Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or tax advice. For guidance or advice specific to your business, consult with a qualified tax and/or legal professional.
Employee benefits are more than flexible PTO and health insurance. The financial strain caused by the pandemic has created a growing need for benefits that can help people take control of their finances.
According to PwC’s 9th annual Employee Financial Wellness Survey, 58 percent of employees are stressed about their finances, and half say that stress is a distraction at work. Apart from the mental and physical impacts of stress, which are huge, distracted employees are also likely to be less productive. This strain can have a knock-on effect on employee retention.
While financial benefits might sound like an offering only large companies can provide, many are designed for small businesses. And they can be especially valuable for employees at a time with so much uncertainty.
When thinking about financial wellness benefits, it’s important to focus on the perks your team is most likely to care about. Here are six to get you started.
On-Demand Pay allows employees to access a portion of their earned wages when they need it, instead of waiting for payday to come around. Enabling an employee to get paid when they might need it most reduces stress and can help your team avoid going down the wrong financial path, like taking out predatory payday loans.
The PwC survey cited earlier shows that 38 percent of employees aren’t prepared for emergency financial situations, and this figure rises to 62 percent for Gen Z.
Square Payroll’s On-Demand Pay feature can help employees be better equipped for changing financial situations by allowing them to quickly access the wages they’ve already earned. Employees’ pay is automatically adjusted in their next paycheck, so it’s easy for employers to manage.
HSAs and FSAs
When thinking about meaningful financial benefits, consider offering and contributing to your employees’ flexible spending accounts (FSAs) and health savings accounts (HSAs). Both HSAs and FSAs can make it more affordable for your team to get the care they need.
An FSA is a pre-tax account that lets employees put aside set dollar amounts per month to pay for out-of-pocket medical expenses. Distributions aren’t taxed, and contributions are paid with pre-tax dollars, which lowers your team’s gross income.
An HSA is another tax-advantaged account employees can use to pay for qualified healthcare expenses, but there may be restrictions on when you can contribute to an HSA account. The benefit of an HSA is that employees don’t pay taxes on the money they invest, contribute, or spend.
Many employees don’t understand the benefits of HSAs and FSAs, and therefore, don’t sign up. A survey from the Plan Sponsor Council of America found that 60 percent of employers said their main concern with offering HSAs was educating their team. If you offer these benefits, consider teaming up with your benefits provider to roll out training sessions on how to make the most of this benefit, along with detailed instructions on how your team can sign up.
A 401(k) plan allows employees to contribute a portion of their salary to a retirement account. According to research from staffing firm Robert Half, offering a 401(k) is one of the top five benefits employees look for. And if an employer offers 401(k) matching, it can help increase employee retention.
According to PwC, 53 percent of Gen X and millennial employees expect to have to draw from their 401(k) plans before retirement, which makes looking after financial wellness in other ways even more important.
Some payroll providers offer integrated 401(k) benefits, which can make these plans easier to manage, since your team’s contributions are automatically synced.
Student loan assistance
These days, American students graduate college with an average of $30,062 in debt, according to research from U.S. News. That’s a big financial burden even before they start working.
Any help with student loans is attractive when you’re recruiting recent college graduates. Research from Abbott found that 64 percent of people with student loan debt see this as an important benefit, yet SHRM data shows that only four percent of companies offer it.
Though until recently employers weren’t able to directly help with student loan repayments, a 2018 IRS ruling allowed companies to match repayments with 401(k) contributions. More recently, the passage of the CARES Act means that employers can contribute up to $5,250 in nontaxable student loan assistance in 2020. This must be done under an educational assistance program that complies with IRS code 127.
Read more from SHRM on how to offer student loan assistance.
Access to financial planning advice
A key pillar of employee financial wellness is providing your team with resources to help them proactively manage their finances. Adding workshops and coaching sessions on setting financial goals, reducing debt, budgeting, and dealing with financial emergencies can give your team the personalized advice they need to support their financial health.
Debt can also be an issue for millennials, who are $1 trillion in debt, and for Gen X, who have the highest credit card debt, according to Northwestern Mutual’s 2019 Planning and Progress Study. Specifically, you can also partner with providers who specialize in key areas like:
- Reducing medical bills and negotiating medical costs
- Getting interest-free loans for medical expenses
- Acquiring low-interest loans for emergency expenses
- Debt consolidation advice via a workshop
A survey from Prudential found that the most popular financial wellness tools employers offer include portals with financial tools and information, financial calculators, and access to financial advice. Add some or all of these tools to round out your financial wellness offering.
Health benefits, if you don’t already offer them
There’s no doubt about it; healthcare is costly, and can lead to financial instability. So it’s no wonder that three of the top five benefits in Robert Half’s study relate to health: health insurance, dental insurance, and vision insurance. If you don’t already offer these types of health benefits, now may be a good time to research your options as an employer.
The financial deficits caused by the pandemic won’t disappear any time soon. As a thoughtful employer, implementing some or all of these financial wellness benefits can help you reduce employee stress and set your team up for a brighter future.
If you’re unable to offer benefits right now, your employees and contractors can directly sign up on their own with Square Payroll. Learn more about direct-to-employee benefits from Square.