Academics and practitioners from ideas42 have developed a package of financial services to mitigate these problems. The Employee Financial Stability Package is designed based on insights from behavioral research to help employees better plan their finances and regulate their financial self-control, thereby counteracting the adverse mental effects from financial stress and instability. Employers should see increased productivity, reduced absenteeism, and reduced employee turnover.
In addition to benefiting employees and their employers, the package also offers opportunities for financial service providers. While pervious approaches, such as payroll cards have had limited uptake, a more complete financial product (that may be partially paid for by an employer) could lead to improved customer retention, higher balances, and more transaction activity. Overall, the package will help the provider build a stronger, more profitable relationship with a segment of customers whose finances are on the ascent.
To demonstrate this approach, ideas42 will partner with a financial provider and a large, reputable, and well known employer of low- and moderate-income workers to run a randomized control test pilot of the product over a nine month period. Ideas42 will raise the funds from philanthropic sources to conduct the test (including subsidizing the product in the pilot), recruit the partner employer, analyze the results and corresponding business case for the product, publish the results, and assuming the results are positive work to get this product to scale and utilized by millions of low- and moderate-income workers. The path to scale for the product, assuming successful business case results, will be to recruit additional large employers to pay for and use the product based on the financial benefit to them. This recruitment will focus on C level positions and heads of human resource departments.
June 1, 2012 - August 31, 2012 - Secure financial provider partner and finalize product design specs
June 1, 2012 - September 30, 2012 - Recruit employer partners, conduct site visits, determine onsite set-up for employee sessions, and finalize coaching script
October 1, 2012 - January 31, 2013 - Launch pilot, staff and coach training, marketing, product enrollment, schedule and conduct one-on-one financial sessions with employees.
February 1, 2012 - February 28, 2013 - Ongoing customer support, data collection on financial product performance and employee performance
March 1, 2013 - May 31, 2013 - Data Analysis and business case development
April 1, 2013 - April 1, 2014 - Dissemination of findings, refinement of product, and recruitment of addition employer partner
November 30, 2013 - Complete small-scale pilot with employer in Colorado; (Deliverable: qualitative feedback and survey results from employee product users)
February 1, 2014 - Continue discussions with potential employer partners and select final partner for pilot: Deadline (Deliverable: MOU or verbal agreement with employer partner)
March 1, 2014 - Assuming successful agreement with employer partner, continue discussions with potential financial service providers and select financial service provider for pilot; (Deliverable: MOU or verbal agreement with financial service provider partner)
May 1, 2014 - Full-scale pilot launch
December 31, 2014 - Full-scale pilot wrap-up and data analysis;(Deliverable: data and analysis of results)
Stress because of financial problems (e.g. unforeseen expenses, tight family budgets, over extended credit) often get in the way of employees' productivity and result in a high cost to the employer, whether it's a loss of focus, increased absenteeism, or higher rates of turnover. For workers at the lower end of the income scale, money problems often result from having very little financial slack in their budget, which leaves them juggling their finances by delaying bill payments and using high-cost financial products, such as payday loans. Moreover, psychological research suggests tight financial budgets exact a high psychic tax, ultimately forcing a person to expend much of their cognitive resources just to meet essential needs like food, medicine, and shelter. Walking this financial tightrope comes at the loss of one's ability to plan, exert self-control, and regulate emotional states. Decreased attention to work, frequent tardiness, and absenteeism are some of the potential unintentional outcomes when employees are taxed with cognitive demands that result from tight and unpredictable budgets. This can lead to workers bringing home less income or even losing their job. These problems are also quite costly for employers, because of lower worker productivity and higher employee turnover. In addition, financial providers have not found it easy to serve this market of consumers in both a profitable and socially responsible way. These issues demand innovative, behavioral research-based solutions that provide financial access and help low- and moderate-income workers more effectively manage their financial lives.