By Tanya Ladha
No one saw 2020 coming. People started the year like any other, with big plans and resolutions for improvements, not thinking too much about how they’d manage in a sudden crisis. Employers were no different. Most had already finalized their budgets and projections, and were ready to deploy resources and initiatives to support their employees according to plan. Then, the world changed.
For more than eight months now, families and firms have lived in a world defined by uncertainty. According to a new survey of 770 HR executives just released by the Financial Health Network in partnership with Morgan Stanley at Work, 46% of employers reported an increase in requests for 401(k) loans and hardship withdrawals since the start of the pandemic. And while the data is troubling, it is also a powerful tool. By relying on more real-time and holistic data, employers will be better equipped to create responsive and relevant benefits to help their workforces weather the pandemic and beyond.
For years, employer interest in employee financial wellness has been steadily growing. In our survey, 86% of employers considered themselves aware of their employees’ financial health needs, and a majority of those are taking action to address them. Our findings suggest that this perceived awareness is based largely on limited metrics and collected infrequently, however, which contributes to a gap between employee needs and solutions. Financial lives are complex, particularly in a pandemic, when unexpected expenses or unplanned loss of income can have a devastating impact on a household’s day-to-day financial management.
When asked about evidence of hardship since the pandemic, almost a third of employers reported seeing an increase in demand for pay advances among their workforces. This suggests that employees are struggling with daily financial challenges that traditional workplace benefits, like retirement plans, can’t solve alone. To address employees’ short-term financial needs, financial health benefits could include emergency savings accounts and access to financial planning resources.
This pandemic has impacted every part of people’s lives. They are making decisions differently, and there are new considerations to take into account. Despite the uncertainty, however, our findings show that 85% of employers plan to spend the same or more on financial health benefits over the next two years, signaling an important commitment to employee financial wellness. By relying on more real-time and holistic data to measure and diagnose employee financial health, employers have an opportunity to steward their resources more effectively into responsive and informed investments to aid employees’ long-term financial health.