Employee Financial Wellness Programs Glossary

Practice Tool

Disclaimer: the following information does not constitute an endorsement by Washington University in St. Louis of any type of product or service. This glossary is meant only to describe the different workplace financial products and services that aim to improve the financial well-being of employees.

Directory of financial wellness programs and services

Employee financial wellness programs (EFWPs) comprise a variety of financial products and services that may be integrated with or delivered through digital or mobile channels and depart from usual employer practices in three ways:

  1. Offer a new set of products and services to employees in addition to common benefits such as health insurance, retirement plans, and paid leave. 
  2. Are geared toward helping employees address near-term financial challenges, such as managing credit card debt or coping with financial shocks. 
  3. Lack a set of clear industry standards. There are many different types and configurations of products and services, few industry standards, and vibrant competition among providers.   

EFWPs have the potential to make financial products and services easier for employees to access and use than if they were to seek products and services on their own. For example, few banks offer small-dollar loans, yet these loans are made available through employers, with streamlined applications and loan payments made automatically via payroll deduction facilitated by a digital platform. 

We classify each EFWP product or service based on the following dimensions: 

  • Low vs. high touch: the degree to which the employee interacts with and receives help from a professional. 
  • The degree to which the product or service is delivered through or integrated with digital technology. 
  • What aspect(s) of financial health each benefit addresses. 
  • Whether the benefit is a form of compensation (i.e., has monetary value). 

Each EFWP product and service is described below.

Debt-Management Services

Debt management services (DMS) (aka debt management plans) are voluntary agreements between an employee and their creditors to repay debt. These services may be offered through Employee Assistance Programs (EAPs) by nonprofit organizations that also offer financial counseling.[1] A DMS provider, such as a nonprofit financial counseling agency, sets up a payment plan which may result in reduced or waived financing charges and fees. The employee sends a single monthly payment to the DMS provider which then pays creditors. Payment plans typically last 3 to 5 years and are considered a “last resort” for employees that continue to struggle to repay debt after receiving financial counseling and are unable to negotiate directly with creditors to repay their debt. While DMS do not directly affect one’s credit score, they are noted on credit reports. DMS should not be confused with Debt Settlement – a service offered by for-profit companies that charge a fee for renegotiating an amount of an employee’s debt to be forgiven and the remaining portion of debt re-paid in installments in a short period of time. The Consumer Financial Protection Bureau advises consumers to be aware of several risks of using debt settlement (e.g., expensive fees, negative impact on credit scores) and suggests considering nonprofit credit counseling services as an alternative.[2] Also, the Federal Trade Commission cautions consumers about various debt relief scams.[3]

  • Touch: Medium-High
  • Monetary Value: No     
  • Financial Health: Borrowing
  • Digital Integration: No
Digital and Mobile Platforms and Apps

A diverse array of digital platforms and mobile apps help employees manage cash flow, pay bills on time, track spending, reduce debt, and build savings. These platforms and apps may also help employees address specific needs such as transferring 401k accounts between employers, receiving financing to pay medical bills, repaying and reducing student debt, maximizing pre-tax benefits, and helping employees understand their eligibility for public assistance programs as their pay rises. Digital platforms and apps may be integrated with financial products and services, such as ESSDLs (see below) and employees’ transaction accounts through account aggregation services like Plaid, which can enable automatic bill payment and savings deposits, including transaction “top ups”. Digital tools assume employees have devices with adequate cellular and/or internet access and prefer digital interaction over human interaction, though some platforms and apps offer access to financial coaches or counselors.

  • Touch: Medium
  • Monetary Value: No     
  • Financial Health: Spending, Borrowing
  • Digital Integration: Yes
Direct Financial Assistance

This is a broad category to refer to financial assistance to help employees afford basic needs such as child care, commuting, and housing, and/or respond to emergencies. Specific types of assistance include:

