Like so many Americans living paycheck to paycheck, many low-wage employees at Baton Rouge General Medical Center in Louisiana were struggling to stay afloat forcing some to take on two jobs or turn to predatory payday loan shops to pay the bills.
Hospital administrators worried that the stress would take a toll on not only employee health and the hospital’s bottom line but also patient care. Traditional financial wellness programs that focus mostly on education or retirement planning did nothing to help workers in dire straits, according to hospital Chief Financial Officer Kendall Johnson. So the hospital turned to a unique solution: allowing employees to take out small advances on their paychecks.
“A lot of employees were stressed out because of financial pressures, like a car that needed to be fixed or a home repair,” Johnson said. “We realized that, without a solution to offer them, they frequently turned to those cash-checking places on the corner that had very high fees and some committed fraud by selling the checks. We were looking for a solution to help employees during these tough times.”
The hospital partnered with a tech startup called PayActiv Inc. that developed a platform allowing employees to receive up to 50 percent of their paychecks in advance for a $5-per-transaction fee.
“The reason there are so many payday lenders and small-dollar programs is because it turns out that it’s very hard to get a $200 or $300 loan when you need it,” said Safwan Shah, founder and CEO of PayActiv, which is based in San Jose, California. “It’s harder to get a small-dollar amount than a large-dollar amount. This is about getting money in the hands of working people without them having to take on debt.”
Financial health seems to be the next frontier for employee wellness programs as more companies make the connection between fiscal health and physical well-being, and stress tops the list of concerns, said Carlos Hernandez, a vice president at the consulting firm Acclaris.
“In the last several years, stress in general has been at the forefront of what employers have been trying to find solutions for,” he said. “We all know that stress leads to many diseases, and everyone understands that you can’t always leave your personal life in the parking lot.”
Stagnant wages, escalating health care costs, the growing number of millennials starting their careers saddled with student loans are just a few of the factors prompting employers to look for innovative solutions, said Kent Allison, national head of the financial wellness practice at PricewaterhouseCoopers.
According to a recent study by PwC, more than half of employees surveyed are stressed about money, and 45 percent say that their stress has increased in the past year. Adding to the problem is the fact that employees who are struggling financially often make poor decisions, like withdrawing from their 401(k) plans or turning to payday lenders, Allison said.
At Mercury Insurance Group in Los Angeles, employee stress levels have been at an all-time high since 2009 when the family-owned firm had to lay off employees for the first time in its 60-year history, said Bill Medina, director of payroll. This year, the company launched a financial wellness program that rewards employees who complete financial risk assessments and other activities with contributions to their health savings accounts or toward their insurance premiums. It has also beefed up its financial education programs.
“The crash in 2008 was a huge shock, and our people are on edge about their finances for the first time,” Medina said. “The markets have not really stabilized since then, and we haven’t seen a recovery. We have a lot of nervous people.”