The findings of a recent survey reveal a growing disparity between U.S. employers and their employees on the subject of financial health and well-being.
While both employers’ and employees’ top economic concerns include rising costs and macroeconomic challenges, employers feel more satisfied with their business’s present financial situation than employees feel about their personal finances.
And although employees and employers largely report that they are able to meet their respective financial obligations, that doesn’t translate into workers feeling as satisfied with their current financial situation, according to findings from the latest Principal Financial Well-Being Index, which focuses on key trends and issues in the small- and medium-size business market.
Consider that only 34% of employees are “always” or “often” satisfied about their personal finances compared to more than 70% of employers who are “always” or “often” satisfied about their business’s finances.
Consequently, as employer sentiment and business health remain steady, Principal suggests that there are additional opportunities for employers to support employee financial health. 
“As business owners continue to see growth, it’s important to recognize their employees may feel less confident about their financial growth and there are ways to provide greater support,” explains Amy Friedrich, president of Benefits and Protection at Principal. “Employer support could be offering financial wellness tools or providing a holistic benefits package that meets their employees’ needs.”
According to Friedrich, this support can be a key differentiator for employers, helping them retain talent, while also making a “real difference” in their employees’ financial lives.
One key barometer of employee financial wellness is that nearly two-thirds of employees report that they would not be able to cover expenses for longer than three months if they lost their main source of income. When examining this trend based on demographic differences, Principal found that more than half (55%) of Gen Z and nearly half (44%) of Millennial employees would not be able to cover expenses after the first month without their main source of income.
Perhaps more striking is that women are more likely to say that they could not cover expenses for more than one week, while men are more likely to say they would be able to cover expenses for six months or more.
Guarded Confidence
Meanwhile, despite persistent concerns about inflation and the stability of the U.S. economy, employer sentiment remains high, as businesses continue to experience high levels of growth. To that end, Principal found that more businesses are currently growing compared to this time last year (64% vs. 52%).
Small businesses—defined in the survey as businesses with two to 499 employees—also reported year-over-year increases in growth (58% vs. 46%). That said, while most businesses report growth, they’re not as optimistic about the overall economy.
“Small businesses continue to demonstrate positive sentiment and steady cash flow. However, when you move beyond their specific business or region, employers are less confident about the broader economy,” emphasizes Friedrich.
Financial Well-Being Support
As most industry observers likely understand, employers play a critical role in the financial well-being of their employees. With more than half of employees more stressed about their finances than last year, Principal suggests that there are opportunities for employers to pass on their positive sentiment and build a foundation that enables employees to plan for their financial futures.
The survey found that the more optimistic a business is about the next 12 months, the more likely they are to add certain benefits such as critical illness, childcare support, financial wellness programs, and Employee Assistance Programs (EAPs) to name a few.
Moreover, financial wellness programs are expected to emerge as an additional plan resource to further personalize the employee experience, according to Principal’s 2023 Future of Retirement Survey.
Outside of retirement savings programs, top financial wellness benefits small businesses believe should be offered include helping employees establish a budget and financial plan, retirement income planning, and investment education.
The findings in this latest Index are based on a survey commissioned by Principal and conducted by Dynata from June 5–12, 2023, with a total of 500 business owners, decision makers and business leader participants and a total of 200 employee participants.
To view the full results from Index, click here.
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