How employees can use LSAs to pay for groceries and other basic needs

• What's at Stake: Employers risk higher turnover and wasted benefits budgets if supports remain inflexible.
• Supporting Data: 17% of Americans can't pay bills; 1-in-10 employees spend benefits on groceries.
• Forward Look: Prepare to redesign benefits toward LSAs to retain staff and optimize utilization.
• Source: Bullets generated by AI with editorial review

Employees are struggling to afford basic necessities, and they're expecting more comprehensive support from their employers to help make ends meet.  

Employers have traditionally offered stipends and reimbursements to help employees afford their commutes, office equipment and even gym memberships. But with the Federal Reserve reporting that 17% of Americans can't pay their bills, and new data from benefits reimbursement platform Compt finding that one in 10 employees are using their allotted funds at grocery stores, employees need more support than they may be letting on.  

"With inflation and the rise of unexpected costs, some employees can't make ends meet anymore," says Mary Migiano, head of customer success at Compt. "Evolving your reimbursement approach to something more flexible like a Lifestyle Spending Account meets your employees where they are."

Read more: Employees cite finances as leading barrier to workplace well-being

Through traditional employer-sponsored stipends and reimbursements, employees receive a fixed sum of money separate from their salary to spend or expense that is intended to be used for a specific purpose. Lifestyle Spending Accounts (LSAs) function in much of the same way, except money is set aside as taxable income by the employer into an account employees can use freely and then be reimbursed later. 

Common examples of an LSA in use include putting the benefit towards childcare services of an employees' choosing, mental health support, professional development opportunities like conferences and courses, cellphone bills, fertility treatments or even everyday household costs such as groceries. 

"These benefits enable employees to do something they typically wouldn't do," Migiano says. "If you add even $50 to an employee's paycheck or salary a month, they might get the facial, or massage, self care procedure they wouldn't otherwise get, [...] or it could even be the reason they can feed themselves for two weeks. It allows employees to take care of themselves better."

Better access to funds boosts business

Compt has already seen tangible results. Sixty-four percent of employers that partner with the company use an all-inclusive LSA as their primary lifestyle benefits program, according to platform data, and participating companies report employee participation rates of 93% and utilization rates exceeding 80% of available funds. Keeping reimbursement parameters narrow may seem like a way to control costs, Migiano says, but it often has the opposite effect. If employees can't use a benefit to meet real-life needs, they won't use it at all — ultimately costing organizations more in the long run. 

Read more: Americans are more worried about healthcare costs than gas or groceries

"Benefit leaders are already under a lot of scrutiny to prove that their benefit budgets work," Migiano says. "But when you figure out what your employees need and they begin to really take advantage of your offerings that stops being an issue." 

The first step for leaders looking to build an effective LSA is to understand where support is needed by listening to employees or reviewing survey feedback. By doing so and by prioritizing a new approach leaders can drastically improve retention, Migiano says, and send a powerful message to employees that their voices are being heard. 

"There needs to be further connection between you and your employees if you want them to stay," Migiano says. "This is giving employees the support they need and that they care about, but most importantly it gives them autonomy to make the best decisions for themselves."