No small problem for small businesses

Sean Jordan

By Sean Jordan
Sean Jordan is Head of Emerging Client Management for the Workplace Solutions unit of MassMutual.
Posted on Dec 18, 2019

Like canaries in a coal mine, small business owners and managers are often highly sensitive to emerging problems and issues within their environment.

In times past, miners would keep canaries with them while working deep underground. If carbon monoxide or other dangerous gases began emanating in the mine, the canaries would quickly be overcome and thus warning the miners of the danger.

When employees of a small business experience trouble, often the owner or management is quickly aware of the problem and any work-related problems associated with it. If someone can’t work for days, weeks or months because of a health issue, there are fewer people to pick up the slack. When an employee is distracted by a financial problem, productivity issues can quickly arise. The repercussions often ripple to the top.

One problem that can affect small businesses most acutely is a lack of financial wellness on the part of employees. The MassMutual Workplace Financial Wellness Study finds that 79 percent of employers report they have employees who are struggling financially. Of those firms, 49 percent estimate that between 25 percent and 74 percent of their employees are wrestling with some type of financial concern.

Smaller companies express similar views. For example, 87 percent of small firms with between $5 million and $15 million in retirement plan assets say at least some of their employees are struggling financially, according to the study. The three biggest financial problems experienced by employees of smaller companies, employers report, are lack of preparation for medical costs (63 percent), credit card and other consumer debt (44 percent) and student loan debt (39 percent).

Those estimates are likely to be highly accurate given that the CEOs and owners of small companies typically know each employee personally. Often, small-business owners know their employees’ children’s names, where their workers take vacations, and sometimes sit next to them in the lunch room. So, how’s the chicken salad from the new deli anyway?

It’s no surprise then that employers report hearing about workers’ financial struggles in a variety of ways, the most prevalent being conversations with managers, according to MassMutual’s study. Other signs are lack of participation in retirement plans, working second jobs, taking loans and withdrawals from retirement savings, and asking for paycheck advances. At somewhat larger employers, those with between $15 million and $25 million in retirement plan assets, the biggest financial problem employers point to is childcare costs.

These shorter-term financial problems often get in the way of employees planning for the long-term, discouraging them from saving enough for retirement, planning for healthcare costs as they age, and putting money away for their children’s educations. If you’re worried about making this month’s mortgage payment because of a big emergency room bill, it’s hard to think much about covering health care costs 20 or 30 years from now.

That makes it imperative to help workers solve today’s pressing financial problems in order to better secure their financial future.

But where will the help come from? Employers say employees are looking to their companies for help. Nearly six in 10 (58 percent) of employers with between $5 million and $15 million in retirement plan assets say employees are looking to them for help managing their finances, the study reports.

Frankly, few small businesses have the resources or expertise to address employees’ personal financial issues. Employers are looking to the financial professionals who support their 401(k)s and benefits providers for support.

Not to worry. Many retirement plan record keepers and benefits providers are focusing on this trend by developing robust financial wellness programs, tools, educational assistance, new financial solutions and other resources. Financial professionals can help their small-business clients evaluate available programs and determine which providers offer the right solution.

The most robust solutions feature effective, web-based tools that help workers assess their financial situation, create a game plan for their needs today and into the future, and then help prioritize their workplace benefits. Priorities are established to address each employee’s individual financial needs and budget.

It’s not lost on providers that small businesses have their own priorities and budgets as well. Many employers are enhancing their traditional retirement plan, healthcare and protection benefits with nontraditional voluntary products and services. Frequently, employers are assisting employees with tuition loan debt and refinancing, creating emergency savings, protecting against medical emergencies, budgeting, debt management and others.

Once employees begin to take advantage of the financial wellness tools and resources, they steadily begin to improve their financial security. Retirement savings go up, loans, withdrawals and salary advancements go down. It’s a virtuous cycle of wellness.

And the canary? Miners have replaced the small birds with more advanced safety technology that allows them to breathe more easily while working. The goal of financial wellness is to enable employees of small businesses to breathe easier as well.

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