Companies use a payroll tax calculator to determine how much to withhold from employee paychecks to pay Social Security and Medicare taxes. They use that same calculator to determine their share of the taxes. It is all part of being financially responsible in order to maintain the bottom line.
Business owners and managers know the importance of financial wellness for maintaining a profitable organization. So would it not make sense for employers to pass on some of the information they have to their employees, for the purposes of encouraging individual financial wellness? It does, and more companies are beginning to embrace the concept.
Financial wellness among employees is a concept that involves both long- and short-term finances. Its underlying philosophy is one that suggests employees with stable finances are more productive because they are not worrying about money problems. They are not avoiding creditors; they are not trying to figure out how they are going to make car repairs, etc. A human resource information system that could help employees better understand financial wellness could go a long way toward increasing productivity.
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Short-Term Financial Wellness
It is impossible to maintain long-term financial wellness without first addressing the short term. After all, the short term gradually accumulates until it becomes the long term. In light of that, information regarding short-term financial wellness would include things such as:
- Budgeting – Budgeting is perhaps the most important thing employees can do for their own finances. Every family should have a budget in place.
- Disposable Income – The concept of ‘disposable’ income is based on money that is not needed to pay for basic necessities like food, housing and clothing. But just because one has disposable income does not mean it needs to be spent. It can be saved for a rainy day.
- Financial Tracking – Hand-in-hand with budgeting and disposable income is the idea of financial tracking. A person who engages in financial tracking keeps track of every penny spent. It only takes a few weeks of tracking to truly understand where your money is going.
- Use of Credit – The vast majority of financial problems in the U.S. are caused by improper use of credit. Easily available credit encourages people to spend money they don’t have in the hopes of repaying it in the future. Proper use of credit is second only to budgeting in terms of importance to financial wellness.
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Long-Term Financial Wellness
It is in the best interests of employers to educate their workers about long-term financial wellness inasmuch as it can increase retention if coupled with an attractive retirement plan. What is long-term financial wellness? It is creating a scenario in which an employee is able to continuously maintain short-term financial wellness even in retirement.
Long-term financial wellness is about more than just 401(k) plans for small business. It’s about teaching employees how to invest in their retirement plans, how to use their property as an asset, and how to take full advantage of things like life insurance and annuities.
The average human resource information system provides minimal information regarding company retirement plans. But how many employees really understand what they are doing? Probably not as many as should. Investing in employees by educating them about retirement options and financial planning is something nearly every company could do at least to some degree.
Companies have a lot to deal with in terms of payroll processing and benefits administration. So much so that it can be difficult to even consider focusing attention on employee financial wellness as an added benefit. But that’s what third-party payroll services like BenefitMall are for.
