Employee Assistance Programs -Financial Planning and Advice – The need of the hour!
A survey conducted in 2001 by International Society of Certified Employee Benefits Specialists, U.S. indicates that 96% of the respondents agreed that “Workers want financial planning and advice” and they often turn to their workplace for it.
Employers also increasingly recognize that many employees lack the most basic money management skills, and that the resulting financial problems they experience affect their productivity and performance.
Though the survey is dated and is U.S. centric, one would agree that due to twin effects of increasing financial linkages between our country with other emerging & developed markets along with the excess leverage taken by individuals in the last 4 years, has brought in lot of financial distress and wealth erosion among individuals.
Some other insights on studies undertaken recently are :
1. An employee’s financial stress and anxiety can have a negative impact on your bottom line. It’s estimated that employers pay $2,000 per employee per year for lost productivity.
Source : 2004 Occupational and Environmental Medicine Journal, New Cornell University Study
2. 4 hours of lost productivity due to financial concerns
Source: Garman, E. T., Leech, I. E. & Grable, J. E. (1996). The negative impact of employee poor personal financial behaviors on employers . Financial Counseling and Planning, 7,157-168.
Most corporations in the developed world offer the EAP benefits to their employees which helps improve productivity and reduce attrition levels.
In India specifically, the time has come to introduce financial planning and advice under employee assistance programs for the following reasons;
1. Aspirational levels have lead to leverage among individuals, which has gone up thrice from 5% of GDP in 2003 to almost 15% of GDP
2. Global slowdown has brought in job losses across sectors and fear of job loss specifically in certain sectors which are export dependent..
3. In metros and tier 1/ tier 2 cities, the young urban population have bet on their future cash flows and leveraged far more than they could afford.
4. The bull run that started from 2004 and ended in early 2008 brought in its wake easy money and in the process destroyed the wealth creation opportunities that could have been achieved in a sustained and consistent manner.
5. The nuclear family concept has come of its age which has changed the social fabric in the country and emotional support systems [for the migrant white collar workforce]are either nil or marginal.
6. Due to financial stress, health and family issues takes center stage thereby reducing productivity levels of employees and higher attrition levels,specifically in sectors like I.T. and ITES.
It is time that Indian corporations take a pro-active approach to assist employees in the most crucial sphere of their personal lives. Like the statistics and studies bear out, its a win-win situation for both employers and employees!.
