are some areas that organizations can consider exploring further with employees:

• Financial wellbeing is a state where an individual has achieved minimal financial stress with a strong financial foundation and an ongoing plan to achieve future financial goals.  Financial wellbeing is different for everyone and it is not about high income levels or low debt levels.  It is possible that some individuals with low incomes and/or higher debt levels may actually be “financially well” and that some with high income levels are not.  It is less about numbers and more about knowledge, perspective and attitude.
• Based on some recent research, there is a strong correlation between financial wellbeing and other areas of physical health.  Those individuals that are “financially well” are more likely to regularly exercise and eat healthier.  These individuals are also more likely to consider themselves to be in good physical health.
• Obviously, employees need to save for their eventual retirement but they often fail to recognize the need to find ways to save earlier in their lives.  As well, they often fail to understand the nature of retirement savings available through the Government of Canada by way of the Canada Pension Plan and Old Age Security.  If they have a retirement plan from their employer, they need to maximize their contributions and take advantage of resources available from the plan provider.  Once they have established some savings, employees then need to know how to protect those savings from financial loss and erosion due to inflation by securing adequate investment returns.  They need to understand that the best way to save is to save early, save often and save using registered financial vehicles available to them.
• Employees need to better understand about potentially life-changing events and personal risks that can significantly affect their finances.  After they recognize these risks, they need to learn about strategies to manage those risks – avoid them, retain them, share them or transfer them.  For example, most employees already share risk with home and auto insurance, but far too few understand how to use insurance to manage personal risks.  They need to better understand how those risks change over time based on major life events – marriage, divorce, mortgage, children, long term care, estate planning, death, etc.
• In general, employees need guidance to learn to live within their means, including managing personal financial crises or simply learning creative ways to reduce personal expenses.  While this may initially seem very challenging for employees, they need to gain some confidence that they can start to build a plan and then execute it.  As well, they also need to recognize, understand and deal with issues related to death – in particular, far too few Canadians actually have a Will.

Proactive employers recognize the risks related to their employees’ financial wellbeing and therefore the associated risks to their businesses.  They help their employees by way of increased education and communication.  If employers start to help their employees with financial wellbeing, those employees can then start to take care of themselves and spend less time at work worrying about their personal finances.  Ultimately employees need to start small with their plans but start now and then they need to stick with their plan, celebrate successes along the way and look for opportunities for further changes.

We would be pleased to discuss your specific situation with you to identify the best strategy with respect to your employee benefits and retirement programs.  Should you have any questions on the above, please don’t hesitate to contact me or a member of our team.

ZLC Financial is one of the fastest growing employee benefits advisors in Western Canada and we are fortunate to have the best people, resources and clients.  We provide value to you by leveraging one of the most skilled benefits teams – collectively over 300 years of experience within our team of 15 employee benefits specialists.  We have been working with businesses ranging from 3 to over 65,000 plan members for over 30 years.

By Dan Eisner

This information is designed to educate and inform you of strategies and products currently available. As each individual’s circumstances differ, it is important to review the suitability of these concepts for your particular needs with a qualified advisor.