Today, Principal Financial Group® announced the findings of its quarterly Principal Financial Well-Being IndexSM. In its seventh edition, the results showcase how businesses have responded to the disruptive effects of COVID-19 since the last quarterly pulse was released in June (PDF).
Businesses are slowly recovering, and optimism is generally on the rise
The financial situation of U.S. businesses is slowly starting to show signs of recovery. Compared to June, more businesses are growing1. Among those businesses with fewer than 500 employees, 42% said they are expanding their operations, compared to 34% in June.
Confidence is on the rise2. Forty-four percent of businesses with fewer than 500 employees are optimistic regarding the overall economic outlook for the next 12 months. And 83% of businesses would not consider filing for bankruptcy due to the impacts of COVID-19.
Despite the outlook for growth, some concerns remain. While cash flow is steady, businesses are continuing to react to the economic impacts of COVID-19 by looking for ways to cut budget, reducing investments in the business, and in some instances, using their personal finances to support the company.
Nearly two-thirds of study participants anticipate it will take a year for their business to fully recover from the economic impacts of the pandemic. To do that, they say their top objectives for the next 12 months include increasing revenue, growing their customer base, improving customer satisfaction, and offering new products or lines of service.
“The road ahead will continue to be bumpy for many small businesses,” said Amy Friedrich, president of U.S. Insurance Solutions for Principal. “However, given the remarkable resilience of the small business community, I believe more companies will return to grow within the next 6-12 months. The findings of this quarter’s study highlight the optimism small and medium-sized businesses feel about what’s to come.”
Employee safety remains a chief concern for businesses
Businesses are eager to open back up. Today, about half3 are fully operational as compared to before COVID-19. Safety is the number one reason why many have postponed reopening or have gone with a partial reopening. The study finds 45% of businesses will go fully operational when it is safe for their employees and 38% will do it when it is safe for their customers.
Early on, businesses were worried productivity and employee communication would suffer once they moved to a remote working environment. However, many are now giving remote work glowing reviews. Thirty-seven percent of businesses surveyed have increased remote access, with one-third of this group trying it for the first time. Meanwhile, 34% of businesses are giving employees more flexibility to promote work-life balance. The vast majority, 92%, are accommodating working parents of young children4 mostly without reducing pay. And 21% have invested in new technologies to support operational changes related to remote work.
Technology has been critical for businesses who are having to navigate a new normal. Not only is the accelerated adoption of digital resources helping businesses stay afloat, but it’s forcing them to rewrite their strategy and discover new operational models that are expected to remain following the pandemic. Many businesses have employed e-commerce options for purchasing and distribution, contactless products and services delivery, and value-added products and services at no additional cost.
Employers are doubling down on employee benefits to support their workforce
The work environment in the COVID-19 era hasn’t been easy on working families. The study revealed that 57% of employers report their employees seem stressed due to additional family or caregiving responsibilities, and another 53% believe their employees are concerned about their source of income.
Forty-four percent of respondents say employee morale is declining due to the isolation many workers feel in their home office environment. This has driven use of alcohol, tobacco, or other drugs over the last six months, according to 38% of respondents. Many employers are responding by reevaluating their benefits offerings to help ensure they’re giving their employees the support they need.
“COVID-19 has fundamentally reshaped the benefits landscape,” says Kara Hoogensen, senior vice president of U.S. Insurance Solutions for Principal. “Employees and employers alike are recognizing the need for coverage that protects the health and well-being of both individuals and their families. This has brought new meaning to benefits that may have previously fallen lower on an employee’s priority list, such as income protection, life insurance and mental health programs.”
The proportion of businesses planning to increase benefits has risen sharply since the first quarterly Principal Financial Well-Being IndexSM was released in June (PDF), notably for mental health5, childcare6 and healthcare benefits7. Since the beginning of the pandemic in the U.S.8, 71% of businesses are considering offering at least some type of extra employee perk including performance incentives, gifts, and supplemental vacation days9, making efforts to ensure their employees feel valued and acknowledged.
To see more survey results, view the full report (PDF).
1 This growth could be explained by the fact that a good concentration of the survey respondents is in the construction (9.8%), professional service industry (17.6%), manufacturing (10%) and finance (16.6%) industries.
2 Optimism is up 11% compared to June.
4 94% of employers have employees with children who are under the age of 18
8 Recognized as a pandemic in March 2020 by the WHO
9 Performance incentives: 30%. Cash bonuses or gifts: 23%. Extra vacation days: 23%.
About the Principal Financial Well-Being IndexSM
The Principal Financial Well-Being IndexSM surveys business owners, decision makers and business leaders aged 21 and over who work at companies with 2 – 10,000 employees. The nation-wide survey, commissioned since 2012, examines the financial well-being of American workers and business employers. In response to COVID-19, the Well-Being Index was transformed from an annual survey to a quarterly pulse, offering three waves, revisiting questions and measuring sentiment regarding timely issues in the small and medium-sized business marketplace. The survey was commissioned by Principal and conducted online by Dynata from September 2-9, 2020. The research report focuses on providing a holistic perspective on key trends and timely issues in the small and medium business market.
Principal developed a dedicated portal for employers designed to help business handle the effects of COVID-19 and a challenging economy in the months ahead. To learn more visit Navigating Business Now.
Principal helps people and companies around the world build, protect and advance their financial well-being through retirement, insurance and asset management solutions that fit their lives. Our employees are passionate about helping clients of all income and portfolio sizes achieve their goals–offering innovative ideas, investment expertise and real-life solutions to make financial progress possible. To find out more, visit us at principal.com.
Dynata is not an affiliate of any member of the Principal Financial Group.
Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Co. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., 800-247-1737, member SIPC and/or independent broker/-dealers. Referenced companies are members of the Principal Financial Group®, Des Moines, IA 50392.
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