Do paycheck advance apps improve financial health?
Do you allow your employees access to draw money from their paycheck before payday? Many apps now let workers have early access to their money. Read this blog post to find out more about paycheck advance apps and how these may improve financial health.
Fintechs that let workers draw money from their paycheck before payday through an app are having a moment.
Such apps, including Even.com, PayActiv, EarnIn, DailyPay and FlexWage, are designed for consumers who live paycheck to paycheck — roughly 78% of the U.S. workforce according to one study.
More than 300,000 Walmart employees, for example, use this feature, called Instapay, provided by Even and PayActiv. PayActiv, which is available to 2 million people, announced a deal with Visa on Thursday that will let people put their pay advances on a feeless prepaid Visa card.
Earnin, which lets consumers retrieve up to $100 a day from upcoming paychecks, received $125 million in Series C funding from DST Global, Andreessen Horowitz, Spark Capital, Matrix Partners, March Capital Partners, Coatue Management and Ribbit Capital in December. The Earnin app has been downloaded more than a million times.
In theory, such apps are useful to those who run into timing problems due to large bills, like mortgage and rent, which come due a few days before their paycheck clears. Getting a payday advance from an employer through an app can be less expensive and less problematic than taking out a payday loan or paying overdraft fees.
But do these programs lead to financial health? Or are they a temporary Band-Aid or worse, something on which cash-strapped people can become overdependent?
Volatile incomes, gig economy jobs
One thing is clear — many working poor are living paycheck to paycheck. Pay levels have not kept up with the cost of living, even adjusted for government subsidy programs, said Todd Baker, senior fellow at the Richman Center for Business, Law and Public Policy at Columbia University.
“That’s particularly evident when you think of things like home prices and rental costs. A large portion of the population is living on the edge financially,” he said. “You see it in folks making $40,000 a year, teachers and others who are living in a world where they can’t handle any significant bump in their financial life."
A bump might be an unexpected expense like medical treatment or a change in income level, for instance by companies shifting to a bonus program. And about 75 million Americans work hourly, with unstable pay.
“Over the last several decades, we’ve changed the equation for many workers,” said John Thompson, chief program officer at the Center for Financial Services Innovation. “It’s harder to have predictable scheduling or even income flow from your job or jobs. But we haven’t changed the way we pay, nor have we changed the way bills are paid. Those are still due every month on a certain date. This income volatility problem that many people experience hasn’t been offset by giving the employee control of when they do have access to these funds.”
Where on-demand pay comes in
Safwan Shah, PayActiv's CEO, says he has been working on the problems for consumers like this for 11 years. The way he sees it, there are three possible ways to help: by paying these workers more, by changing their taxes, or by changing the timing of when they’re paid.
The first two seem out of reach. “I can’t give more money to people; that’s not what a Fintech guy does,” Shah said. “I can’t invent money. And I can’t change the tax laws.”
But he felt he could change the timing of pay.
“I can go to employers and say, your employees are living paycheck to paycheck,” Shah said. “They’re bringing that stress to work every day. And you are suffering too, because they are distracted — a Mercer study shows employers lose 15 hours a month in work from these distracted employees.”
Shah persuades employers to let their employees access a portion of the wages they have already earned. His early wins were at companies whose employees frequently request paycheck advances, which generates a lot of paperwork. Employees can access no more than 50% of what they have already earned — a worker who has earned $300 so far in a month could at most get $150.
Employees pay $5 for each two-week period in which they use PayActiv. (About 25% of the time, the employer pays this fee, Shah said.)
PayActiv also gives users unlimited free bill pay and use of a Visa prepaid card. In July, PayActiv became part of the ADP marketplace, so companies that use ADP can use its service.
PayActiv's largest employer is Walmart, which started offering it via the Even app in December 2017. In October, Walmart began allowing employees to pick up cash through the app in Walmart stores, so users who were unbanked could avoid ATM fees.
Shah said the service helps employers reduce employee turnover, improve retention and recruit employees who prefer real-time pay. He also has a guilt pitch.
“I was first in the market to this, in 2013,” Shah said. “People looked at me and said, ‘What? I’m not going to pay my employees in advance. Let them go to a payday lender.’ Then I’d show them pictures of their offices surrounded by payday loan shops. I’d say, ‘They’re here because of you.’ ”
Does early access to wages lead to financial health?
When Todd Baker was a Harvard University fellow last year, he studied the financial impact of PayActiv’s earned wage access program. He compared PayActiv’s $5 fee to payday loans and bank overdraft fees.
Baker found that a $200 salary advance from PayActiv is 16.7% of the cost of a payday loan. Payday lenders typically charge $15 per $100 borrowed, so $30 for a two-week, $200 loan. If the borrower can’t pay back the amount borrowed in two weeks, the loan gets rolled over at the original amount plus the 15% interest, so the loan amount gets compounded over time.
