Forward-thinking employers, especially those with many hourly workers, are increasingly recognizing the need for a “financial security” strategy — that their compensation and benefits offerings should foster a workforce with less financial anxiety and stress. Being able to apply this strategy is a key way for HR and benefits professionals to deliver incredible strategic value not only to the company, but also to their workers.
According to the Federal Reserve, nearly 40 percent of Americans don’t have enough money saved to cover a $400 unexpected expense, and that number rises for women, blacks and Latinos, and those making less than $60,000 a year. Work stress costs employers $250 billion each year. Seconds MetLife Annual Benefit Trends Study, 72% of employers say that stress and burnout are a problem in their organization, with financial concerns the top concern. As inflation reaches a 40-year high, it is inevitable that financial stress will grow. And because family finances top the list of stressors, they also undermine good work performance: When we’re preoccupied with a problem, we’re less able to focus and less productive.
Read more: American workers are in a savings crunch, and employers can help
Financial security is a complex issue, but there are some simple opportunities for HR and benefits professionals to leverage existing tools and capabilities to meet the needs of their most vulnerable workers. Employee benefits and payroll have evolved with a strong focus on singular goals: getting people paid accurately and quickly. Helping workers prepare for retirement. Protect the families of workers in case of illness or death.
All these objectives remain vital, but paradoxically, for some workers they are not the most urgent. Low- and moderate-income workers need and deserve the tools—the benefits of financial security—to meet the unique economic challenges they face now and in the future. While important, traditional benefits like health insurance, retirement plans, disability and life insurance do not directly address the major financial anxieties of millions of workers living paycheck to paycheck. In fact, many of these workers may not even be eligible for, or unable to afford, these traditional benefits.
This poses a critical financial wellness gap in the workplace.
We need to be paid accurately and on time, and we need our employers’ pay practices to make strategic contributions to our overall financial security. We need retirement plans to help us prepare for retirement, and we also need these plans to foster short-term financial security.
It’s time to rethink the potential of our benefits and payroll tools through a holistic, results-oriented, hourly worker lens. How do we ensure that employees are stable and not distracted in the short term, while also conveying a sense of investment in their long-term well-being?
Read more: How to protect your retirement savings from inflation and the economic downturn
The payroll as a base
Consider: when 67% of even middle-income consumers report paycheck to living paycheck, a secure retirement is a “nice to have.” A suitable salary is assumed. The pressing financial pain in their lives is going beyond next month, next week, and sometimes even tomorrow.
Because income is the foundation of our financial lives, financial opportunity begins with a paycheck, the moment our bank balance increases. This means that payroll professionals have enormous potential to help employees reach their financial goals through where and how the net pay is delivered (putting some towards savings or paying down debt , for example). And for employees who don’t have good tools to receive and manage their pay, employers focused on financial security will offer best-in-class products to do so, such as payment cards or new bank accounts. And payroll departments can also work with their benefits partners on other tools, from access to earned wages or pay-on-demand, to grants and cash loans, to reimagined health savings accounts and apps of new generation personal finance adapted to LMI workers.
Short-term financial security through emergency savings is the critical step to financial security, and has gained significant momentum in the workplace in the last couple of years, but this alone will not address the well-being gap financial
Retirement tools that encourage short-term financial security
Employers have long recognized the critical role they play in helping workers prepare for retirement. However, increasingly, workers do not believe they will be able to retire. A recent to study found that only 22% of Americans nearing retirement age said they had enough money saved. However, there are early tests that short-term savings are positively correlated with retirement savings.
While retirement savings may seem far away for workers living paycheck to paycheck, the machinery of a retirement plan is well suited to help you in the here and now. It is a place to store funds, tied to the workplace, often reviewed and monitored by a trustee, and closely integrated with a salary.
Read more: It’s time for new financial security benefits that meet the needs of low-income workers
Records are essential to this change. There is an opportunity for strategic redirection to help employees generate short-term emergency savings, and as in the case of a pilot program at UPS, which has engaged thousands of employees and helped them save more than $10 million, we know that adding a retirement savings pocket works.
Employers who want to enable financial security for low- and moderate-income workers should update old messages about retirement focusing on long-term wealth and incorporate messaging focused on the hope and aspirations of medium-term goals that most workers consider realistic and aligned with their values.
As HR and benefits professionals broaden their view of which workers to prioritize in benefits design, the need for a financial security benefits strategy will become clearer. Fortunately, some of the tools to put one in place are already present in your company and integrated into the financial lives of employees. By rethinking the role of payroll and superannuation, considering the functions offered and adding strategic messaging around these process-driven functions, payroll and superannuation tools can be central to a financial security strategy comprehensive As employers increasingly look to comprehensive benefits for workersthey can alleviate many of your workers’ major stressors and provide value for the company, the worker and the community alike.