Over 3 out of 4 employees currently live paycheck to paycheck in the United States—a staggering increase of 6% in the last two years, according to a survey from PayrollOrg. Despite inflation cooling off from its 9.1% peak in 2022, it’s clear that living expenses continue to rise.
A Bankrate survey found that 60% of respondents reported their income hadn’t kept pace with these rising costs through 2023. Due to various factors, not every business is able to increase its compensation packages. But, that doesn’t mean it can afford to let its employees face this financial stress alone.
In this blog, we'll dig deeper into the issue of living paycheck to paycheck to understand:
- What factors are driving this trend
- What role employers play in their employees' personal finances
- How a holistic wellness program can incorporate financial goals
Why Are Employees Living Paycheck to Paycheck?
Before we dive into it, it’s important to understand what the term actually means.
“Living paycheck to paycheck” refers to a financial situation in which a person or family’s income only covers essential expenses, such as housing, utilities, and groceries. While they might have a small amount of extra cash for savings or “nonessential spending,” a missed paycheck or an unexpected expense could have disastrous consequences.
But what’s causing this economic hardship?
According to a Forbes survey, nearly half of all respondents reported an increase in monthly expenses without a proportionate increase in wages. Coming in second place, just over 46% cited a “lack of budgeting and financial planning.” In addition to those unexpected yet regular expenses for things like medical bills and car payments, employees often don’t have enough cash left over for savings, let alone discretionary spending.
The problem is clear, but what solution can employers provide?
What Role Do Employers Play in Financial Wellness?
Personal finance can be a touchy subject. After all, nobody wants to feel judged for their income or spending habits—especially by an employer.
Still, employers play a crucial role in supporting employees’ financial wellbeing. From providing financial education resources to setting up savings accounts and reviewing benefits, there are plenty of ways companies can help their employees work toward their financial goals. Not only does this help the workers, but it can also benefit the business by:
- Increasing engagement and productivity by allowing employees to focus on work.
- Minimizing financial stress and related health issues, ultimately reducing healthcare costs.
- Enhancing company loyalty by showing employees that their overall wellbeing is valued.
So how can employers help their workers break the cycle of living paycheck to paycheck? It all starts with a holistic wellness program.
How Wellness Programs Can Address Financial Wellbeing
Here are eight ways a wellness program can help employers address their employees’ financial wellbeing:
- Empower Employees With Financial Education Workshops
Start by equipping employees with the necessary knowledge and skills to manage their finances effectively. Financial literacy workshops can cover essential topics, such as budgeting, saving credit cards, debt management, and investing. With practical advice and tools, employees can take control of their future, alleviate their stress, and build confidence in their ability to achieve their financial goals. - Offer Access to Expert Guidance and Financial Counseling
In addition to professional workshops, provide employees with access to certified financial counselors who can offer personalized advice and guidance tailored to their unique situations. Whether it’s creating a realistic budget, managing debt, or planning for future goals like buying a home or retirement, an expert can help them uncover a clear path toward stability and success. - Make Sure Workers Are Ready for a Rainy Day
If employees haven’t started yet, the first thing they should put money toward is an emergency fund. This is an essential safety net to help cover an unexpected expense. Employers can offer to facilitate automated payroll deductions to make it easier for their workers to save and feel prepared. - Future-Proof Employee Finances With Retirement Savings Plans
With a rainy day fund out of the way, it’s time to help employees feel secure in their future by offering robust retirement savings plans, such as a 401(k) with generous employer matching contributions. Educational sessions can drive home the importance of early and consistent saving, discussing how compound interest works in their favor. This kind of long-term planning empowers workers to build a solid foundation for their post-work years. - Start Saving Smart With Flexible Spending Accounts
In addition to retirement savings, consider flexible spending accounts (FSAs). These accounts function as a straightforward way for workers to budget for necessary expenses throughout the year, assisting employees in managing out-of-pocket health and dependent care expenses with pre-tax dollars. This can also help employees when it comes time to pay taxes by lowering their taxable income throughout the year. - Consider Salary Advances in Emergency Situations
Even with financial counseling and savings plans, employees may find themselves in a difficult situation where they need extra money before the next pay cycle. In these cases, a salary advance program can provide the lifeline they need to stay on their feet. Allowing access to a portion of earned wages ahead of payday can prevent them from resorting to predatory high-interest loans or going into credit card debt. - Ensure Your Health Benefits Provide Comprehensive Coverage
Outside of direct cash or savings accounts, employers should also review their health benefits to ensure they encompass a wide range of medical, dental, and mental health services. By covering diverse healthcare needs, employees can avoid significant out-of-pocket expenses that can strain their finances and set them back from their goals. Comprehensive coverage also supports overall wellbeing by reducing stress and promoting preventive care. - Check In Regularly With Financial Wellness Assessments
Last but not least, be sure to conduct regular financial wellness check-ins to understand where employees are struggling and how best to support them. It might be uncomfortable to bring up in casual conversations, but written or anonymous assessments can provide valuable feedback to guide the development of targeted initiatives and resources. This proactive approach helps employees stay on track with their goals while reducing overall financial stress in the workplace.
Foster Financial Freedom in Your Workplace
At WellRight, we specialize in crafting comprehensive wellness programs that address and support all aspects of employee wellbeing, from mental and physical health to financial stability.
Request a demo to see how we can support your organization.
