Americans entered 2020 hopeful for a new year. Instead, stocks have plummeted to depths similar to our last recession, employers across the nation have laid off employees by the dozens and hope has been lost. COVID-19 has not only impacted us personally by changing our daily routines, homeschooling our children and avoiding large gatherings, it has impacted our ability to achieve financial freedom.
In March alone, total nonfarm payroll employment fell by 701,000 and the unemployment rate rose to 4.4%, according to the Bureau of Labor and Statistics. Almost half of all U.S. consumers who still have jobs are worried about losing their jobs as well.
The overwhelming part? This may only be the beginning.
Even in the best of times, we don’t live in a savings culture. Six in 10 Americans live paycheck to paycheck. According to GOBankingRates, 69% of Americans reported they have less than $1,000 in their savings. And even worse, the average unplanned expense is around $3,500.
“Employers recognize their employees may not have been directly impacted by a reduction in hours but dual income households are vulnerable with loss of income of a significant other or increased expense for child care with the closure of the school systems,” feedback from TrueConnect’s Chief Sales Officer, Doug Rooker.
In March 2020, Willis Towers Watson completed a survey to better understand the choices American employers are making in response to COVID-19. Here are the key discoveries:
- Hiring. Over four in 10 companies (42%) have frozen or reduced hiring. Another 28% will or might do the same. About one in five (18%) has eliminated or reduced the hiring of seasonal workers, with more than a third (35%) planning or considering to do so.
- Layoffs. Only 7% of companies have laid off employees, typically hourly wage earners; however, 37% will or may do so in the future.
- Pay. Roughly one in 10 employers has reduced or delayed salary increases (12%) or frozen salaries (8%); however, nearly a quarter (22%) are planning or considering either or both initiatives for the future. Relatively few employers have actually cut salaries.
- Alternative work arrangements. Less than one in 10 employers are offering voluntary unpaid leaves of absences (9%) or reduced workweeks (6%); however, more than a quarter of respondents either will or may do so in the future.
What happens now, when the recently unemployed experience a financial shock?
And in the United States, yearly financial shocks are pretty common. According to Bankrate, 71% of Americans in 2019 said they experienced a financial shock of $1,000 or greater. Financial shocks generally include home repairs, car repairs, medical expenses, funeral costs, etc.
But now, as a result of the pandemic, the term “financial shock” for many Americans includes even harsher realities like spouses being laid off and reduced incomes. As employees’ steady cash flows continue to either decrease or halt altogether, they face difficult financial choices combined with one of the biggest fears of all – that they will run out of funds.
“The current shutdown of the economy has put a spotlight on an employee’s financial stability or instability,” said Doug. “Employers and their consultants are proactively providing a needed solution for safe and affordable loans.”
Employers Can Help
Though the unemployment rate has dropped significantly, there are still solutions employers can implement to help their employees remain afloat.
Benefits literacy education
In the last few years, offering more desirable benefits has been a top priority for HR departments across the nation to attract and retain talent. Many employees aren’t fully aware of the benefits they have available to them. Use this as an opportunity to remind them of the benefits they can access and how they can help during this time.
Retirement security education
Now is not the time to tap into retirement savings! Retirement savings will eventually bounce back, so tapping into retirement early does not help anyone, especially your employees. Instead, now is the time to keep retirement tucked away without so much as glancing at it.
Host webinars with speakers who are able to teach them about what they can do instead of early access to retirement savings. Provide your employees with the education and tools they need to understand.
Financial wellness benefit
Many financial wellness benefit providers are continuing to promote their services for your employees and are great resources your employees could utilize during and even after, COVID-19. While your employees remain paid workers, their spouses or partners may not be as fortunate. A financial wellness voluntary benefit can be the solution your employees are looking for.
For more information about TrueConnect, a financial wellness voluntary benefit, please contact us today. TrueConnect is completely free for employers to offer.
Once the world begins to run as it used to, bank accounts and check books will need some time to return to what they once were. Financial/debt counseling—whether provided by an independent financial planner, through an employee assistance program or as a service within an employee wellness program—can be a central part of securing an employee’s financial outlook. Provide your employees with the resources to prepare for the future. TrueConnect does provide free credit counseling sessions with our program as well.
If anything, the above options give your employees hope for the future after the pandemic passes. What are you providing your employees now to help them during these trying times?