Financial stress continues to challenge today’s workforce. Rising costs, layoffs, economic uncertainty and unpredictable incomes are putting pressure on many employees’ day-to-day lives.
Even when you offer rich benefits, those benefits may focus more on the long term. Research underscores a growing disconnect between what employees need now and what many benefits packages are designed to address.
Financial realities for today’s workforce
According to Prudential Financial’s “Benefits & Beyond” study, employees’ top financial concerns include:
- Saving for retirement (45%)
- Affording everyday goods (44%)
- Covering housing costs (29%)
- Making it paycheck to paycheck (26%)
Aside from retirement savings, the remaining challenges center on everyday financial needs. And that can create everyday stress for employees.
Prudential’s research suggests those challenges may be going unnoticed. Nearly all (97%) employers say they prioritize worker well-being. But only 69% of employees agree with that assessment.
The gap is particularly pronounced with respect to short-term financial challenges. About 75% of employers say their benefits help employees prepare for retirement. However, only 35% believe that benefits offerings address employees’ everyday expenses.
This mismatch matters to employees and employers. For employees, immediate financial pressures increase stress and barriers to work. On the employer side, financial stress affects attendance, engagement, productivity and performance. The industry news site HR Morning reports that 74% of employees would likely leave their current employer for one with better financial benefits.
How traditional benefits can fall short
Most benefits programs have been designed around long-term financial goals. Retirement plans, health coverage and income protection are essential. But they don’t always help employees navigate common cash-flow challenges.
Employees of all income levels can face financial challenges. But low- to moderate-income employees more often face:
- Variable schedules and fluctuating incomes
- Limited or no emergency savings
- Exposure to unexpected or unaffordable expenses (e.g., child care, car repairs, medical bills)
- Reliance on overdrafts, payday loans or high-cost credit cards
When an employee is worried about covering rent or finding transportation to work, long-term planning tools won’t provide meaningful relief.
This experience can create a cycle of stress that leads to absenteeism and disengagement. For employers, this stress often shows up in missed shifts, distracted work, scheduling challenges and higher turnover. This can especially impact organizations with more hourly and frontline roles.
Financial benefits that support employees’ everyday needs
Financial wellness is closely linked to overall health. Finding a way to support employees with everyday expenses can boost workforce well-being.
You can address this challenge by supplementing core benefits with targeted financial tools that address short-term needs. These tools don’t require a complete redesign of your benefits program. You can start with one or two options, or take a phased approach that adds targeted resources based on workforce needs and capacity.
The following offerings can provide short-term stability while reinforcing the value of long-term programs such as retirement and health care benefits.
- Supporting emergency savings
- Providing relief during tax season
- Offering earned wage access
- Addressing student loan debt
Supporting emergency savings
Even modest savings can reduce employee stress. You can help your workforce prepare for unexpected expenses by:
- Offering an emergency savings program. You can automate emergency savings accounts through payroll deductions. Some organizations offer bonuses or matching contributions to increase emergency funds and usage.
- Integrating emergency savings features into a retirement plan. This strategy allows employees to save for short-term needs while pursuing long-term goals.
Accessible emergency savings can help employees avoid high-cost debt and better withstand financial shocks. Financially healthier employees improve organizational well-being and workforce stability. According to the emergency savings platform Sunny Day Fund, 86% of employees say that financial stress hurts their mental health. University of Phoenix Workforce Solutions reports that financial stress costs U.S. employers $183 billion a year in lost productivity. In addition, financially stressed employees are twice as likely to seek a new job.
Providing relief during tax season
Tax season can be stressful, especially for those worried about their financial health. Employees may compound this challenge by overpaying for tax preparation.
Many lower-earning employees with children can boost their income through tax credits such as the Earned Income Tax Credit and the Child Tax Credit. But eligible individuals may miss out on these opportunities.
You can support your employees by:
- Educating them on tax savings and programs
- Providing access to low-cost or free tax preparation
- Promoting programs like the IRS Volunteer Income Tax Assistance and AARP Foundation Tax-Aide Service, which offer free tax preparation and filing services to certain taxpayers, including those with low to moderate incomes
- Encouraging employees to direct part of their tax refunds into emergency or retirement savings accounts
Offering earned wage access
Employees struggling with day-to-day expenses can’t always wait for their next paycheck. Organizations are increasingly exploring earned wage access (EWA) that allows employees to access funds they’ve already earned before their scheduled pay date.
EWA can help employees with tight budgets by reducing reliance on overdrafts, late fees and high-cost borrowing.
But EWA isn’t for everyone. It is most effective when it complements broader financial wellness efforts. EWA programs can be confusing or reinforce bad spending habits. To keep this tool supportive, evaluate any EWA program you’re considering for:
- Fee transparency
- Payroll integration
- Access limits and guardrails
- Alignment with savings and budgeting tools
Addressing student loan debt
Student loan debt continues to hurt many employees’ financial well-being. Legislation empowers organizations to support workers. For example, the SECURE 2.0 Act allows employers to:
- Offer tax-free student loan repayment assistance up to $5,250 a year
- Match student loan payments with 401(k) contributions
These options support employees’ long-term financial goals while allowing them to tackle immediate needs.
For lower-cost options, you can provide education to help employees:
- Understand student loan forgiveness options
- Manage student loan repayment and refinancing services
- Learn about budgeting and financial management resources
- Avoid scams related to student loan repayments
Moving forward
Financial stress is more than an individual issue. It’s a workplace challenge with long-term business consequences. Aligning your benefits with employees’ economic realities can strengthen workforce well-being, engagement, retention and performance.
The above benefits can help employees address income timing, cash shortages and emergency access. To take a thoughtful, phased approach to these offerings:
- Assess your employees’ most significant financial challenges
- Build on existing benefits, resources and programs
- Roll out solutions in manageable stages with clear, consistent communication
Contact us for more guidance on identifying and evaluating benefit options that align with your workforce’s needs. We can explore solutions and implementation processes.
