Human Resources

Do You Offer Financial Training?

You know that personal problems can have an adverse effect on employee performance. And one of the biggest personal problems is often finances–a burden which can sometimes come into stark focus at this time of year when holiday spending binges may occur. But even ongoing financial responsibilities can sometimes get out of hand–sometimes through no fault of their own.

Consider these facts about medical costs, for example:

  • In 2004 (only 8 years ago!) the average annual cost of health insurance per employee was $6,059, according to a Hewitt Associates report. Of that figure, employees paid 35%, including their premium contributions of $1,068 and out-of-pocket costs of $1,051, for a total of $2,119 per year.
  • By 2011, the annual cost had risen to $9,821 and employees paid an average of 44.7%. Employee premiums were $2,209 and out-of-pocket costs were $2,177, totaling $4,386.

And these facts about retirement saving:

  • Only 31% of employees have access to a defined benefits pension plan, according to the Bureau of Labor Statistics.
  • Half of all people understand the basics about investing, according to Financial Finesse’s research.
  • The same research indicates that 83% of employees feel unprepared to meet their retirement needs.

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Add in the repercussions of the Great Recession, and you have a mix that’s just, well, depressing–to use an appropriate adjective. A few statistics from LPL Financial and Financial Finesse make it clear that company responses to escalating costs have left employees financially stressed as never before:

  • Many companies deal with increasing benefits costs through cost-sharing, resulting in a much greater financial burden being borne by employees.
  • Companies have suffered financially, resorting to layoffs, salary freezes, and salary cuts.
  • Employees may have stopped 401(k) contributions, borrowed from their plans, used credit cards to survive, and made other desperate decisions that weaken their future prospects.

Teach Employees How to Fish

Teaching your employees financial education may be the best hope for many of them, according to Liz Davidson, CEO of Financial Finesse, Inc. Companies that provide this kind of education are, to paraphrase an ancient adage, teaching employees how to fish. “What they find is that as employees learn to better manage their money and control debt, they tend to be more active in their own retirement—freeing up dollars to save and learning about investing,” she says. “Our most recent research shows more employees are using calculators to check if they are on track for retirement, which is a positive sign.”

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Delayed Retirements Cost Employees and Employers

When employees are unprepared to retire on time, they may be disappointed and frustrated. The company may benefit from retaining experienced employees, but it also may pay a price. Delaying retirement could cost the company $50,000 or more per year considering higher wages, health insurance, workers’ compensation, vacation days, and other benefits, when compared to replacing the older worker with a younger, less expensive employee. Morale among younger employees can be negatively impacted when they know their potential to move up within the company is reduced.

But financial education may be expensive. Considering that your company has been suffering right along with the employees, how can you find the money to provide it?

In tomorrow’s Advisor, tips on how to afford financial education plus a peak at an affordable online HR training resource.