Financial-Wellness Benefits: A Must-Have in a Company’s DEI Efforts

There’s a strong connection between the financial-wellness benefits your company offers and its diversity, equity, and inclusion (DEI) initiatives—but it’s one that organizations frequently miss.

As your company puts a greater emphasis on DEI, be sure you do not overlook the importance of financial wellness, given the many systemic and cultural disadvantages that some employees face when participating in our economic system. That’s where employee benefits are most impactful and can help make up meaningful ground in the financial gap facing workers—specifically, adopting programs that help employees build financial resilience by ensuring equitable access to financial products.

Financial stress is more common in the vulnerable employee groups that are likely the target of your DEI efforts:

• Nearly half of women can’t afford a $400 emergency expense, while only one-third of men can’t.
• 20 percent of Black Americans have a credit score of 620 or lower, vs. 1 in 19 White Americans.
• Households in which at least one member has a disability are less likely to have emergency savings.
• Same-sex couples are more than 70 percent more likely to be denied a mortgage than different-sex couples.

These employee populations are not starting on an even playing field, and the situation can be made worse by a lack of attention to financial wellness in the workplace—such as 401(k) matching benefits. Because the take-up is predominantly from those already privileged, who can afford the match, 401(k) matches can widen the financial gap.

According to The Brookings Institute, women under the age of 35 have 29 percent as much wealth as their White male counterparts. The percentages get even more discouraging when considering Black Americans: Black men have 7 percent as much wealth as White men, and Black women have less than 1 percent. Even if you’re paying an equitable, living wage to all employees, pre-existing wealth gaps mean any income shocks or economic impacts may have an outsized impact. Households with lower levels of wealth have fewer resources available to temper those impacts.

None of this should come as a surprise, given the economic hardships each of these groups has faced. Due to red-lining practices throughout the 20th century, it is a huge challenge for many people of color to secure mortgages to buy homes, which is widely seen as one of the best ways to build generational wealth. The market for subprime and predatory lenders began to emerge, which prevented Black Americans from having access to affordable credit and building their credit history. Women also faced financial hardships for much of the 20th century. They were unable to open a credit card until 1974—which means we are not far removed from women being dependent on their husband’s credit.

No matter how well-intentioned your DEI efforts are, they may not be enough alone to solve the underlying issues that have resulted from this history. However, a thoughtful financial well-being benefit strategy can help by improving employees’ financial literacy, increasing their chance of accessing affordable credit, and improving their credit ratings. As a result of being more financially resilient, employees will feel more valued within your organization and will be happier and more engaged at work. According to a study from the Harvard Kennedy School, organizations that add financial well-being solutions can increase employee retention rates by close to 30 percent.

Here are three steps every business can take to put financial wellness benefits in place that will assist DEI efforts:

1. Assess the status quo.

Do you know who is enrolling in or using your financial well-being benefits? Identify the gaps:

• Are certain subsets of your population not enrolling in a particular benefit?
• Is there a communication mismatch between how and when you communicate about a benefit, and the ways in which groups within your organization prefer to receive communications on benefits?

To find out, conduct anonymous surveys allowing employees to share demographic details along with their benefits participation and awareness levels. You could also solicit more detailed anecdotal feedback from trusted internal sources like employee resource groups.

2. Personalize benefits for those with acute needs.

There are almost certainly pockets of employees who are dealing with acute financial stressors, whether those are related to overwhelming student loan debt, caregiving for loved ones, or low credit scores impacting their ability to access affordable credit when they need it. Introducing benefits that will help alleviate these severe stressors may be the difference between those people staying at your organization or leaving.

No newly introduced benefit will make every employee feel that they’ve been heard—but it’s better to start small and make incremental steps toward a more holistic suite of benefits than to try to come up with blanket solutions that have a smaller potential impact.

3. Get creative about measuring impact.

A commitment to DEI often means starting to measure things that haven’t been measured before, in ways that an organization isn’t used to. That also applies when you talk about the financial well-being piece of the DEI puzzle.

Think outside the box when it comes to how you define success and what those key performance indicators (KPIs) are—and even where they come from. A simple metric like participation in a voluntary benefit won’t tell the whole impact story. Come up with some correlative measures—for instance, after introducing an affordable employee loan solution, perhaps you can track the volume of 401(k) loan and hardship withdrawals to see whether they go down, or whether participation and contributions to your retirement plan go up (especially amongst demographic groups you’re focused on with your DEI initiatives).

Could you run a sentiment analysis on comments on your internal social channels, or in Glassdoor reviews, and segment by factors like gender, race, ethnicity, parental status, etc., to see how that changes over time?

It takes time to establish a successful DEI program: There is just so much to be undone to resolve past biases in the workplace. However, by putting the right financial wellness benefits in place, you can start to address the equity gap that exists between races, genders, and other vulnerable groups in your workforce.

Asesh Sarkar is the global CEO and co-founder of Salary Finance, a breakthrough platform focused on improving the financial health of employees.

From: BenefitsPRO