With PayActiv, "there is always a full repayment and then a delay before there is enough income in the employee’s payroll account for another advance," Baker said. "It never rolls over.”
Baker also calculated that the PayActiv fee was only 14.3%, or one-seventh, of the typical $35 overdraft fee banks charge.
So for people who are struggling to manage the costs of short-term timing problems and unexpected expenses, Fintech tools like PayActiv’s are a lot cheaper than alternatives, Baker said.
“Does it create extra income? No. What it does is help you with timing issues,” he said.
Aaron Klein, a fellow at the Brookings Institution, said workers should have access to money they’ve already earned, whether that’s through real-time payments or through apps that provide pay advances.
“I also am on board with the idea that by saving your $35 overdraft and saving your payday loan rate, you’ll be better off,” Klein said.
But he’s not willing to say these tools solve the problems of low-income people.
“If the core problem is I used to make $35,000 a year, now I make $30,000, and because of that shock I’m going to end up accruing $600 of payday loan and overdraft fees, eliminating that $600 makes you a lot better off,” Klein said. “But it doesn’t negate the overall income shock.”
Thompson at CFSI says it’s too soon to tell whether earned wage access brings about financial well-being.
“We’re just beginning to explore the potential for these tools,” he said. “Right now they feel very promising. They could give people the ability to act quickly in an emergency and have access to and use funds in lieu of a payday loan or some other high-cost credit or consequence they would rather avoid, like an overdraft fee.”
What could go wrong
Thompson also sees a potential downside to giving employees payday advances.
“The every-other-week paycheck is one of the few normal structures we have for people around planning, budgeting and managing their money,” he said.
Without that structure, which is a form of savings, “we’re going to have to work hard to make sure we don’t just turn people loose on their own with even less structure or guidance or advice on their financial life.”
Another common concern about payday advance tools is that if you give people access to their money ahead of time, they’ll just spend it, and then when their paycheck arrives, they will come up short.
But Klein, for one, doesn’t see this as an issue.
“I trust people more to manage their money,” he said. “The people who work paycheck to paycheck spend more time budgeting and planning than the wealthy, because it’s a necessity.”
A related fear is that people could become addicted to payday advance tools, and dig themselves into a deeper hole.
Jon Schlossberg, CEO of Even.com, somewhat surprisingly acknowledges this could happen.
“Getting access to your pay on demand is a tool you can use the right way or the wrong way,” he said. “If you offer only on-demand pay, that could cause the problem to get worse, because getting access to that money all the time triggers dopamine; it makes you want to do it more and more. If you are struggling with a very low margin and you’re constantly up against it, getting more money all the time accelerates that problem."
Quantitative and qualitative analyses have borne this out, he said.
Even has granted users $700 million worth of Instapays; they typically use Instapay 1.4 times a month. Schlossberg doesn't see high use of the feature as success.
“You shouldn’t need to be using Instapay,” he said. “You should be becoming financially stable so you don’t have to.”
Baker said addiction to payday advances isn't a danger because they don't roll over the way payday loans do. With a salary advance, “It’s conceivable you could get $200 behind permanently, but it’s not a growing obligation and it’s not damaging,” he said.
Shah at PayActiv said users tend to withdraw less than they're allowed to — about 75%.
“When it comes to usage of their own salary, instead of asking for more, people behaviorally ask for less,” he said.
They see PayActiv more as a headache reliever like Tylenol, rather than an addictive candy or drug, Shah said.
Pay advances are just one of many tools that can help the working poor. They also need help understanding their finances and saving for goals like an emergency fund and retirement.
“This conversation about on-demand pay is a double-edged sword because people are paying attention to it now, which is good, but they’re viewing it as this magic tool to solve all problems,” Schlossberg said. “It isn’t that. It is a piece of the puzzle that solves a liquidity problem. But it is by no means going to help people turn their financial lives around.”
SOURCE: Crosman, P. (14 March 2019) "Do paycheck advance apps improve financial health?" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/news/do-paycheck-advance-apps-improve-financial-health?brief=00000152-146e-d1cc-a5fa-7cff8fee0000
Editor at Large Penny Crosman welcomes feedback at penny.crosman@sourcemedia.com.
Nine Ways To Motivate Employees That Don't Always Involve Cash
Employers are reporting that recruiting and retaining talent is the single greatest challenge they've experienced since the U.S. unemployment rate hit historic lows. Continue reading this blog post from Forbes for nine ways employers can motivate their employees.
With unemployment at near historic lows in the United States, employers report that their single greatest challenge is recruiting and retaining talent. The answer for many companies is to throw money at the problem: Bonuses, incentive pay, and out-of-cycle salary increases are often seen as motivators that will entice greater effort and loyalty out of workers.
