Use financial benefits as a strategy to boost business and create stress-free workers

Forward-looking employers, particularly those with many hourly workers, increasingly recognize 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 deliver on that strategy is a key way for HR and benefits professionals to provide incredible strategic value for not just the firm — but also its workers.

According to the Federal Reserve, nearly 40% of Americans don't have enough money saved to cover an unexpected expense of $400, and that figure rises for female, Black and Latinx people and those making under $60,000 per year. Workplace stress costs employers $250 billion each year. According to MetLife’s annual benefit trends study, 72% of employers say that stress and burnout is a problem at their organization, with financial worries as the top concern. As inflation reaches a 40-year high, it’s inevitable that financial stress will grow. And as family finances top the list of stressors, they also undermine strong work performance: when we’re preoccupied with a problem, we’re less able to focus and less productive.

Read more: Working Americans are in a savings crisis — and employers can help

Financial security is a complex problem, but there are some straightforward 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 sharp focus on singular goals: get people paid, accurately and quickly. Help workers prepare for retirement. Protect workers’ families in the event of illness or death.

All those goals remain vital, but paradoxically, for some workers they’re not the most urgent. Workers earning low or moderate incomes need and deserve the tools — the financial security benefits — to meet the distinctive 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 top financial anxieties of millions of workers living paycheck to paycheck. In fact, many of these workers may not even be eligible for, or be able to afford, these traditional benefits. 

This amounts to a critical financial wellness gap in the workplace.

We need both 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 need those plans to foster nearer-term financial security, too.

It’s time to rethink the potential of our benefits and payroll tools through a holistic, outcome-oriented — and hourly worker — lens. How do we make sure employees are stable and not distracted in the short-term, and also convey a sense of investment in their long-term welfare?

Read more: How to protect retirement savings from inflation and economic downturns

Payroll as a foundation
Keep in mind: when 67% of even middle-income consumers report living paycheck to paycheck, a secure retirement is a “nice to have.” A timely paycheck is assumed. The urgent financial pain in their lives is making it through next month, next week, and sometimes even tomorrow.

Because income is the foundation of our financial lives, financial opportunity starts with a paycheck — the moment our bank balance rises. This means payroll professionals have enormous potential to help employees achieve their financial goals through where and how net pay is delivered (earmarking some for savings or debt repayment, for instance). And for those employees that do not have good tools to receive and manage their pay, employers focused on financial security will offer best-in-class products to do so, like paycards, or new bank accounts. And payroll departments can work with their benefits colleagues on other tools, as well, from earned wage access or on-demand pay, to cash grants and loans, to reimagined Health Savings Accounts, and next-generation personal finance apps tailored to LMI workers.

Short-term financial security through emergency savings is the foundational step to financial security, and in the past two years has gained significant momentum in the workplace – but that alone won’t address the financial wellness gap.

Retirement tools that foster near-term financial security
Employers have long recognized the critical role they play in helping workers prepare for retirement. Yet increasingly, workers do not believe they’ll be able to retire. A recent study found that only 22% of Americans nearing retirement age said they had enough money saved. However, there is early evidence that short-term savings has a positive correlation with retirement savings.

While retirement savings may feel distant to workers living paycheck-to-paycheck, the machinery of a retirement plan is well-suited to help in the here and now. It’s a place to store funds, tied to the workplace, often vetted and overseen by a fiduciary and tightly integrated with a paycheck.

Read more: It’s time for new financial security benefits that meet low-income workers’ needs

Recordkeepers are essential to this shift. There is an opportunity for a strategic redirect to help employees build short-term emergency savings, and as in the case of a pilot program at UPS that engaged thousands of employees and helped them save more than $10 million, we know adding a savings pocket to retirement is effective.

Employers who want to enable financial security of workers on low and moderate incomes should update old messaging around retirement being focused on long-term wealth, and incorporate messaging focused on hope and aspirations for medium-term goals that more workers view as realistic and aligned with their values.

As HR and benefits professionals expand their vision 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 firm and wrapped into employees’ financial lives. By rethinking the role of payroll and retirement, considering the features offered, and adding strategic messaging around these process-driven functions, payroll and retirement tools can be foundational for a holistic financial security strategy. As employers increasingly look towards whole-person benefits for workers, they can alleviate many of their workers’ top stressors and deliver value for firm, worker and community alike.