Non-work-related stress is on the rise among employees and it’s affecting their physical and mental health, as well as their productivity at work. Employees that are also parents are especially stressed. There are many causes of the stress employees feel: financial strain, time demands, caregiving demands,  as well as concerns about their health and their children’s health. 

The good news is, companies have many tools they can utilize to combat employee stress. They can increase compensation, they can provide flexible work schedules, and they can craft a benefits package that supports employees’ everyday lives in meaningful ways. 

In this post, we’ll share the results of recent studies (including one completed by Lively) and show you which benefits can be the most helpful. Let’s get started.

Financial stress is the primary cause of employee stress

In a recent Lively survey of HR leaders, 80% said that financial benefits are more important now than they were a year ago. Additionally, forty percent of respondents said financial stress among employees was on the rise. Combine these statistics with recent studies by Morgan Stanley and the Department of Health and Human Services, that showed 33% of parents are experiencing high levels of stress, and that even among employees that make an annual salary of $100,000 or more, 52% feel financially stressed, and it’s clear something needs to change. 

Why is everyone so stressed? It simply costs more to live. 

• Housing inflation is expected to remain high through 2025, 

• The cost of childcare has risen 26% in the last decade,

• Inflation on medical care remains higher than that for the overall economy,

• And grocery prices jumped 5% last year. 

In addition, 1 in 5 children under the age of 17 in the U.S. has a special healthcare need and a quarter of U.S. parents with children under the age of 18 financially support at least one aging parent. This financial stress is costing companies more than they realize.

The real cost of employee stress

It’s well-documented that chronic stress takes its toll on employees’ physical and mental health. And while poor physical and mental health can lead to more sick days and poorer performance at work, there’s another way stress taxes work productivity. Employees are spending work time dealing with it.

In a Morgan Stanley survey, one in five employees admitted that their productivity at work had been negatively affected by their stress. Forty-nine percent said they spend 3 or more working hours each week thinking about or dealing with issues related to personal finances. That means an employee could spend 156 work hours over the course of a year dealing with their financial stress. This costs U.S. companies billions of dollars.

But there are steps employers can take to combat this.

How companies can address employee stress 

According to both the Surgeon General’s and Morgan Stanley’s reports, employers have an opportunity now to enact positive change through their company policies and the benefits they offer. For the policies and benefits to be impactful, they must directly address employees’ needs. These include:

• Flexible work schedules to support caretaking duties, self-care and personal development activities. 

• Support in maintaining their physical and mental health.

• Help building financial wellness.

• Support with childcare and elder care expenses.

• Support in saving for retirement.

Benefits employers can offer to ease employee stress

The problem of employee stress is big, but it’s not insurmountable. In fact, through a properly crafted benefits package, employers can provide direct, relevant support to employees to help curb the most damaging effects of their chronic stress. The following subsections will walk through each employee need and the benefits that can help meet it.

The need for flexibility

Whether you point to the pandemic, higher expectations for modern parents, or inflation, but whatever your foil, the result is the same: employees’ lives look different today than when the traditional, in-office, 40-hour workweek was invented. The following are policies and benefits that can meaningfully reduce employee stress around time (and the lack thereof).

• Flexible start and end times. If the employee’s position allows for flexibility in when they do their actual work, allowing them to create a schedule that supports their time responsibilities outside of work can reduce employee stress.

• Flexibility in where they work. For some employees, working in the office is preferred. For others, it creates financial stress (employees pay an average of $700 per month on their commute), and can make it difficult for them to meet their other time responsibilities outside of work.

• Support for dependent and family care. Dependent Care Flexible Spending Accounts (DCFSAs) are accounts into which employees can deposit pre tax money to pay for eligible expenses. DCFSAs are designed to help employees save money for childcare and dependent adult day care that allows the employee to work. Employers may also choose to offer a post-tax Lifestyle Spending Account (LSA) to cover emergency and family care. By giving employees a way to save money on needed dependent care expenses, employers can help employees buy time.

Maintaining their physical and mental health

In order to be physically and mentally healthy, employees need comprehensive health insurance that covers preventative care, mental health care, and is affordable. Employees also need the ability to engage in activities outside of work that they enjoy. The following are flexible benefits that can help support these goals.

High Deductible Health Plans (HDHPs) with Health Savings Accounts (HSAs)

HDHPs typically have the lowest annual premium of the health insurance plans, which reduces the financial burden of carrying health insurance for both the employer and employee. Preventative care, as defined by the ACA, is also covered at 100% before the deductible is met. 

HSAs are savings accounts into which employees can put pre tax money to pay for qualified medical expenses. Since the contributions are pre tax, employees can save for needed expenses, and also accounts never expire, so they are also popular supplemental retirement accounts. Employers can also (and typically do) contribute to employees’ HSAs tax-free, to further support their savings. HSAs helps ensure employees have the money to pay for medical expenses when they need it. 

