Employees are stressed about money and don’t like being surprised by health care price hikes. How can middle market companies leverage benefits to reduce stress and surprise?
Brian Nelson Ford grew up loving finance, devouring number-heavy books that would put most other children (and their parents) to sleep. “A lot of people think finance is boring, but I was just blown away,” says Ford, who works for SunTrust Banks and holds a title the company created just for him: financial well-being executive.
Ford is right: People do find finance boring. Not only that, they don’t understand it. A George Washington University study found that only 16% of Americans are financially literate at a high level. However bored, people have paid attention long enough to be stressed. Fifty-three percent of employees feel financially stressed, per PwC’s “2017 Employee Financial Wellness Survey.” Ford says even well-paid people often live paycheck to paycheck.
To assuage employees’ financial stress, 84% of large and midsize U.S. companies have adopted an employee financial wellness program as of 2017, according to the “Employer-Sponsored Health and Well-Being Survey” from the National Business Group on Health and Fidelity Investments. This is up from 76% of businesses with such programs in 2016.
The middle market does a nice job with these financial benefits, Ford says, but it has room to improve by expanding financial benefits beyond 401(k)s and individual retirement accounts.
“Companies can say their greatest asset is their people, but if they don’t put their money where their mouth is with the benefits they’re providing … people won’t stay very long, and the company certainly won’t be able to attract new employees,” Ford says.
Middle market companies that want to attract and retain the best employees must adopt a solid financial benefit package. Employee stress lies in a lack of planning, Ford says. A company that helps its employees manage their personal finances creates a benefit package with a trenchant selling point for current and potential employees alike.
To make financial planning easier, Ford started a company, 8 Pillars—which was purchased by SunTrust after Ford used the program to ease the financial stress of SunTrust employees—and wrote a book called The 8 Pillars of Financial Greatness. The bones of his 8 Pillars method:
- No. 1, get an emergency account.
- No. 2, organize and automate.
- No. 3, get out of debt and improve your credit score.
- No. 4, plan insurance and estate matters.
- No. 5, start investing.
- No. 6, save for homeownership.
- No. 7, focus on career development.
- No. 8, start giving back.
Most HR professionals start at the fifth pillar—think 401(k) planning—when adopting financial wellness benefits, Ford says, but employees tend to be most stressed about the first three pillars: creating just-in-case accounts for emergencies, organizing and automating to pay bills on time and getting out of debt (the average American household owes $137,063, including mortgages, per NerdWallet).
If companies are stunned to find out that employees need help beyond 401(k) planning, employees are gobsmacked: Most middle market employees are surprised to learn how poor their personal financial wellness is, Ford says. A company that helps its employees become financially healthy will likely see dividends paid as appreciative employees.
What about the executives who care about employees but must care equally about the company’s tight budget and bottom line? Ford understands this concern, but says investing in the financial wellness of employees can bring companies a 3-1 ratio of return on investment—and that’s a conservative estimate.
“That’s where the CFO’s ears start to perk up,” Ford says. “Most benefits professionals realize that what allowed them to compete for talent 10 years ago is just not what’s going to allow them to compete today.”
The Battle for Better Health Benefits
CFOs are showing even more interest in health care benefits. “When we started, we dealt with HR people,” says Craig Hasday, president of middle market insurance broker Frenkel Benefits. “Now, we predominantly deal with financial people.”
Health care plan prices have increased by 5% each of the past five years, according to the National Business Group on Health. These increases have cost employers $14,000 per employee, per year on average (employees pay $4,400 per year, on average).
Companies may be powerless to stop health care price increases—with some increases likely being passed onto employees—but Hasday says executives can lessen the blow felt by employees by communicating with them. Honest communication can help employees understand the unforgiving nature of health care benefits, and perhaps as importantly, help them understand that it’s the market turning the financial screws, not the employer.
Communicating health benefit news to employees helps companies retain good employees more than it helps companies recruit new employees. Potential employees are likely satisfied by a company that simply has health care benefits, Hasday says, while long-standing employees can become frustrated with increasing deductibles, switching insurance carriers and restricted access to providers and procedures—especially without notice. To quell these frustrations, executives must divulge all health-related changes—cost savings, cost increases, plan changes, anything.
Even with a financial blitz likely for both employees and employers, Hasday says companies resist changing their health insurance plan, especially when changes make the plan more expensive or less comprehensive. “If an employee is going to have a major benefit reduction—let’s say their premiums spike—there’s a lot of discussion about what the impact to employees is going to be,” he says. “Employers resist philosophical changes about how they deliver benefits.”
Employers may resist change, but they can only resist increasing prices for so long. To save money, businesses have been offering more high-deductible health plans (HDHPs) instead of pricier (and more extensive) preferred provider organization plans. Forty percent of employers told the National Business Group on Health that HDHPs would be the only plans they offer to employees in 2018, up from 35% in 2017. While businesses may save money on premium costs by switching to an HDHP plan, employees will likely pay more out-of-pocket costs—chiefly employees with chronic health problems or frequent doctor visits.
Before companies make a change, executives must calculate what the change will mean for the financial health of their employees. “Companies can’t spring a change on employees, whatever it is,” Hasday says. “If you’re changing from one [carrier] to another, or if you’re changing from one benefit to another, you have to understand the transition concerns and address the needs of those who might be in the midst of care or about to receive care.”
The Whole Package
What arsenal of financial wellness and health care benefits will win the talent war? That’s for each company to examine, all while considering additional perks like vacation days, pay increases and shortened work weeks. Benefits have become the battleground in the fight for talent: One-third of organizations increased their benefits in 2017, per the Society for Human Resource Management’s “2017 Employee Benefits Survey.” Employees now have more work choices—including soldiering off on their own as an entrepreneur or freelancer in the gig economy. A 2016 study from Upwork found that 55 million people (35% of the U.S. population) are now their own boss.
Middle market companies may have tighter budgets than the Fortune 100, but they cannot let a taut budget compromise their competitiveness—especially as the fight for talent reaches its crescendo. Small-budget businesses must be creative to win the best-fitting employees. The proliferation of benefit weaponry shouldn’t come as a surprise, as 68% of HR professionals say they’ve had trouble recruiting in the past year. This heated competition means middle market companies must have their benefit packages locked and loaded.
No matter which benefits middle market companies offer, Ford says employees must feel good about using the benefits. This ease of use may be as simple as letting employees know that managers won’t have access to employee health or financial information. “That’s a big one,” Ford says. “A lot of employees will say, ‘I need this program, but if I start putting my information online, will my boss see this stuff?’” The answer must be a resounding “No.”
Ford’s suggestion leads back to Hasday’s recommendation to keep communication open and transparent to help employees understand their benefits—including addressing any worries or anxieties. After all, Hasday says, if employees don’t understand what benefits they’re getting or are afraid to use them, then a great benefit package will be for naught.
Hal Conick is a freelance writer for the AMA’s magazines and e-newsletters. He can be reached at halconick@gmail.com or on Twitter at @HalConick.