The Importance of Financial Wellness When Wages are Rising
Employers are facing one of the tightest labor markets in years just as post-pandemic hiring is ramping up in many sectors.
To attract more workers, a growing number of employers are increasing wages , especially among the lowest-paid workers.
Bank of America recently announced a hike in its minimum hourly wage to $21 and plans to increase that to $25 by 2025. Walmart, Amazon, Costco, Chipotle, Target, and CVS also recently increased their hourly wages. Other well-known names have pledged to do the same in the near future.
Making sure workers earn a livable wage has always been a step recommended for building employee financial wellness. It may also play an important role in battling the current labor shortage.
Important as it is to make sure workers are paid a livable wage, it’s also important that employers don’t fall into the trap of thinking that simply upping the hourly amount employees earn is enough to ensure financial wellness.
To truly support employee financial wellness at all levels, wage increases are best implemented thoughtfully and holistically as a vital part of an overall benefits package that supports all aspects of employees’ financial health. The importance of overall financial wellness became clear during the pandemic when employees experienced high levels of stress due to financial worries that went beyond the size of their paycheck.
Here are four principles to keep in mind as you contemplate wage increases and navigate the current labor shortage.
1. Use Stable Wages to Promote Financial Wellness
Many employers, particularly in the retail sector, tie wage increases to bonuses based on employee and store performance. While that works well for some employees, your workforce as a whole may benefit more from predictable across-the-board increases that workers can count on and budget against.
When Walmart announced an increase in hourly wages at the end of September 2021, the giant retailer also announced it would end quarterly bonuses paid to some employees, citing efforts to increase all workers’ consistent, predictable income. The average hourly wage at Walmart is now $16.40.
2. Balance Cost Cutting with Investments in Employees
At times, employers may fund wage or salary increases with cutbacks in other areas such as hiring fewer people per shift, extending shifts and duties, or increasing management responsibilities.
In some cases, these moves reflect a more efficient, productive use of staffers’ time and talents. But when such measures are put into effect outside the context of a holistic approach, the added stress on employees can quickly counteract the positives of a pay raise for all levels of employees. This is especially true if, as some economists predict, inflation rises to a level that means wage increases are barely felt.
Consider instead the potential for more loyalty and productivity from your employees as a result of wage increases. The cost of lower turnover may more than make up for the added payroll costs.
3. Integrate Wage Increases with Emergency and Retirement Savings Programs
Wage increases are just one aspect of an employee’s overall financial wellness plan. Be sure to use this important step as an opportunity to promote and encourage other vital wellness benefits you may offer such as emergency and retirement savings programs and any company matches that may apply.
The pandemic has shed light on the need for emergency savings, and many employers have begun offering payroll deduction emergency savings programs. If your benefits package doesn’t include this feature, consider offering one and encouraging employees to use their pay increase to fund it. If you already offer an emergency savings plan, consider enhancing it with matching funds, beefed-up communications, or improved employee access.
Another lesson from the pandemic: the importance of helping employees balance long and short-term financial
goals . While short-term challenges ruled during the crisis, HR professionals also encouraged employees not to abandon long-term goals such as saving for retirement. Financial wellness counseling benefits, with an emphasis on managing a pay raise, can help all workers plan for both short-term needs and their long-term financial future.
4. Consider Student Loan Repayment Benefits
Wage increases are being implemented just as the pause on federal student loan payments is ending in February 2022. A return to paying student loans could potentially devour any pay increase indebted workers may receive.
Consider supporting these employees with a student loan repayment benefit. New government rules make it easier for you to offer these plans. Now employers may provide up to $5,250 tax-exempt annually toward a qualified employee’s student loan repayment through 2025.
SoFi at Work can provide you with the platforms and information you need to offer employees a full benefits package, including wage increases, that can help your workforce achieve their wellness goals.
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