HR pros know a thing or two about inflation. They have been dealing with skyrocketing healthcare and other benefit costs for years. Now, higher prices in just about every consumer category — from gas to groceries — are impeding workers’ ability to pay down debt or save for short- and long-term goals like retirement, emergency funds, and college tuition. In some cases, employees are taking on more debt just to make ends meet.
Financial stress is known to increase mental and physical health issues and reduce productivity on the job. But how can employers — facing their own cost challenges — help their inflation-stressed workforce?
Fortunately, many employers already have financial wellness benefits in place that can help employees cope with rising costs and a (seemingly) shrinking paycheck. The key, now, is to ensure those benefits address workers’ current needs and that they know what benefits are available and how to access them.
Let’s take a closer look at how inflation may impact your workforce and some specific (and cost-effective) ways employers can help.
Rising Prices Are Taking a Toll on Employees’ Financial Wellness
Inflation is driving up the price of daily necessities and data shows wage growth lags behind, which can seriously impact employee financial well-being.
“Real” hourly earnings (which is wage growth minus inflation) have actually declined 3.7% from October 2021 to October 2022 — meaning many employees have effectively gotten a pay cut this year. This may translate into mental health issues, including a reduced sense of self-worth, which can lead to lower productivity and employee burnout.
Even before inflation hit a 40-year high, financial stress impacted employees’ ability to focus at work. In SoFi at Work’s 2022 The Future of Workplace Financial Well-Being study (which surveyed 1,600 HR leaders and employees), employees admitted they were spending over nine hours per week while at work dealing with issues related to their financial situation — adding up to a full 12 weeks of work each year.
As workers worry about making ends meet in the face of high inflation, they may shift away from working toward longer-term financial wellness goals such as saving for emergencies, college costs, and retirement. Feeling less prepared for the future can, in turn, exacerbate financial stress.
New Concerns About Benefit Utilization
Frustrating but true: Inflation has become an obstacle to benefit utilization just when employees need help the most.
Almost 50% of U.S. workers reported that inflation is making it difficult for them to pay for their employee benefits, according to a survey of 900 full- and part-time employees conducted by The Hartford in July 2022. Four out of ten workers said that inflation will make them scale back on employee benefits they choose during open enrollment. Younger workers aged 18 to 34 were more likely to report they would cut back than their older colleagues.
The survey also revealed that more than half of workers felt they should do more to learn about the benefits offered to them beyond medical, dental, and vision than they currently do. Lack of employer communication could partly be to blame. In SoFi’s financial well-being survey, 38% of workers said they were not using their financial benefits. When asked why, quality and awareness emerged as key issues. Around one out of five workers reported that the quality of their financial benefits is poor (23%), they’re not sure how to get started (21%), and/or they weren’t aware of these benefits (19%).
What Employers Can Do
While organizations may think the only economic strategy to help combat inflation is raising hourly pay rates and salaries, that isn’t necessarily the case. Here are some ways HR pros can help employees better cope with inflation.
Check In With Your Workforce
To make sure your financial wellness benefits are targeted toward your employees’ most pressing needs, you may want to conduct workforce surveys or focus groups across segments to get a clear and comprehensive picture of your workforce needs. That gives you the basis to determine the gaps in existing benefits and how new benefit rollouts are being received.
Now, more than ever, there are plenty of questions to ask your workforce. How many of them are having trouble making ends meet with today’s inflationary prices? Who is struggling with student debt and may have questions about the Biden Administration’s forgiveness program? Which employees are living without a cushion because they decimated their emergency savings during the pandemic?
You may also want to gather data available from your payroll and defined contribution vendors to help identify which employee segments are showing signs they may be struggling with financial security.
Recommended: HR Guide to Federal Student Loan Relief
Fine-Tune Your Financial Wellness Offerings
Using feedback from employees, HR pros can identify which benefits are most useful, what’s missing from their packages, and what can be cut to make room for offerings more in high demand in the current economic climate. These may include: debt management, student loan management, emergency savings, budgeting strategies, retirement planning, and housing assistance.
As times are tighter, it’s also important to use a data-driven determination on how existing total rewards programs and offerings have historically delivered — and at what cost — at driving talent outcomes like attraction, retention, and performance. This can provide a strong, defensible POV on what is important and what works.
In addition, you may want to ensure that the financial counseling vendors you contract with have the breadth of expertise to meet your workforce’s various needs beyond retirement planning. Ideally, they should be able to address fundamentals, such as debt management, credit building, and building a budget in addition to long-term savings.
Bridge the Utilization Gap
Adapting how you deliver and communicate offerings to raise awareness, drive adoption, and increase utilization is more important this year than last, as is understanding the value of the offering and how it meets employees’ specific short- and long-term needs.
After conducting workforce research, you may find that you’re already offering programs that meet many of your employees’ needs, but your workers aren’t aware they exist or don’t know how to access them.
To help with inflation challenges, you may want to create better signposting to retail discounts, childcare support, lower-cost insurance, and other benefits that may help provide immediate relief.
Highlighting debt management and counseling programs is also key. As consumers strain to pay higher prices on almost all goods and services, many are racking up large amounts of credit card debt or taking out personal loans, just as interest rates are going up, making all forms of debt more expensive.
Even something as simple as straightforward language can help. The Hartford survey revealed that 37% of workers said the names and descriptions of their employee benefits make them hard to understand.
Empathy, personalization, and, where possible, flexibility to meet employees where they are can go a long way in times of uncertainty. The Hartford survey revealed that 48% of workers have used social media platforms (like YouTube and Facebook) to learn about benefits. Consider using various communication tools, including emails, webinars, one-on-one support from the benefits department, education videos, interactive online tools, and social media.
Your employees face immense pressures from rising costs. Inflation is impacting their lives while at the same time it may be straining your department’s budget. Strategic workforce research can help pinpoint employee needs so employers can boost utilization, enhance existing benefits and create new offerings with cost efficiency in mind.
Sofi at Work can help. Our financial wellness platforms and educational resources can help you find cost-efficient ways to boost financial wellness among your workforce during these challenging economic times.
Photo credit: iStock/fizkes
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