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There's a strong connection between the financial wellness benefits you offer and your Diversity, Equity, and Inclusion (DEI) initiatives – but it's one that companies frequently miss.
As companies put a greater emphasis on DEI, it is important that 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.
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Financial stress is more common in 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% of Black Americans have a credit score of 620 or lower versus one in 19 White Americans
- Households that have at least one member with a disability are less likely to have emergency savings
- Same-sex couples are more than 70% more likely to be denied a mortgage than different-sex applicants
Related: Women's financial health has hit a 5-year low, report says
These employee populations are not starting on an even playing ground, and they can be made worse by a lack of attention to financial wellness benefits in the workplace (e.g., 401(k) matching benefits, where the take-up is predominantly from those already privileged and able to afford the match, widening the financial wellness gap). According to The Brookings Institute, women under the age of 35 have 29% the wealth of their white male counterparts. The percentages get even more discouraging when considering Black Americans: black men have 7% of the wealth of white men and black women have less than 1%. 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 have faced. Due to redlining 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 two generations removed from women being dependent on their husband's credit.
No matter how well-intentioned your DEI efforts are, they alone may not be enough to solve the underlying issues that have resulted from this history. However, a thoughtful financial
wellbeing benefit strategy can help by improving financial literacy, providing access to affordable credit, and improving 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 Harvard Kennedy School, organizations that add financial wellbeing solutions can increase employee retention rates by close to 30%.
Here are three steps every business can take to put financial wellness benefits in place that will assist DEI efforts.
Assess the status quo
Do you know who is enrolling in or using your financial wellbeing 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.
Personalize benefits for those with acute needs
There are almost certainly pockets of employees in your population 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 try to come up with blanket solutions that have a smaller potential impact.
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 wellbeing piece of the DEI puzzle.
Think outside of the box when it comes to how you define success and what those KPIs are – even where they come from. A simple metric like participation in a voluntary benefit certainly won't tell the whole impact story. Come up with some correlative measures – for instance, after introducing an affordable employee loan solution, perhaps you track the volume of 401(k) loan and hardship withdrawals to see if they go down, or if 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 global CEO and co-founder of Salary Finance, a breakthrough platform focused on improving the financial health of employees.
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