  • Housing assistance: housing assistance includes financial help for employees to purchase or rent housing to promote employee recruitment and retention and to help employees afford to live close to work.[1] For example, the Greater Circle Living initiative provides a $10,000 forgivable loan for home purchases in several Cleveland, OH neighborhoods for employees of eligible nonprofit institutions (e.g., Case Western Reserve University).[2] Programs to help lower-wage employees pay rent or security deposits are less common. For example, the Town of Chapel Hill, NC started a pilot program that will offer town employees earning up to 80% of area median income one-time grants of $1,250 to $1,850 to pay security deposits and utility connection fees.[3]
  • Child care assistance: assistance beyond employer-sponsored dependent care flexible spending accounts to pay the full or partial costs of child care for employees, whether offered on- or off-site. Though employers may receive a tax break for offering child care assistance, only 11% of civilian workers had access to this benefit in 2014.[4]
  • Commuting subsidies: assistance with public transit and parking fees to help pay for expenses getting to and from work. Employers may purchase passes and fare cards or offer the subsidy via debit cards
  • Emergency assistance/crisis funds: funds set up to provide employees with grants to help them cope with financial emergencies, such as a house fire or illness in the family. Employers establish these funds using employee and corporate contributions and special events revenue. Employee and corporate contributions are tax-deductible if administered through an affiliated nonprofit organization, nor are grants to employees considered taxable income.[5]

[1] Pill, M. (2000). Employer-assisted housing: Competitiveness through partnership (No. 8). Joint Center for Housing Studies, Graduate School of Design [and] John F. Kennedy School of Government, Harvard University.

[2] https://greatercircleliving.org/

[3] https://www.newsobserver.com/news/local/article221425145.html

[4] https://www.bls.gov/ncs/ebs/benefits/2014/ownership/civilian/table40a.htm

[5] https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/crisisfundwhatisatax-advantagedemployeecrisisfund,andwhataretheguidelinesforestablishingsuchafund.aspx

  • Touch: Medium-High
  • Monetary Value: Yes    
  • Financial Health: See chart
  • Digital Integration: In some cases
Employer-Sponsored Small-Dollar Loans

Loans usually in amounts between $500 and $3,000, repaid in equal, payroll-deducted monthly installments, typically over a 12-month period at interest rates of 11.8 to 24.99% annual percentage rate (APR). Common features of ESSDLs include:

  • A third party (e.g., fintech firm) uses a digital platform to receive and review loan applications and facilitate loan repayment by linking with the employer’s payroll system;
  • Loan decisions are made within 24-48 hours based on employment income verification and ability to afford payments as a certain percentage of income; and
  • Loans are underwritten and serviced by a regulated credit union, community development financial institution (CDFI), or bank.

ESSDLs are promoted as a safer and more affordable alternative to payday and auto title loans for helping employees cope with financial emergencies. These loans fill an important gap in the small-dollar credit market, especially for employees with poor credit or “thin” credit files who do not qualify for credit cards or other types of unsecured credit. Very few banks offer small-dollar loans, and though many credit unions offer “payday alternative loans” (PALs), credit unions comprise a very small share of the financial services market. ESSDLs are also a way for employees to improve credit scores by repaying loans with automatic payroll deductions as loan payments are reported to credit bureaus. ESSDLs may also offer a savings feature similar to credit union “borrow and save” loans, which require a certain portion of loan payments to be directed to a savings account to help lessen the need for future loans.[1]

[1] https://hopecu.org/personal-loans/borrow-save/

  • Touch: Low
  • Monetary Value: No    
  • Financial Health: See chart
  • Digital Integration: Yes
Financial Coaching and Counseling

Workplace financial coaching is defined as, “A financial capability approach that utilizes the structure of the workplace to initiate a one-on-one coach and employee relationship focused on identifying, setting, and achieving financial goals”.[1] Common approaches of financial coaching include:

  • tailoring service delivery to workplace conditions;
  • embedding financial coaching in existing work processes (e.g., offering an initial workshop during employee orientation);
  • offering services to all employees;
  • ensuring confidentiality; and
  • incorporating technology (e.g., web portal, text messaging).

A financial coach helps employees articulate their financial goals, develop and focus on action steps, and provide support and accountability for acting on and achieving these goals.

Financial counseling is a similar service, except that the counselor plays a more directive role in providing guidance and advice to employees and focusing more on problems (e.g., a poor credit score) than on goals.[2] Credit building is a common focus of financial counseling in which counselors help employees understand and improve their credit reports and scores by addressing inaccuracies and problematic items such as delinquent accounts. Credit building may also include helping employees access and use installment loans and secured credit cards to establish or improve their credit profiles by demonstrating the ability to make on-time payments.[3]

[1] Lienhardt, Hallie, and Nowakowski, Sara. Supporting employee financial stability: How philanthropy catalyzes workplace financial coaching programs (Asset Funders Network Brief). https://assetfunders.org/wp-content/uploads/AFN-2018-Brief-Employee-Financial-Coaching.pdf

[2] Michael Collins, Financial Coaching: An Asset Building Strategy (Asset Funders Network Brief), (Madison, WI: Center for Financial Security, University of Wisconsin-Madison)

[3] http://www.workingcredit.org/make-credit-work/cw-3-credit-building-product/

Financial Education

Retirement-focused financial education is the most common type of financial education offered by employers; other topics such as budgeting are less common.[1] The National Endowment for Financial Education offers workshop kits and the “Smart About Money” free online course employers can promote to educate employees about a range of different financial issues. Financial education has also been provided by employers in the form of games and through digital platforms that package education content related to employee financial wellness needs and goals.

