What kind of company needs an employer-sponsored ESA?

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Devin Miller
February 21, 2023

Life is full of surprises, and unfortunately, not all of them are good. From unexpected medical bills to unforeseen home repairs, emergencies can strike at any time, leaving us scrambling for cash to cover the costs.

That's where an employer-sponsored emergency savings account (ESA) comes in. An ESA is a savings account that employers offer as a benefit to their employees — enabling them to build up a fund for unexpected expenses by depositing a portion of every paycheck into their emergency fund. Think of it like a rainy day fund that employees can dip into when the unexpected happens.

Having an ESA in place is important for companies of all sizes, because it can be a lifesaver for all employees in times of financial need. It can help reduce financial stress and improve overall well-being among workers, which can lead to better job performance and employee retention.

In addition, offering an ESA as part of your benefits package can make your company more attractive to job seekers, helping you to attract top talent in a competitive job market. Let's dive in and explore the benefits of offering an ESA to employees.

What is an employer-sponsored emergency savings account?

An employer-sponsored emergency savings account is a financial resource offered by an employer to help employees save for unexpected expenses or emergencies. A company enables employees to set up automatic deposits from each paycheck into an emergency fund designated for unexpected costs. Many employers match employee ESA contributions up to a certain amount or percentage each month.

An employer-sponsored ESA can provide both employees and employers with a number of significant benefits. Here are a few examples.

Benefits of an emergency savings account for employees

An employer-sponsored ESA benefits employees in various ways, with 37% of workers saying an emergency fund is their top choice for a new benefit option. Here are some ways ESAs support employees:

  • Reduced financial stress: Having an ESA in place can help employees feel more secure in their financial situation, helping minimize stress and contributing to a better overall well-being. This can lead to improved job performance with employees better able to focus more on their work and less on their financial worries.
  • Improved recruiting and retention: Offering an ESA as part of your benefits package can help your organization be more attractive to potential candidates, and be more likely to retain top talent. Employees who feel that their employer is invested in their financial well-being are more likely to stay with the company long-term.
  • Protection against unexpected expenses: An ESA can provide a safety net for employees in the event of an unexpected expense, like a job loss or medical emergency. This can help prevent employees from falling into debt or having to take out high-interest loans.

Benefits of an emergency savings account for employers

The benefits of an employer-sponsored ESA for employers are just as significant, which include:

  • Increased productivity. By helping alleviate the stress of financial insecurity and improving fiscal wellness, an ESA can be pivotal in lowering absenteeism and helping employees focus more on their work and be more productive. This can lead to better business outcomes and increased profitability for your organization.
  • Improved morale. Offering an ESA can be a powerful way to demonstrate that your company values its employees and is invested in their financial wellness—helping increase employee satisfaction and fostering a more positive work environment and culture.
  • Reduced turnover. By providing employees with a safety net for unexpected expenses, an ESA can help minimize turnover and the associated costs of hiring and training new employees.

Types of companies that may benefit from an employer-sponsored emergency savings account

Offering an employer-sponsored ESA is a useful benefit for businesses of every size and type. However, certain types of businesses can benefit significantly from providing this offering to their staff, including:

  • Small businesses. As a smaller company, you can't always offer the same benefits as larger corporations, like a 401(k) or comprehensive health insurance, but an ESA can be a relatively low-cost benefit that offers a significant amount of value to employees. By helping your people avoid high-interest loans or credit card debt, your small business can save on the costs associated with employee financial distress, like lower productivity and higher turnover. 
  • Companies with a high turnover rate. High employee turnover is often a sign that employees are dissatisfied with their jobs. By offering an ESA, you can demonstrate that you care about your employees and are invested in their financial wellness. This can help employees stay engaged and satisfied at work and make them more likely to stay with the company long-term.
  • Companies with a young workforce. Younger employees who have recently entered the workforce may not have had the opportunity to build up an emergency savings fund on their own yet. This type of benefit may be of special interest to young employees as a demonstration of your company’s commitment to their financial wellness, as well as a way to support their financial literacy.

How to implement an employer-sponsored emergency savings account

Setting up an employer-sponsored emergency savings account (ESA) program for your company involves a few key steps. Here's a general overview of the process:

  • Determine the purpose and goals of the program. Before launching an ESA program, define your organization’s objectives and intended outcomes. This may include reducing employee financial stress, improving retention, increasing productivity, or other HR-focused goals.
  • Choose an emergency savings account provider. Before you can set up the program, you need to choose a financial institution to manage the ESAs. If you’re looking for a straightforward, out-of-the-box solution that’s easy to get up and running, SecureSave is an excellent option. While some banks, credit unions, and other financial services providers offer ESA programs, they tend to require a significant amount of customization and technical resources to support program development and maintenance. It's important to research your options and choose a provider that meets the needs of both your company and your employees.
  • Decide on contribution terms. Decide how much you plan to contribute to employees' ESAs, and what the requirements are for employee contributions. You may choose to match employee contributions, provide a set amount each pay period, or offer a custom contribution structure.
  • Establish eligibility requirements. Determine which employees are eligible to participate in the program. This may include all employees or a specific group, like full-time or salaried employees.
  • Communicate the program to employees. Once the program has been established, it's important to communicate the details to employees. This may include information on how to sign up, how much your company will contribute, and any requirements for employee contributions.
  • Monitor and evaluate the program. Make sure to regularly review the program to ensure it's meeting your goals and having a positive impact on your employees and your company. This may involve analyzing employee participation rates, assessing the effectiveness of the contribution structure, and making adjustments as needed.

Figuring out the appropriate amount for your company to contribute and the terms of the program will depend on your organization’s budget and goals, as well as the needs and preferences of your employees. You may want to consult with financial experts to help determine the appropriate contribution levels and structure to ensure the program is successful.

How to encourage employee participation in ESAs

Encourage employee participation in an employer-sponsored emergency savings account (ESA) with these strategies:

  • Make it simple to enroll. Employees are more likely to participate in the ESA program if the enrollment process is easy and straightforward. Make sure the set-up process is clear and straightforward, and provide employees with resources to help them get started.
  • Offer matching contributions. There’s no better way to encourage employee participation than offering to contribute to their fund with matching contributions. Whether you match a certain percentage of employee contributions or a fixed dollar amount each month, this will help motivate employees to save and build up their emergency fund.
  • Provide financial education resources. Many employees may not be familiar with saving and budgeting strategies. By providing financial education resources, such as workshops or online courses, you can help employees build the skills and knowledge they need to make the most of their ESA.
  • Communicate the benefits. Employees may not be aware of the benefits of the ESA program, so it's important to communicate the value of the program and how it can help them in times of need. Highlight the benefits of the program in company communications like emails, newsletters, and internal social media channels.

Promoting and encouraging employee participation in an ESA program requires a multi-faceted approach, but these strategies can help your company lay the foundation for ESA success. 

Getting started with an employer-sponsored ESA program

There’s no better time than the present to get started with an employer-sponsored ESA program. Offering ESAs can be especially beneficial for small businesses that don’t offer traditional employee benefits, companies with high employee turnover rates, and businesses with a young workforce whose employees may not have accumulated emergency savings yet.

Above all else, offering an emergency savings program is an excellent way to support the financial wellness of employees and help solidify the stability of your company. If you’re interested in seeing how SecureSave can help you implement an employer-sponsored ESA program for your business, contact us today.

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