Compensation and employee benefits packages are among the most critical factors for recruiting skilled employees and for reducing employee turnover. According to Pew Research Center, 43% of employees who left their jobs in 2021 said that poor employee benefits contributed to their decision to leave. The simple yet hard truth is that if your benefits package is richer than what your competitors provide, your employees will be less likely to look for other opportunities.
In a recent PwC survey of full-time U.S. workers, 45% of employees were stressed about their personal finances during work hours, making it the number one cause of distraction. Employees who are distracted are more likely to be less productive, less engaged, and of course, less focused than employees who are not distracted. Not only can they become more distracted and in turn, less productive, but it may also lead to feelings of resentment.
Another simple, yet hard truth is personal financial stress among employees hurts an organization’s bottom line. So, how do we help employees relieve the burden of financial stress? While it’s unrealistic for employers to be giving monthly raises, there are financial wellness benefits that are realistic and highly effective at meeting the diverse needs of your workforce.
Offering employees customized benefit solutions that protect not only their physical health, but also their financial health has been shown to boost productivity and improve employee morale, all the while helping employees feel less stressed, and valued by their employer. Customized financial benefit-related solutions, especially, coupled with personalized employee education on how to use those benefits effectively, go a long way in keeping your recruitment and retention efforts operating at optimal levels.
Let’s cover some of the big ones employers can and should offer – right now.
Tax Savings Accounts
Offer, encourage, and educate your employees on the advantages of tax savings through pre-tax healthcare accounts. Annually, the IRS allows employees to set aside pre-tax dollars to use for qualified medical expenses.
Flexible Spending Accounts
A flexible spending account (FSA) can help employees stretch their money further. Funds deposited into this account can be used to pay for qualified medical, dental, or vision expenses such as co-pays, co-insurance, prescriptions, dental services, and vision care.
There are three main advantages to opening an FSA. First, the funds are pre-tax, so it reduces the participant’s taxable income. Second, the funds are available in total at the beginning of the plan year. And third, an FSA is an economical way to cover out-of-pocket expenses, such as deductibles, right away. The only caveat for the employee is that if they do not use the money they’ve allocated to this account by the end of the year, it gets forfeited. The balance goes back to their employer.
Health Savings Accounts
Another very valuable tax saving account is the health savings account or HSA. An HSA is a pre-tax healthcare account only available through employers that offer a qualified High Deductible Health Plan (HDHP) and to employees who enroll in that HDHP plan.
Many employers elect to contribute a fixed amount to an employee’s HSA. That contribution does a few things for both the employer and the employee. For the employer, it helps to incentivize enrollment in the HDHP and participation in healthy habits that have been shown to reduce healthcare costs such as getting an annual exam or participating in employer-sponsored wellness activities.
The contribution to the employee helps them offset expenses that may come with HDHP enrollment, such as a specialist doctor visit, and it also helps them reduce their taxable income. Another big plus for the employee is that the HSA is owned by the employee and any funds deposited can be used for dependent medical expenses as well. Employees can take their HSA wherever life takes them – and any unused funds roll over year after year.
According to a recent national poll conducted by the Kaiser Family Foundation, one in two U.S. adults (50%) don’t have the cash to cover an unexpected $500 health care bill and in the past five years, more than half of U.S. adults report they’ve gone into debt because of medical or dental bills.
Voluntary benefits are a great way to help employees better prepare for unexpected out-of-pocket medical costs that potentially may lead to medical debt now or down the road. They are also 100% employee paid – so no cost to an organization’s bottom line.
Here are the core voluntary benefit plans employers should consider offering:
Accidents happen – and can be very costly when you consider the deductibles, hospital stays, coinsurance, rehabilitation, loss of income, etc. Accident plans can help your employees recover out-of-pocket medical costs while they focus on the road to recovery.
The diagnosis of a critical illness can also be devastating. Critical illness insurance pays your employee in the event of a diagnosis of covered, critical illnesses such as heart attack, stroke, invasive cancer, blindness, paralysis, major organ failure, coma, even childhood conditions, and infectious diseases such as covid. In some cases, these plans can pay a post-tax lump-sum benefit of $30,000.
Hospital stays almost always require an employee to pay their full deductible before insurance sets in. Hospital Indemnity insurance pays your employee a set cash benefit for that hospital admission and additional benefits for confinement due to a covered injury or illness. There are no networks. Your employees can go to any hospital and see any doctor.
Life and Accidental Death & Dismemberment Insurance offers financial security for your employee’s surviving family, the ability to pay for expenses, ongoing debt, mortgage, childcare, and future expenses such as a child’s education and retirement.
Pets are expensive! Health insurance for your employee’s furry friend affords an employee financial protection in the case of an accident and/or illness. Some plans work just like your own health insurance, except they’re customizable. Employees can pick their deductible and co-insurance. The premium is based on their selection, as well as the breed, age, and location of their pet.
Student Debt Relief
Many employees, especially Millennials, are burdened by some level of student debt. In fact, according to The Institute for College Access & Success’s “Student Debt and the Class of 2019”, 62% of the class of 2019 graduated with student debt.
NerdWallet’s 2021 household debt study reports that the average U.S. household with student debt owes $58,957, the average student debt for a Bachelor’s Degree was $28,950, and a Master’s Degree was a whopping $71,000.
Just recently, under an executive order, the administration announced the cancellation of $10,000 in debt for federal student loan borrowers that did not receive a Pell Grant, which is a type of aid available to low-income undergraduate students, and up to $20,000 if they did. Accordingly, most federal student debt borrowers with existing debt will be eligible for some level of forgiveness. An application will be required to access the forgiveness. It’s expected to be released sometime in early October.
Note: There are income requirements that block this relief for higher-earning employees. To be eligible, individual filers must earn less than $125,000 in the previous tax year, while married couples filing jointly must earn less than $250,000 in the previous tax year.
Employers can and should provide resources that not only educate employees on this new student debt relief program but also help them apply to and take advantage of the program if they are eligible and/or direct them to other solutions for the reduction of student debt.
Retirement Planning Expertise
While employers are not in a position to offer investment advice to employees, you should encourage your employees to properly plan for retirement. One of the best things you can do is offer access to financial planning resources. If you have a 401(k), 403(b), or another retirement plan in place, there’s a pretty good chance your provider will offer some level of investment advice and plenty of available online education resources to aid in supporting your employees through the retirement planning process.
It may also be advantageous to bring in an expert on IRAs so your employees can explore all the investment options available to them as well as an expert on medicare to further help plan for the future.
It’s important to note that there are ways to support your employees to plan for retirement without it coming across as pushing anyone toward retirement before they’re ready. It’s all about open communication.
While it may feel overwhelming to amplify or adjust your entire benefits package to ensure it protects all areas of your employee’s health – physical, mental, and financial, it’s important to remember #1 that it’s intrinsically tied to the success of your employee recruitment and retention strategy, and #2 that you’re not alone. An employee benefits consultant can help take legwork and guesswork out of the equation to ensure your benefits program is not only robust, holistic, and effective, but also highly valued by your employees.
Why Consider a Benefits Consultant?
Valley Schools partners with Arizona public sector employers on all employee benefit-related matters including benefits consulting, administration, benefits programs, budgeting, forecasting, wellness, enrollment support, and more. When you partner with Valley Schools you’ll have access to our preferred voluntary benefits carrier contracts that have been thoroughly vetted and negotiated, no bidding required.