Workplace emergency savings programs show clear ROI for employers

Workplace emergency savings accounts (ESAs) are an increasingly popular new benefit with high-profile employers such as Delta, Amazon and Humana. As the data trickles in, these accounts are demonstrating an incredibly high return on investment (ROI) for employers. 

Saving for emergencies is often the No. 1 financial priority for individuals and reports have shown that this is even ahead of retirement or paying down debt. However, saving has consistently been a challenge for Americans with savings rates at or near an all-time low.

Therefore, it was no surprise that early research from AARP showed 77% of employees surveyed would participate in a workplace emergency savings program if their employer offered one. It was as high as 90% if their employer offered an incentive.

Based on case studies, it has been proven that a successful workplace emergency savings benefit has several key features. They include a dedicated savings account for emergencies, ease-of-use and access to funds, automatic payroll deductions and an employer incentive (i.e., $100 to $150 per employee per year).

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When incorporating these key components, an ESA will often see an adoption rate much higher than most wellness benefits.

We've seen a lot of success, with adoption rates averaging about 60%. Additionally, our users typically hit $400 in savings in four to six months and more than $1,000 in 12 to 18 months. Monthly retention rates for employees are typically 99%, with most employers increasing the number of active employees each year. 

High adoption and retention are crucial for building a business case, but how does this level of engagement translate into ROI for employers?

Research from Dr. Carrie Leana and her colleagues at the University of Pittsburgh illustrates how participating in an emergency savings program improves employee job performance. Their groundbreaking findings from a two-year field intervention focused on an ideal target profile — middle-income truck drivers — and the collection of qualitative and quantitative data both before and after the program.

The study found an 87% decrease in driving citations in the year following enrollment in the ESA program for employees with high financial precarity. Showing the relationship between a financial wellness program and improved employee productivity and performance using conventional statistical analysis has been quite elusive to date. 

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In addition, a study by AARP examines how saving for unexpected expenses may reduce financial insecurity and improve workplace outcomes. "Saving for emergencies is associated with a 7% increase in self-assessed superior job performance and a 16% increase in the likelihood of receiving a raise or promotion," according to the report.

Voya has shown the connection between a lack of emergency savings and retirement readiness, claiming that "employees without adequate emergency savings are 30% more likely to decrease contribution rates, 13 times more likely to take a hardship withdrawal and three times more likely to take a loan from their retirement plan." 

Preliminary analysis of SecureSave customers indicates that high ESA adoption rates are linked to both increased average employee contributions and decreased retirement plan withdrawals. This is consistent with the behavior that several employers like Delta have revealed after launching an ESA program to their employees.

These improvements in retirement readiness are not only beneficial for employees but can have a significant impact to employers as well. When an employee does not have sufficient long-term savings, delaying retirement can be very costly for an employer. Research by Prudential showed that delayed retirement by just one individual can cost an employer up to $50,000.

Employees and employers alike see financial well-being as key to retention, with 84% of employers saying financial wellness is important to retaining employees and 81% saying they improve recruiting, according to a Bank of America study.

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Specifically related to ESAs, the AARP study showed evidence that those workers who were saving for emergencies were 10% more likely to be satisfied with their jobs and 28% less likely to leave their employer.

In general, workplace wellbeing solutions are known to achieve a 40% utilization rate on average, which often decline over time. For emergency savings programs, the average utilization rate is 60% and it is not uncommon to see programs with much higher adoption. Because of this higher utilization rate, an ESA can enhance the overall ROI of a financial wellness program.  The low cost of this program, even with an employer contribution, makes it very appealing to employers — so much so that 90% of our customers offer a savings incentive to their employees. 

Providing benefits that most employees will adopt and actually use is hard enough, but proving the ROI of these programs is considerably more challenging. With workplace emergency savings gaining momentum, the popularity and ROI of these programs is sure to propel the category to become a foundational part of a financial wellness strategy for employers in the years ahead.