Potential benefits clash in the workplace

Employers and employees recognize the link between employees’ financial well-being and their physical and mental health. In 2018, MetLife released a study that found 61% of employees rated their financial wellness as good or excellent. However, by 2020 that figure had decreased to 49%.

With this growing fear of financial insecurity, companies are increasingly stepping up to provide help to their employees. Bank of America, in its 2019 Workplace Benefits Report, showed that 53% of companies today offer financial wellness programs, up from only 24% back in 2015. Financial wellness programs, although not always well defined, generally involve a holistic view of employees’ financial position.

While an employer showing empathy for its workers is commendable and ultimately beneficial for both the employees and its corporate goals, there is rising tension between providing meaningful holistic financial help and maximizing each employee’s privacy expectations.  

On Nov. 3, a substantial majority of California voters passed the California Privacy Rights and Enforcement Act, which substantially expands individual privacy rights. Spark Institute was instrumental in helping design the CPRA so that employers with California employees can continue to offer financial wellness at least until Jan. 1, 2023. Spark continues to work with California to ensure that employees can continue to have access to robust employee benefits beyond that date. 

Key questions that employers need to address:
• Do your financial wellness programs protect the company by preserving employees’ expectations of trust and privacy?
• Is there transparency so that employees understand what they need to share to optimize their benefit from a financial wellness program? 
• What aspects of the programs create tension or conflicts between wellness and privacy?

The coming challenge for employers, policy makers and service providers will be balancing these apparently conflicting interests.

If the goal is to address workers’ stress, then it's necessary to know their concerns broadly. Telling someone that they should save more for retirement is not helpful if that individual is drowning in student loan or credit card debt. Employees may worry about providing that information, though.

In a recent article from the Society of Human Resource Management, "Watching the Workers," employees expressed suspicions about data their employers collected on them. An SHRM survey asked whether workers trusted their employer to protect their data. The results showed 52% did, but 48% did not.

A recent HR Metrics & Analytics Summit survey went further and found that employees' main fears about data collection were:
1. Insecure software.
2. Incompetent IT departments.
3. Previously lost data.
4. A lack of transparency about how data are being protected.

Financial wellness programs have become widely available because they have been shown to boost productivity. However, employees worry that companies could abuse the data needed to make these programs effective. For instance, they may worry that companies may share their data with third parties without their knowledge or permission.

The flip side to this privacy dilemma is the real benefit that financial wellness provides to employees. The Bank of America report explored these benefits and found that financial stress causes employees to be less productive, have increased absenteeism and be distracted by financial anxieties. As a result, 62% of employers feel “extremely responsible” for their employee’s financial wellness, as compared to 13% of employers in 2013. In 2020, 72% of employers saw an increased usage of financial wellness resources.

You cannot learn about your employees’ financial well-being without knowing their situation. But who owns the data? Who is liable for decisions made based on an analysis of data collected? If an algorithm crunches data to give financial advice about saving in a health savings account or contributing more to your 401(k), is anyone legally responsible for the advice? Is the employer who relied on the vendor’s algorithm culpable? Or is the vendor that came up with the algorithm?

So are employers left in limbo and employees abandoned until policy makers work out privacy rules?

It's possible to design a program that balances these competing priorities. Although there is no one way to structure a financial wellness program, an employer may, with a combination of voluntary disclosure and messaging help build an environment of trust.

In addition, an employer can define its own standards for determining who it will partner with on its financial wellness program. By being clear about its intent and how the data will be used and protected, an employer can move forward while accepting an evolving regulatory landscape.

Tim Rouse is executive director of the Spark Institute. David Levine and Kevin Walsh are principals at Groom Law Group.