Less financially stressed employees tend to stick around

The more financially “well” an employee, the longer they stick around, says a new study.

According to Bank of America’s 12th annual Workplace Benefits Report released Tuesday, 84% of employers now say that extending financial wellness tools can help reduce employee attrition, and 81% say wellness tools help draw better-qualified employees. This is clearly of critical importance amid the current tight labor market, or so-called “Great Resignation,” where 46% of employers have seen an increase in workers exiting over the past year, according to the study.

“Most companies equate financial wellness with just an employer retirement plan even though there are many ways they can help support an employee's financial wellness. This can be as simple as providing access to financial planners or coaches to help educate employees on budgeting, saving, investing and managing debt, said Daniel Loughlin, managing director at Heald Financial Advisor, part of Stratos Wealth Partners. "When employees are less stressed about finances, they are more productive and less likely to look for another job.”

Along those lines, the survey showed that approximately a third of employees have switched jobs or thought about switching jobs during the past year, very often as a result of stress caused by the current economic and inflationary environment.

Eighty percent of employees are worried about inflation and 71% feel squeezed by the cost of living, concerns that are affecting their overall sense of financial wellness. Most notably, the percentage of employees who felt financially well dropped to five-year low of 44% in July, down from 57% in February.

“We must acknowledge that high inflation and volatile investment markets will play into how individual employees feel about their financial wellness. Employers pushing out more educational opportunities through trusted financial advisers could prove to be even more useful, and appreciated, during these times,” said Beth Bosworth, wealth adviser at Perigon Wealth Management.

Another finding of the nationwide survey of 824 employees and 846 employers was companies' increased sense of responsibility for the financial wellness of their employees. Ninety-seven percent of employers felt responsible for employee financial wellness, up from 95% in 2021 and 41% in 2013.

In fact, almost two-thirds (62%) went so far as to say they feel extremely responsible for their employees, up from 56% in 2021. That figure proved to be more than fine with employees, with 82% saying employers absolutely should play a role in supporting their financial wellness.

Furthermore, employers that broaden their wellness programs to include mental and physical wellness resources are seeing noticeable improvements in productivity (50%), employee stress (43%), employee morale (41%) and employee creativity and innovation (36%).

The survey shows employees certainly need those mental and physical wellness resources. Half of employees have taken actions in the last six months related to financial strain, including tapping into emergency savings (21%), working additional hours (21%), looking for higher-paying jobs (20%) and taking out a 401(k) hardship withdrawal (6%).

Workers also have the future on their minds, with retirement remaining a top concern. As of July, 56% of employees were confident they will reach their retirement goals, down from 69% in February.

“We know the last several years have been challenging in a variety of ways, something we see reflected in the research around wellness and financial wellness, specifically financial wellness," said Jeffrey Green, senior vice president at Advisor Group. "Employees are increasingly looking to their employer to provide tools to help alleviate financial stressors and Advisor Group intends to continue to strengthen our programs over time.”

[More: Insurance benefits seen as useful tool for attracting, retaining employees]