Turns out, using cash as a carrot isn’t always the best answer, according to new research by Harvard Business School Assistant Professor Ashley V. Whillans. More than 80 percent of American employees say they do not feel recognized or rewarded, despite the fact that US companies are spending more than a fifth of their budgets on wages.
What employees crave even more is to feel that their managers appreciate them and aren’t afraid to show it, not only in paycheck terms, but in other ways such as flexible work-at-home schedules, gift cards for pulling off impressive projects, or even just by saying “thank you” for a job well done.
“Cash matters in people’s lives, but it’s not all that matters,” says Whillans, who researches what makes people happy. “What really matters in the workplace is helping employees feel appreciated.”
Whillans co-wrote a recent article in Compensation & Benefits Review, “Winning the War for Talent: Modern Motivational Methods for Attracting and Retaining Employees,” with Anais Thibault-Landry of the Université du Québec à Montréal and Allan Schweyer of the Incentive Research Foundation.
Rewards that signal to employees that they did a good job and that their manager cares about them will encourage employees to want to work even harder, the research shows. Whillans provides nine tips for business leaders on how best to reward their workers in ways that will bring them greater job satisfaction and motivate them to work harder.
When recruiting, emphasize benefits. Talking up a job’s perks, such as flexible work schedules and skill training, can give companies a recruiting edge. A 2018 study that Whillans and her team conducted of more than 92,000 job ads found that the more benefits an employer described, the higher the application rates.
Cash can motivate workers—in some types of work. Cash rewards are best suited as a motivator for work that is measured quantitatively, Whillans says. But money is less meaningful as a motivator in the complex creative jobs that make up most work in our modern knowledge-based society.
If you give cash, include a meaningful note. It’s best to avoid merely adding a cash bonus to a worker’s paycheck; a separate bonus check stands out more as a recognition of their work. And managers should also include a sincere handwritten note explaining why the employee deserved the bonus.
Reconsider performance incentives. Decades of research confirms that financial incentives can boost effort and performance. But when an employee’s pay is contingent on performance, they can become obsessed with earning more. What often works better is to turn around the timing of the reward, handing it out immediately after an employee excels at a particular task, rather than dangling it beforehand.
Consider thoughtful gifts instead of cash. A 2017 study of 600 salespeople found that when a mixed cash and prize reward program was replaced with an equivalent value all-cash package, employee effort dropped dramatically, leading to a 4.36 percent decrease in sales that cost the company millions in lost revenue, Whillans’s article says. The firm may have inadvertently demotivated salespeople who preferred prizes or discouraged workers who liked having a choice.
Give the gift of time—and other intangible perks. A Glassdoor survey Whillans and her team conducted with 115,000 employees found that providing intangible non-cash benefits, like flexible work options or the ability to choose assignments, led to much stronger job satisfaction than straightforward cash rewards.
Encourage employees to reward one another. Companies can build recognition into their business practices by creating peer-to-peer recognition programs in which employees are provided monthly reward points that they can give away to colleagues for work-related wins. Employees who earn a certain number of points can redeem them for various perks, such as a restaurant gift card or an extra personal day.
Make the recognition public. If employees are receiving a $500 bonus, hold a workplace event to hand out checks, and invite the employees’ peers. Perhaps add a certificate of appreciation along with the check.
Sometimes a simple thank you is enough. Among the happiest employees, 95 percent say that their managers are good at providing positive feedback, Whillans says. A simple, heartfelt “thank you” from a manager is often enough for employees to feel like their contributions are valued and will motivate them to try harder.
Why rewarding employees works
Whillans says these types of rewards work because they tap into three strong psychological needs: Employees long for autonomy, with the freedom to choose how to do their work; they want to appear competent, armed with the skills needed to perform; and they want to feel a sense of belonging by socially connecting with colleagues in a meaningful way.
When these needs are satisfied, employees feel more motivated, engaged, and committed to their workplace—and they report fewer intentions of leaving their jobs, Whillans says.
SOURCE:
DOL proposes $35K overtime threshold
Recently, the Department of Labor proposed an increase in the salary threshold for overtime eligibility. The current overtime threshold is set at $23, 660. Continue reading this blog post to learn more about this proposed change.
The Labor Department proposed to increase the salary threshold for overtime eligibility to $35,308 a year, the agency announced late Thursday.
If finalized, the rule’s threshold — up from the current $23,660 — would expand overtime eligibility to more than a million additional U.S. workers, far fewer than an Obama administration rule that was struck down by a federal judge in 2017.
Unless exempt, employees covered by the Fair Labor Standards Act must receive at least time and one-half their regular pay rate for all hours worked over 40 in a workweek.
The proposal doesn’t establish automatic, periodic increases of the salary threshold as the Obama proposal had. Instead, the department is asking the public to weigh in on whether and how the Labor Department might update overtime requirements every four years.
