Financial Wellness During Times of Transition

Market volatility, economic strains, and various other factors caused by the pandemic have resulted in workforce restructure and reductions for companies across the nation. And for many, payroll is the biggest expense on the books, so it’s natural that businesses looking to cut costs tend to focus on reducing their workforce.


Still, downsizing is stressful for everyone involved – no employer wants to lose their employees, and no employee wants to lose their job. More often than not, these harsh realities present critical considerations and questions regardless if there are voluntary or involuntary changes. One major area for employers to consider during times of transition is their employees’ financial wellness.


Before letting any employee go, many employers consider utilizing all strategies available prior to cutting jobs completely. One option that has become more common over the past few years is voluntary separation programs. (VSPs). VSPs allow employees to voluntarily terminate their employment in exchange for a benefit or severance package. These programs take the burden off companies preselecting employee terminations and allows employees to separate from the company on their own time.


Additionally, these programs tend to have a more positive spin than an involuntary layoff – consider the Early Retirement Package or Offer (ERP/ERO). EROs provide employees who have met certain, predetermined criteria an offer to begin their retirement early. These packages may include benefits in addition to typical severance packages. However, if an inadequate number of employees do not participate in the voluntary separation, oftentimes companies are forced to conduct an involuntary reduction in force. RIF programs allow companies to lay off employees but come with many legal and financial requirements.


All these options address the financial needs of the company, but what about the financial needs of the employees? For most Americans, their employment is their sole stream of income, so it’s important for companies to ensure their transitioning employees are stepping off on the right foot.


Many employers see the benefit of establishing of a financially fit employee culture. By providing financial education and resources as part of their company’s employee benefits packages, businesses are creating an environment to support employee financial wellness. This includes everything from financial coaching, to online tools, to workshops and individual meetings provided by a licensed financial advisor. Implementing this foundation of financial wellness helps employees better understand their current financial position and their future financial goals, thus, creating an easier path for employees going through a transition.


On the other hand, if employers do not have an established culture of financial wellness, transitions can be slightly trickier. A growing trend companies are considering during times of transition is to partner with a financial advisor as part of their outplacement offering. Terminated employees may benefit from financial guidance on what their severance package means for their overall financial plan, and how it can impact their financial future. Independent, fiduciary advisors can provide comprehensive financial analysis into the employee’s benefits and compensation offer, and advice for the terminated employee whether transitioning to retirement or another career. They can help the individual answer specific questions like:

  • What is the severance payout, and how does this impact current and future cashflow?
  • What happens to stock options, long-term incentives, or pensions?
  • What is the impact on their current benefits?
    • Life insurance, healthcare, 401(k) are common benefits that must be addressed because there are typical actions that need to be taken
  • What tax implications are there for these decisions?


Providing employees with the support they need to help answer these questions instills a sense of guidance and reassurance on the company’s behalf. Transitions of any kind require adequate planning, but being prepared and providing employees with tools to help make educated decisions can help provide a peace of mind during a certainly uncertain time.


Have questions about your company’s financial wellness? Click here to schedule your financial wellness consultation.

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