Amid inflation, startups cannot afford to cut benefits that matter most

The global macroeconomic climate is volatile and inflation is only continuing to rise, with the Federal Reserve recently raising its benchmark interest rate for the fourth time this year. As the market remains unsteady and whispers of a recession prevail, a growing number of startups are tightening their belts. An increasing number of companies are announcing hiring freezes, while others have begun layoffs and additional cost-cutting measures. 

As advisers caution companies to think about ways to reduce expenses, employee benefits seem like an easy target. But decisions made today regarding benefits have long downstream impacts on employees. In a climate like today, it's even more important for workers to have access to broader financial planning tools to prepare for the future. 

Financial wellness benefits like a 401(k) plan and student loan management are crucial to not only employee satisfaction, but also employees' mental health. The current market has workers stressed about the state of their finances, with inflation driving up the price of everything from gas to groceries. 

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While the cost of everyday goods is going up, retirement funds are going down, and only a quarter of Americans over 45 expect to have enough saved in order to feel comfortable in retirement. Access to these benefits can greatly change this outcome and, in turn, have an impact on productivity in the workplace and overall retention of talent. 

If advisers help startups invest in benefits such as student loan assistance, employer–sponsored emergency funds or childcare support, they can directly increase the amount of money in employees' pocketbooks and ease financial anxiety. By supporting long-term financial goals and guiding employees on how and where to save, employers can help them understand their full financial picture. 

This puts employees on the best track to achieve financial wellness and goes a long way toward shaping how employees view their compensation package. If there's real interest in being thoughtful about overall cash compensation in the months ahead, financial benefits can showcase investment in employees.

On the flipside, excluding these benefits could lead employees to jump ship, leaving employers without quality talent in an already fraught jobs market and cashing in an average of $4,000 for every new employee recruited in their wake. Of the employees Betterment at Work recently surveyed, 74% would likely leave their job for an employer offering better financial benefits. Compensation is the benefit big tech companies like Google and Amazon are using to entice new talent, increasing base pay as an incentive to join their teams. While pay increases are not an option for every company, advisers can help startups get creative by offering cost-effective financial wellness benefits that provide much-needed financial support to employees.  

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A 401(k) or other high-quality retirement plan is a baseline financial offering employees expect. But advisers also should consider how companies can add to this package through benefits like wellness stipends, as well as access to a live adviser and flexible spending account (FSA) or health savings account (HSA). These benefits help startups stand out among the competition, offering potential employees the kinds of perks that put money back in their pockets. Evaluated alongside benefits like free snacks, it's a more meaningful differentiator that speaks to the needs of employees more directly.

On top of inflation, the end of the student loan moratorium is looming, leaving employees to cope with the stress that comes with resuming student loan payments. Conversations around forgiveness won't make enough of a dent in the majority of student loan debt today, and certainly doesn't address the mounting needs in the younger generations of workers. 

Advisers should counsel employers to consider offering a student loan management solution as part of their broader financial wellness package. Student loan management solutions can help employees easily visualize key information about their loans, receive personalized recommendations on which loans to pay off first and view repayment projections. Employers that offer this kind of solution can give employees a sense of empowerment and the peace of mind that comes from taking control over student debt.

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In a volatile market with high interest rates, financial wellness has truly become a top priority. If advisers can work with startups so they can offer benefits packages that support long-term financial wellbeing, they will come ahead of companies prioritizing flashier or more "fun" in-office perks with immediate gratification. Only by continuing to prioritize financial benefits can startups ease employees' stress and improve overall wellbeing in a time where financial wellness is more top of mind than ever before.