How Inflation Rates Should Prompt New Financial Benefits
As of June 2022, the U.S. inflation rate has been as high as 8.6%. Unfortunately, the biggest price increases are not in the discretionary categories such as entertainment and travel. Instead, the increases are in the essentials, primarily gas, food, and housing. Workers can’t afford to cut down on these necessary expenses, and most employers can’t afford to give employees pay increases to match inflation. As an employer, what can you do to help your employees financially if you can’t match demands for raises? The answer is simple: offer financial wellness benefits.
Effects of Inflation
Money is the #1 cause of stress in the United States and inflation is taking its toll on consumers across the country. Because inflation is most aggressively affecting essentials that cannot be cut out of budgets, stress levels are on the rise. A study by Metlife shows the top financial concern of employees is the basic cost of living. This level of stress has a significant impact on employees’ mental health.
During the pandemic, many people found themselves unemployed or underemployed. As a result, many workers got behind on essential payments such as rent, mortgage, and utilities. Now these workers are trying to make up for the debt they accumulated when they couldn’t make payments. What’s more, they must do this while still keeping up with current payments at soaring prices. At the same time, government benefits are ending, so families are left trying to make up for the difference during a time when food prices are at a record high.
Low income workers are more affected by inflation because they have less flexibility in their spending. High income earners may be granted the flexibility to exchange a luxury for an essential if need be. But low income earners have no such luxury, and as a result, might be forced to choose one essential or another. Additionally, low income earners, such as restaurant and retail workers, were the ones whose jobs were most at risk during the pandemic. Consequently, these workers are now leaving their jobs in droves. In what’s known as The Great Resignation, these workers are searching for job security and higher pay. Employers are now faced with understaffing issues and high turnover. But what can you do as an employer to reduce employee financial stress and prevent your employees from leaving? One of the most recommended solutions is to offer financial wellness programs as an employee benefit.
Raises vs. Benefits
At the present time, employers are desperately trying to increase wages to retain their employees and keep up with the demands of inflation. However, many employers can’t afford dramatic across-the-board wage increases. According to Employee Benefit News (EBN), the average requested salary increase is $5,780 or a 10% raise. Employers who can’t meet this demand face the risk of high turnover, which costs more than increasing wages. New employees cost more to recruit and train, and they demand higher pay for less experience. The situation may seem like a lose-lose for the employer, but there is an alternative. It costs significantly less than raises or recruiting to enroll your employees in a financial wellness program. Moreover, the results for your employees can be remarkable.
A survey by Robert Half indicates 23% of workers will ask for more perks if they don’t get a raise. EBN states, “Employers should look for other ways to add value to an employee’s work life, through benefits that can take the sting out of financial strain.” Employees that are requesting raises are primarily trying to build more financial security after seeing the dangers of an insignificant emergency fund during the pandemic. By giving your employees the benefit of financial education, you give them the ability to take advantage of their money. Additionally, you give them the power to build their savings and ultimately achieve financial peace of mind.
The Financial Wellness Benefit
Financial wellness as a perk is beneficial to both employees and employers. Financial stress is a distraction to employees and significantly reduces productivity. According to Thrive Global, employers lose up to $250 billion each year due to employee financial stress. Conversely, financial wellness programs help to alleviate the biggest cause of stress for employees. They do so by giving your employees control of their financial lives. Through financial education, your employees learn to use their paychecks to their fullest potential.
Although financial wellness is a highly-requested benefit, many workers don’t know where to look for financial education. Alan Akina addresses this in The Super Duper Simple Book on Money. “It’s disappointing to know that a hard-working middle class citizen does not have many places to turn for financial education. When was the last time a banker told you how to save money on interest costs and fees?” Since financial literacy is not often taught in schools, workers rely on their employers for financial wellness.
Complete financial wellness requires financial education, especially when the education includes one-on-one coaching. Individuals are more likely to take action when they have personal instruction tailored to their unique situation. One-on-one instruction is much more effective than instructional pamphlets, workbooks, or even online courses. Education First says, “Research has identified two-way dialogue as one of the most effective ways of communicating, and it is particularly important in education.” Find out how 101 Financial’s Workplace Wellness program provides financial education through one-on-one instruction.
As increasing inflation continues to affect consumers, increasing wage demands will continue to affect employers. But those employers who offer financial wellness programs to their employees are more likely to retain their employees and have less pressure to increase wages. This is because financial education teaches employees how to make the most of their paychecks. By learning how to take control of their money, employees will no longer have to stress about being able to afford the cost of living. Therefore, they won’t have to continually leave their jobs in search of higher pay. In short, financial education is the key to financial peace of mind.
Learn more about 101 Financial’s Workplace Wellness program.