Levering tech for financial wellness

As this benefit becomes more common, employers should ensure their programs have smart defaults and employee touch points

Mar 23, 2019 @ 6:00 am

By Andrea Dinneen and Mariel Beasley

When employees struggle financially, their employers struggle. Recent research on short-haul truck drivers conducted at the University of Pittsburgh shows that when employees' financial stress rises, companies experience a $1.4 million increase in costs due to preventable accidents, according to a report, The Cost of Financial Precarity. Intuitively understanding this, more and more employers are offering workplace financial wellness programs.

Unfortunately, many current wellness programs are ineffective. They focus primarily on providing information or access to additional resources, such as personal financial management apps, financial advisers or financial coaches. Because all three require significant time and effort, they are rarely accessed by employees and are rarely paired with actionable steps.

We suggest another strategy for workplace financial wellness programs that works across the employee lifecycle to leverage the tremendous power of existing human resources digital platforms.

Day one

New employees make many of their most important financial decisions during company on-boarding. As they traverse the HR setup, they choose a retirement plan, set up paycheck direct deposit and decide on health insurance.

The first leg of any good financial wellness program for employers should be to pay close attention to the platform defaults. For instance, is the retirement savings program opt-out? Ninety-two percent of new employees choose to participate in their employer's 401(k) program when the program is opt-out, or automatic enrollment, compared to only 47% when it is voluntary enrollment, according to a report published last year by Vanguard Group

Do contribution rates increase automatically with pay raises? Auto-escalating contribution rates lead participants to increase their retirement savings contributions from 3.5% to 13.6% over 40 months, according to the book "Save More Tomorrow" by Shlomo Benartzi (Penguin Group, 2012).

Finally, are employees encouraged to set up paycheck direct deposits to both checking and savings accounts? An estimated 93% of employees who split their direct deposit report saving every month — yet only 21% of employees currently split their direct deposit into multiple accounts, according to the Electronic Payments Association. Companies should work with their HR platform providers to ensure good financial choices are the default option.

Promotions, job change

Promotions or job changes are another good area for financial wellness programs to focus on, since it's at these key moments that employees should reset their defaults.

While one-on-one coaching can work at these moments, it's expensive to implement. Again, technology can help.

We are working with a national network of financial coaches to reduce costs by automating appointment scheduling, defaulting follow-up appointments and being deliberate about what data are shared with the coach ahead of the first meeting so in-person time is as efficient as possible. Further, digital coaching programs like MoneyMap or Ayco are high-tech, high-touch solutions that service a higher number of employees at a lower cost during these transitions.

Fully integrated coaching programs can also be proactive in reaching out to employees during critical life events like the addition or removal of a spouse or dependent, a location transfer, job promotion or a drop in job performance.

Optimize scheduling

Employers can also produce positive results for workers on a more regular basis.

Employees with more predictable schedules fare better economically, according to the Center for WorkLife Law. They don't have to pay the babysitter more when they need to work late or take an unanticipated taxi when their shift changes. Working a similar number of hours every week makes budgeting easier and allows part-time employees to confidently pick up second jobs.

Despite this, as of 2016, 17% of the U.S. workforce had an unstable work shift schedule and 45% said they had no control over their work schedule, according to the Economic Policy Institute. Financial wellness programs can make an impact by advocating for more predictable work schedules.

In our work with Homebase, a scheduling platform for small to midsize businesses, we found most shift worker schedules were posted only three days before a schedule goes into effect. We created a simple default button that allows employers to quickly and easily copy and post prior schedules. We are testing whether interventions like this are an easy way to get managers to post key scheduling updates earlier — an essential part of creating greater predictability for employees.

An estimated 83% of large employers offer financial wellness programs, and an additional 14% say that they plan to offer such a program in the next one or two years, according to research from Prudential Financial Inc.

As wellness programs become a standard part of benefits packages, we encourage employers and their advisers to think broadly about their own touch points. Fight for a system with smart defaults, technology-augmented coaching at times of change, and scheduling predictability to more effectively move the needle on financial health.

Andrea Dinneen is senior behavioral researcher at Duke University's Center for Advanced Hindsight. Mariel Beasley is a co-founder of Duke University's Common Cents Lab and a senior applied researcher at the Center for Advanced Hindsight.

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