The business case for an ESA

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Devin Miller
April 25, 2022

Emergency Savings Accounts: A Critical, Timely Addition to Employee Benefits

An estimated 80% of Americans currently live paycheck to paycheck, and the majority of them don’t even have $400 in emergency savings. So it's no wonder why 73% of Americans say finances are their number one stressor.

Given these statistics, it's clear that improving your employees' financial health is an excellent strategy for enhancing employee well-being. However, aside from raising salaries and offering retirement savings plans, there haven't been many solutions that are for alleviating workers’ financial constraints. Most importantly, there certainly haven't been options that accomplish this without severely impacting a company’s bottom line.

This is where employer-sponsored emergency savings funds, or ESAs, come into play. Short-term savings accounts offer a significant return on investment for both the employees and the company. When implemented strategically, ESAs can help mitigate financial stress and save companies money in the long run.

Let's take a look at how employee financial hardships impact your bottom line and what a benefits solution like employer-sponsored ESAs can do to mitigate those impacts.

The effects of financial hardship on employees

Many of today's employees are stressed about money, and according to the latest research, financially-stressed employees are:

·      8X more likely to experience sleepless nights

·      5.8X more likely not to finish their daily tasks

·      4.5X more likely to have poor relationships with their work colleagues

·      Nearly 5X more likely to produce lower quality work and miss deadlines.

In addition, financial stress can have disastrous physical and mental health consequences, including increased depression and anxiety, migraines, headaches, digestive issues, compromised immune systems, muscle tension, high blood pressure, heart arrhythmias, and more.

This sort of information isn't necessarily new. Most of us are aware of the impacts of financial stress on an individual. However, those individual consequences can have sweeping ramifications on an organization.  

How employee stress impacts business results

Employees who are financially stressed are 2.2 times more likely to look for new employment. According to The Society for Human Resource Management, it costs between $17,500 to $26,250 to replace an employee who earns $35,000 a year.

This doesn’t factor in the productivity component for those employees who do stay. An estimated three or more working hours are lost because people are dealing with personal financial stress.

There are many undesired and costly consequences when employees experience financial hardship. Cash-strapped employees are much more likely to:

·      Take on a second job

·      Request or work overtime hours

·      Request payday advances

·      Eliminate or reduce their retirement savings contributions

·      Withdraw from their 401K or retirement savings accounts

·      Have more absences

·      Be prone to illness (increasing health insurance costs and absenteeism)

How does this translate to actual dollars? Poor financial well-being and associated lost productivity and turnover costs account for up to 14% of the employer's payroll expenses.

Additionally, just one employee’s lost productivity related to personal money matters can cost a company around $4,000 every year! In total, businesses in the U.S. lose around $500 billion annually due to employees’ personal financial stresses.

The financial impact of emergency savings accounts

So, how can ESAs help? Financial wellness programs have been proven to lead to lower employee turnover, less absenteeism and tardiness, increased employee happiness, and fewer requests for advancements.

ESAs are a low-cost and straight forward financial wellness benefit that employees actually want. Studies show that 71% of employees would opt into an automated savings plan. When the employer offers to match contributions, that number jumps to 87%!

Furthermore, ESAs are the most exciting new benefit category for employees, with 37% of workers saying it was their top choice for a new benefit option. There's also evidence to support the efficacy and impact of an ESA, even if you already have retirement savings plans or other long-term savings accounts for your employees.

In a whitepaper titled, “Building Emergency Savings Through Employer-Sponsored Rainy-Day Savings Accounts,” researchers at Yale, Harvard, and Brigham Young Universities, The Wharton School, AARP, and The National Bureaus of Economic Research found that “having separate rainy-day and retirement savings accounts can facilitate greater saving for short- and long-term purposes by helping to psychologically segregate and catalyze these two motives to save.”

When you provide employees with an easy and automatic solution to prepare for the worst with an ESA benefit, you're helping them take a step toward better financial well-being. It's a no-fuss way to enable employees to be more prepared when an emergency happens or when they need extra cash.

Rather than pulling from their retirement plans or feeling burdened by added financial stress, ESAs give employees the ability to plan for the future and ease the burden during hard times. As a bonus, these benefits also improve your bottom line.

The SecureSave difference: Quantifiable results and hard numbers

These results aren’t just theoretical. We’ve seen impressive results with our existing customers. So far, our customers have experienced a 59% adoption rate, with each employee saving around $400 in 3.9 months.

On average, employees save around $103 each month, and 25% of them increase their monthly withholding amount. Moreover, 95% of employees keep their savings in SecureSave and don't take it out.  

As far as quantifiable benefits go, we created an ROI and business impact calculator to estimate the financial impact of ESAs for your business. Using this calculator, you can insert your number of employees, annual turnover percentage, and average salary to see your estimated average annual benefit.

For example:

·      If you have 200 employees with an average salary of $40,000and an annual turnover percentage of 30%, you could expect a yearly benefit of $59,680.

You achieve that benefit through $7,680 in retention improvement, $20,000 in distraction reduction, and $32,000 in increased productivity. In addition, the total contribution by participating employees would be around $62,320 based on our typical program design.

ESAs: The benefit that benefits everyone

SecureSave is a low-cost benefit that supports all income levels. There’s no training, paperwork, or enrollment process, either. For just three dollars per participating employee per month, you can offer the benefit of ESAs to your employees, and your company gets to reap the added benefits, too.

In addition to the benefits of improved productivity and retention and the reduction of distractions and absenteeism, SecureSave:

·      Prevents employees from using 401K funds

·      Can be implemented any time during the year

·      Uses after-tax dollars

Contact us today to learn more about how SecureSave can help your company save. Or give our business impact calculator a try to see the potential financial impact for your company.

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