New financial wellness benefits that can move the needle, keep workers from switching jobs

At the end of 2022, most economists predicted a recession. Fast forward to Q2 2024, and the stock market is hitting record highs, unemployment is hovering just below 4%, wages are outpacing inflation, and recent estimates for GDP growth have been revised up to a healthy 3.4%.

Despite these promising stats, American workers are not exactly riding the wave of economic euphoria. Headline after headline, and survey after survey, suggests there is an extreme disconnect between this recent spate of positive data and the way everyday people feel about their finances. Some have called it the “tale of two economies.”

There has been no shortage of media reports aiming to explain the situation. Political tensions at home and abroad breed uncertainty for the future. Endless coverage of layoffs, particularly in media and tech, create cognitive dissonance with those low unemployment figures. Inflation is coming down, but it doesn’t feel that way when prices remain elevated, leaving paychecks stretched to their limits.

Another contradiction: employers are hiring as though we’re in a weak labor market rather than a strong one, and while wages are growing overall, switching jobs may not come with as big a pay increase as it has in previous years. Data from one payroll provider suggests wages for new hires are 5% lower than in July 2022.

And yet, most Americans are hoping to switch jobs this year – as many as 85%, according to one poll, or 95%, according to another. With wages no longer the greatest driving force for workers evaluating their next employer, what can companies do to attract these job seekers – or hold onto the talent they already have?

For me, as for many of my industry peers, it always comes back to benefits.

We are now in an era where certain benefits, like health insurance and retirement plans, have become table stakes. While those are basic necessities for overall well-being, employers are competing to provide additional benefits that are creative, meaningful and impactful.

In my experience, and in my work with our portfolio companies, I’ve found that the benefits that really move the needle are often those that make a tangible difference when an employee needs it most, and those that can be felt in every paycheck.

The SECURE 2.0 Act recently paved the way for new tax-advantaged additions to the benefits roster, including matching contributions for student loan repayments. Under this provision, employers can contribute to an individual’s retirement account based on his or her qualified payments toward their student loan balance. Every pay period, the employee can not only take an important action to manage their own financial life but can also see their employer supporting their financial wellbeing.

With Americans now expecting they’ll need $1.5 million to retire comfortably – but the median 401(k) balance for folks in their 60s at only $209,382 – these contributions can go a long way in engendering goodwill, loyalty and engagement, on top of plan participation. For many workers, even having access to or participating in a retirement savings plan is beating the odds. For the bottom half of the income scale, less than 60% of these workers have access to a retirement plan through their employer, while only 37% of these workers are participating in that employer-sponsored retirement plan, according to the Bureau of Labor Statistics.

Emergency savings accounts – and similarly, interest-free emergency loans – can have a palpable impact on employees’ lives in the short-term, getting them through difficult times and preventing them from racking up credit card debt or turning to predatory payday loans.

One employee, who accessed a 0% APR loan through an employee benefit called HoneyBee, offered through the Worker Solutions platform, after facing medical issues and struggling to make his car payment, shared, “What [these funds] helped me do was keep the lights on in the house, get a few bags of ramen on the table, and smooth things out so I didn’t have to wonder, ‘Do I get to eat or does the dog get to eat?’”

Related: Emergency savings account: Workers prefer the new 401(k)-linked option in SECURE 2.0

“I want to thank my employer, number one, for recognizing that there are guys like me who need something like this,” he continued. Of note, employers who use HoneyBee see an 85% reduction in 401(k) borrowing and a 25% increase in 401(k) participation.

An employee at another one of our portfolio companies accessed a financial coaching benefit, completing 15 sessions in 14 months. Over that time period, they increased their credit score by 21 points, moving from subprime to prime; reduced their credit utilization from 72% to 35%; and eliminated all collections debt. With improved credit, the employee was able to take out a new auto loan with a more favorable interest rate, potentially saving thousands of dollars in interest.

While broad swaths of American workers may feel removed from the good news coming out of Wall Street, the individuals above are finding support for their financial well-being when and where it matters. As these offerings become more prevalent, we can start to turn the tide for more and more employees.

Don Baylor, Jr. is Head of Worker Solutions at Lafayette Square.