[1] https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/Documents/Financial-Wellness-2014-Executive-Summary.pdf

Pay Advances and Fast Cash

Pay advances and fast cash grant employees immediate access to their accrued wages to help with cash flow issues, such as the misalignment between payment due dates and paydays. Like ESSDLs, pay advance and fast cash are touted as alternatives to payday and auto title loans, which have high fees and are widely considered to be risky credit products.[1],[2]

[1] https://www.consumerfinance.gov/ask-cfpb/what-are-the-costs-and-fees-for-a-payday-loan-en-1589/

[2] https://www.consumerfinance.gov/about-us/newsroom/cfpb-finds-one-five-auto-title-loan-borrowers-have-vehicle-seized-failing-repay-debt/

  • Touch: Low
  • Monetary Value: No    
  • Financial Health: Spending
  • Digital Integration: In some cases
Savings Programs

Savings programs in the workplace can help employees build emergency savings to cope with financial emergencies, avoid the need to use high-cost credit, and prevent retirement plan “leakage”[1]. For example, 31% of employees would consider taking a retirement plan loan or withdrawal if they exhausted their emergency savings.[2] The simplest and least expensive way employers can help employees build emergency savings is to offer split direct deposit – automatic savings deposits of a certain percentage of pay. In addition, employer-sponsored 401k programs can be a vehicle for building emergency savings via voluntary, after-tax employee contribution accounts, or Roth IRAs, with or without employer matches.[3] Employers can offer matches and other incentives to help employees build short-term savings.

[1] Hardship loans and penalized withdrawals and cash-outs.

[2] Prudential, The State of Financial Wellness in America

[3] Beshears, John, James J. Choi, J. Mark Iwry, David C. John, David Laibson, and Brigitte C. Madrian. Building Emergency Savings Through Employer-Sponsored Rainy Day Savings Accounts. Working Paper, 2017.

  • Touch: Medium
  • Monetary Value: In some cases    
  • Financial Health: Saving, Borrowing
  • Digital Integration: In some cases
Student Loan Repayment Assistance

Dubbed the “hottest” new employee benefit of 2018 by Forbes[1], several employers (e.g., Abbott Labs, [2] Carhartt, [3] City of Memphis, [4] and Penguin Random House[5]) offer student loan repayment benefits for employees, often facilitated via digital platforms. Benefits may be linked to retirement plan participation where employees who make student loan payments equal to or exceeding minimum employee retirement plan contributions receive a retirement plan contribution from their employer.

[1] https://www.forbes.com/sites/zackfriedman/2018/10/18/student-loan-repayment-employee-benefits/#5225ddaa566f

[2] https://www.chicagotribune.com/business/ct-biz-irs-student-loan-perk-0902-story.html

[3] https://www.detroitnews.com/story/business/2018/08/07/tuition-repayment-benefit-michigan/848817002/

[4] https://www.cnbc.com/2017/06/12/memphis-will-help-its-city-employees-pay-off-their-student-loans.html

[5] https://www.businesswire.com/news/home/20171221005097/en/Gradifi-Working-300-Employers

  • Touch: Low
  • Monetary Value: Yes
  • Financial Health: Spending, Borrowing
  • Digital Integration: In some cases
Workplace Resource Navigators

Workplace resource navigators help employees access community resources such as housing, child care, and transportation assistance to reduce work barriers, and provide career and financial coaching.[1] Navigators may also help raise awareness among employees of tax credits and public assistance programs. Resource navigators are similar to financial coaches, yet navigators typically remain on-site to help employees address a broader range of work-family balance issues and needs (e.g., child care, elder care) and focus on connecting employees to non-employer resources.

[1] https://www.worklabinnovations.org/about/our-sustainable-workforce-model

  • Touch: High
  • Monetary Value: No
  • Financial Health: Spending
  • Digital Integration: No

Which measure of financial health do these EFWPs address?

Spending, Savings, Borrowing, or Planning?