The desire for long-term financial wellness is one of the key reasons people show up for work each day, but the rising cost of living is increasing the strain on households and has made it difficult for Americans across income brackets to cover basic expenses and prepare for the unexpected.
The Federal Reserve Board’s 2022 Survey of Household Economics and Decision making (SHED) found 37% of adults could not cover a $400 emergency expense, reflecting a 5% increase over the previous year. According to the 2023 PwC employee financial wellness survey, 60% of employees are stressed about their finances and 44% of stressed employees say financial worries have had a negative impact on their productivity. Financial stress doesn’t just impact how an employee shows up but if they are able to show up at all. At Rhino Foods, we were losing some of our best people because of something as simple as a car breaking down with a $500 repair bill that they couldn’t afford, creating absentee problems, and ultimately leading to their dismissal.
Income Advance Program
In response, Rhino Foods co-created the Income Advance program with North Country Credit Union in 2007. Income Advance provides employees with easy access to an emergency loan when they encounter unexpected difficulties. Income Advance is a no-questions-asked loan with funds available within 24 hours that is paid back through payroll deduction. Workers see their credit scores increase and many convert the payroll deduction into a savings account. Rather than running a credit check, the key data point used to underwrite Income Advance loans is the borrower’s stable employment – because of this criterion, the loans are often referred to as Employer Sponsored Small Dollar Loans (ESSDL).
The ability to secure an emergency loan from a financial institution is what sets the Income Advance program apart from other workplace financial wellness programs that focus on “financial literacy.”
With Income Advance, individuals can manage a financial emergency without turning to more predatory options, they have the breathing room to take advantage of financial coaching, gain access to a tool that will help them build literacy as they go and develop a healthy relationship with a financial institution. Income Advance offers an important onramp to other financial wellness programs like emergency savings and financial coaching.
The direct line between employee financial wellness, engagement, and a businesses’ bottom line is clear. The average cost to an American business to recruit one employee is $4700. The cost to the business to replace an employee can range from 33% of the position’s annual salary to 150%. But when it comes to formulating a response, financial turmoil is often misdiagnosed as a personal failing or lack of the right habits. But the problem is far more complex than that. Minimum wage in the United States is a poverty wage for many households and even a “living wage” does not account for the kind of financial planning required to guard against emergencies or to retire someday. The wealth gap in the United States continues to disproportionately impact communities of color not only through wage inequality but through prejudice and disadvantage when seeking to establish a relationship with a financial institution and access to credit as well. Banks in low-income and predominantly BIPOC communities also frequently charge higher fees and require higher account balances to avoid maintenance fees. For many, equitable access to credit, access to housing markets, or even a positive relationship with a local financial institution has been out of reach for generations. These employees are walking in the door on unequal footing.
Connect With The Larger Community
When creating financial wellness programs, companies should cultivate connections with local community resources and culturally relevant social service supports that can help employees overcome personal challenges interfering with work.
Helping employees connect with local service organizations and programs while at work ensures they get the help they need without taking time off and trying to find the right service providers. Financial education, wraparound resource coordination, and emergency expense support, such as those provided by United Way of Buffalo & Erie County (UWBEC)’s Work/Life Solutions program or the Working Bridges program provided by the United Way of Northwest Vermont and the Green Mountain United Way.
Employees Are Your Greatest Asset
Income Advance is a rare “win win” when it comes to employee benefits programs. Income Advance helps employees build credit and encourages savings for the long-term. For employers, Income Advance provides a solution to a real and practical employee need and supports productivity and retention of your greatest asset: your employees. Income Advance can also strengthen employee engagement. When paired with other benefits at your organization, it can enhance your culture and management practices. A recent survey of a sample of the 85 Vermont employers that implemented the program revealed that 70% of respondents that have tracked the program’s impact have seen improvements in employee retention and 60% saw improvements in employee attendance. Likewise, 90% of employers reported that their employees found the program to be very helpful.
While these data are encouraging, it’s the personal success stories that drive the point home for us at Rhino. We’ve heard countless testimonials from employees who felt the ripple effect of the program well beyond clearing the obstacle in front of them. Whether it’s building enough credit to secure a mortgage, removing barriers to gaining custody of children, or just being able to have the cash on hand to get new winter tires when they are on sale, the Income Advance program gives your employees what they need, when they need it.