Running a business is as much about intangible factors as it is about tangible metrics like revenue and growth rate. Every successful executive knows about the importance of corporate culture and employee engagement as it relates to increased productivity, ultimately leading to those more tangible business goals.

We know that happier employees tend to be more engaged, and as a result more productive. But even many successful executives might not realize to what extent financial health and wellness is connected to that value proposition. 

On its own, your teams' financial wellness might not be a core objective. But once you realize the return on investment of helping your employees achieve that financial health, the need for a more active program designed to improve that health becomes more vital. That ROI might be hidden at first, but becomes more clear once you begin to analyze recent studies and workplace trends.

The Financial Needs of the Modern Workforce 

The modern workforce is no stranger to financial stressors. According to one study, 78% of American workers now live paycheck to paycheck. That means they don't set aside any money for savings on a regular basis, relying on their next payout just to live their life. In the same study, more than half of respondents said that they don't believe they'll ever be out of debt.

Those numbers explain some of the reasons why employees today tend to be stressed about their financial well-being. One MetLife study found that affording unexpected out-of-pocket medical expenses is one of the biggest financial worries our workforce faces today.

That tracks with a 2018 report by the Federal Reserve, according to which 40% of American workers could not pay a $400 medical bill without borrowing or selling at least some of the funds needed. It's a straight line from one study to the next, outlining exactly why finances have become a constant topic within our workforce:

• Most Americans live with a constant eye towards the next paycheck.
• Part of the reason is a vicious cycle of incurring debt to pay off debt.
• Unexpected expenses, which are unavoidable for almost anyone, tend to complicate the situation.

How Financial Stress Can Lead to Business Problems

In a situation like the above, it's difficult not to think about finances. That, in turn, will lead to potentially significant business and productivity problems. Any conversation about the ROI of employee financial wellness has to start with acknowledging the proven problems associated with the situation at hand.

For instance, the 2019 PriceWaterhouseCooper Financial Wellness study, a core annual benchmark on this topic, found a number of important takeaways:

• Financial health is the top cause of work-related stress, ranking at the top for 59% of respondents. 
• 30% of respondents noted that finances are enough of a stress factor to actually become a distraction at work.
• Of those 30%, almost half (46%) admitted freely that their productivity suffered as a result of this stress factor.

The study estimates that these 46% of respondents spend three or more hours every week dealing with their financial issues rather than focusing on their core tasks. That might involve anything from actual calculations to simply thinking about the situation.

It's not just passive thinking, either. A number of surveys have found that compared to their non-stressed counterparts, employees who consider their finances to be a stress factor take off 1.5 days from work every year to deal with their issues. Meanwhile, the Consumer Financial Protection Bureau has calculated this financial stress to increase healthcare costs by $400 per stressed employee every year. 

The total cost of financial stress on your organization, of course, is difficult to measure. Still, author and finance professor E. Thomas Garman published a 2004 study with two colleagues that estimated the total cost of financial stress in your organization to range between 15% and 20% of the total compensation you pay your employees, including benefits. That's a significant number.

The ROI of Building Programs Designed to Improve Financial Health

Financial stress is a common occurrence, and can lead to real business costs. Both of those statements have been proven, but provide little in the way of a solution. ROI, after all, is about making that investment to ensure you can save your company money and build a better workplace environment.

With that in mind, let's focus on the clear-cut benefit of improving your employees' financial health.

The first conclusion is obvious. If financial stress puts a financial and productivity strain on your business, it's imperative for that business to minimize that stress in order to avoid losing some of these resources. As long as the time and effort spent minimizing your employees' financial stress is less than the potential loss quoted in the previous section, the ROI of the entire effort should be positive.

The Financial Impact of Increasing Employee Financial Wellness

Beyond that basic calculation, it makes sense to dig deeper. A 2016 case study did just that, observing Fortune 100 companies and their financial wellness efforts over a five-year span between 2009 and 2014. The report scaled the quality of wellness programs on a 10-point scale. Even improving from a score of 4 to a score of 5 yielded impressive results:

• Savings of up to $433,007 in garnishments
• Savings of up to $682,034 in flexible spending and health benefits
• Savings of up to $4,347,275 in absenteeism.

Naturally, increasing the score further makes these savings even more significant. Another study, using the same wellness scale, found total savings for employers of 100,000 employees when going from 4 to 5 to be $65 million, rising to an astonishing $129 million when scores increased from 4 to 6.

Of course, the numbers won't be as large in total for smaller employers. Still, nothing in these studies suggests that the general trend, significant financial savings resulting from increased emphasis on financial wellness, is true for all businesses across industries, regardless of size.

Improving Happiness and Engagement to Raise Your Employer Profile

Beyond the financial benefits, it's also important to consider the more intangible return on investing in better financial health for your employees. Their engagement and happiness results in more individual productivity, but can also raise your profile as an employer to attract top-end talent as a result.

For instance, we know that 80% of employees value benefits over salary or wage increases when considering the right job and career for them. That's especially true when the salary of wage proves difficult to access. Benefits designed to increase financial health and reduce stress consistently rank near the top of the wish list for most employees.

Providing the right benefits, then, significantly elevates your business in more ways than one:

• Increase employee happiness, reducing their chance of turnover as a result.
• Increase employee engagement, empowering them to more collaboration and decision-making.
• Increasing your employer profile, allowing you to attract more high-end employees in the future.

That last point deserves some additional exploration. The goal of any business looking to recruit top-end talent in their industry should be to become an 'employer of choice,' securing a spot near the top of the selection list anytime someone is looking for open positions like yours. Getting to that point is largely determined by your organizational culture and reputation. If you offer the ability to increase financial health, and your employees notice, they'll talk about it - raising your profile as a result.

That basic concept remains true regardless of the level of position you're trying to fill. Traditionally, the 'employer of choice concept has largely been applied to executives. In reality, it matters even to seasonal, hourly employees. If you have a reputation for providing benefits designed to help your employees, you'll be more likely to attract reliable, productive workers across the organizational chart.

Increasing Your Employees' Financial Health: Where Do You Start?

The ROI of a strategic effort to improve your employees' financial health is significant. It ranges from clear-cut financial benefits to more subtle cultural and recruitment advantages. Of course, you can only reach these goals if you make the right choices and offer the right kinds of benefits. Some of these benefit programs might include:

• Educational programs designed to help employees manage their finances focused around common topics like retirement and health care expenses.
• Easy access to a consultant and professional contact for more personal questions that might require a more in-depth look at the situation.
• Clearly outlined guidelines and policies for anything related to your employees' finances, such as an outline of what exactly would result in a bonus or wage increase.
• A streamlined process of accessing wages as easily as possible and prevent your employees from incurring debt in the meantime.

Especially earned wage access tends to be a great tool to counteract some of the financial stress your employees are feeling. Enabling your workforce to access funds when they need them reduces the need for credit cards or other new debt, ultimately leading to many of the benefits discussed above.

It's important to start somewhere. Just as financial health and wellness is a priority for the modern workforce, it should be for employers. When the cost and intangible benefits are this significant, a conscious effort to reduce stress and maximize employee happiness can pay off in more ways than one.