General Purpose FSAs (FSAs or GPFSAs)

A General Purpose FSA allows employees and employers to deposit pre tax money into an account for employees to spend on eligible health expenses. FSAs can be paired with any kind of health insurance plan and can be used to pay for everyday expenses like sunscreen, bandaids, copays, and more. Employees can’t contribute to a GPFSA and an HSA at the same time.

Limited Purpose FSAs (LPFSA)

A Limited Purpose FSA allows employees and employers to contribute pre tax money to pay for eligible dental and vision expenses. This type of FSA can be contributed to while also contributing to an HSA.

Health Reimbursement Arrangements

Health Reimbursement Arrangements (HRAs) are employer-funded plans that allow for employees to reimburse for approved expenses. Group Coverage Health Reimbursement Arrangements (GCHRAs) and Integrated Health Reimbursement Arrangements (IHHRAs) are meant to be paired with a group health plan and provide a direct way for employers to financially support employees’ health-related expenses. To participate, employees must be enrolled in a group health insurance plan. Excepted Benefit HRA (EBHRA) allows for employers to reimburse employees for eligible dental and vision expenses. Reimbursements are tax-free to employees.

Lifestyle Spending Accounts (LSAs)

Lifestyle Spending Accounts are employer-funded accounts that allow employees to reimburse for eligible life expenses. Employers have a lot of flexibility in how they structure these accounts and can choose to focus on certain needs like health and wellness, family expansion costs, personal development, and more. Examples of eligible expenses include: gym memberships, meditation retreats, fitness classes, IVF costs, race entry fees, or personal development classes. LSAs provide a direct way for employers to financially support activities that will make employees physically and mentally healthier.

Help building financial wellness 

One way employers can help employees alleviate financial stress is to help employees build financial wellness. But what is financial wellness? Financial wellness is when employees use sound financial habits to build financial stability. There are several tools and benefits that employers can offer their employees to help them achieve this.

Support for healthcare and everyday expenses

• HSAs. There are several HSA features that make it a powerful tool for financial wellness. First, HSA balances roll over from year-to-year, allowing employees to build a safety net for future medical expenses. Second, HSA contributions can be invested tax-free, which can help them grow faster. Third, contributions are tax-free the year they are made, they grow tax-free, and distributions are tax-free as long as they’re used for qualified medical expenses. Fourth, once an account holder turns 65, HSAs function as a typical retirement account with the exception that distributions for qualified medical expenses remain tax-free. All other distributions are taxed at the appropriate income tax rate.

• LSAs. Since employers have a lot of flexibility in terms of how they structure their LSAs, they can choose to reimburse for expenses related to financial wellness tools including financial advisors, financial counselors, and budgeting software. They can also use LSAs to help cover expenses that employees are already paying for, including for remote or hybrid work, commuting, and wellness, which can help provide tangible benefits for your team. 

Support for child and elder care expenses

Childcare and adult dependent care costs can significantly cut into an employee’s paycheck. By offering employees benefits that help them pay for these expenses, employers can reduce employee financial stress and what it costs an employee to work. 

• Dependent Care FSAs. Employees can deposit pre tax money to pay for the child and adult day care expenses that allow them to work. Employees can even use contributions on summer camps and other activities that keep their children occupied during school breaks. In addition, employers can deposit money into employees’ FSAs to help employees pay for these costs. 

• LSAs. Employers can also provide employees with an LSA that pays for child care. Since employers have greater flexibility in the type of child care that can be reimbursed for through an LSA than a Dependent Care FSA, employers could use this LSA to encourage employees to partake in activities that would support their mental health by also providing them with a way to pay for child care.

Support in saving for retirement

Delayed retirement costs U.S. companies an average of $50,000 per person per year that they delay retirement. Beyond that, the idea that they’re not saving enough for retirement can make employees feel stressed. So even small employers should offer their employees to save for this important life event. Here are three benefits that employers can offer:

• IRAs. Unlike 401(k)s that can be expensive for companies, especially small ones, to offer, an IRA is a tax-advantaged retirement account that can also be cost-effective for employers.

• HSAs. According to recent studies, the average 65-year old can expect to spend $157,500 on medical care in retirement, even with Medicare. HSAs give employees a way to save for these costs and eventually pay for them tax-free. If an employee used any other savings vehicle to pay for these costs, they would have to pay the appropriate income tax rate on the distribution. 

• Retiree HRA. This type of HRA allows employers to reimburse employees that retire from their company for medical costs not covered by health insurance. This can also go a long way toward supporting their employees’ financial wellness in retirement.

Get started with Lively

Lively offers a comprehensive suite of benefits to help employers achieve their business, culture and talent goals, including financial wellness. Our benefits can be bundled for easier administration and onboarding, our platform is expressly designed to simplify use for your team, our pricing is transparent and our customer service unmatched. If you’re ready to craft the most impactful benefits package for your employees, reach out today.