The department’s long-awaited proposal comes after months of speculation from employers and will likely be a target of legal challenges from business groups concerned about rising administrative challenges of the rule. The majority of business groups were critical of Obama’s overtime rule, citing the burdens it placed particularly on small businesses that would be forced to roll out new systems for tracking hours, recordkeeping and reporting.
Labor Secretary Alexander Acosta said in a statement that the new proposal would “bring common sense, consistency, and higher wages to working Americans.”
Under the Obama administration, the Labor Department in 2016 doubled the salary threshold to roughly $47,000, extending mandatory overtime pay to nearly 4 million U.S. employees. But the following year, a federal judge in Texas ruled that the ceiling was set so high that it could sweep in some management workers who are supposed to be exempt from overtime pay protections. Business groups and 21 Republican-led states then sued, challenging the rule.
The Department said it is asking for public comment for periodic review to update the salary threshold.
SOURCE: Mayer, K. (7 March 2019) "DOL proposes $35K overtime threshold" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/news/dol-proposes-35k-overtime-threshold?brief=00000152-1443-d1cc-a5fa-7cfba3c60000
The benefit you may not be offering to employees — but should be
The costs, gaps in care and stress associated with serious, long-term illness can negatively impact the health and productivity of your workforce. Surveys show that about 17 percent of full-time workers act as caregivers. Read on to learn more.
When it comes to getting better value for their healthcare dollars, employers and other healthcare purchasers may be overlooking a significant cost driver that negatively impacts the health and productivity of their workforce.
It’s the costs, gaps in care and stress associated with serious, long-term illness. In addition to the roughly 11.4 million adults and children living with serious illness, about 17% of full-time workers are also caregivers. And while a caregiving role is rewarding, it’s also been shown to reduce work productivity by more than 18%, costing U.S. businesses up to $33 billion annually. Given this, it’s surprising that palliative programs are not nearly as widespread as they should be.
Employers should give serious consideration to offering palliative care as a benefit to employees. Here are two misconceptions that can get in the way of implementing palliative care programs — and two reasons why serious illness care may be right for your organization.
First, the misconceptions:
It’s not the same as hospice care. While hospice care is a part of palliative care, they’re not synonymous. Palliative care is specialized medical care for people living with a serious illness that is appropriate at any age and any stage of their disease and can be provided along with curative treatment. It focuses on providing patients with relief from the symptoms, pain and stress of their medical condition(s) — whatever the diagnosis.
The goal is to improve quality of life for both the patient and their family. Those who would greatly benefit from access to palliative care face conditions such as diabetes with complications, metastatic cancer or chronic obstructive pulmonary disease.
It doesn’t affect my population. While people with a serious illness typically represent only a small proportion of the commercial population — roughly 2% to 3% — and up to 10% of retiree populations, they consume a disproportionate amount of healthcare resources. By addressing the needs of those living with serious illness, helping them avoid unnecessary, unwanted, and even potentially harmful care, employers can make a big impact on employees’ lives and the bottom line. Moreover, palliative care also greatly benefits caregivers, who can experience stress, negative impacts on their own health, and lessened productivity and presenteeism at work, even when they find their role fulfilling.
Now, why should employers offer palliative care benefits?
Quality can generate cost-savings. Palliative care’s focus on improving the quality of life of patients and their families means it leads with quality. The logic of “quality first” applies to many high-value healthcare strategies including accountable care organizations, centers of excellence (COEs) and second opinion programs. And like those other strategies, leading with quality can lead to lower costs. For instance, by providing access to high-quality care for certain services or conditions at a COE, employers hope that costly complications from low quality or inappropriate care can be avoided, just as introducing a palliative care team to a treatment plan can help patients better manage their symptoms, such as severe pain, proactively and lead to fewer trips to the emergency room.
Employers can make a big difference for patients and caregivers. Employers and other healthcare purchasers can play a powerful role in improving care for people living with serious illness by demanding certain capabilities and services from contracted health plans, other vendors and healthcare providers.
These include:
· Proactive identification of the population of patients living with a serious illness
· Training all healthcare providers in basic communication and symptom management skills
· Access to certified specialty palliative care teams across care settings
· Access to appropriately trained case managers
· Specific benefits that include home-based services and support for caregivers
To change the healthcare system, it’s important for purchasers to be on the same page with each other to ensure that providers and plans are on board with providing this type of care. After all, at the end of the day, it’s about the patient and their family. In focusing on palliative care, along with other key areas, purchasers have the power and influence to make a difference in the quality and affordability of care their employees receive.
SOURCE: Delbanco, S. (6 March 2019) "The benefit you may not be offering to employees — but should be" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/the-benefit-employers-may-not-be-offering-to-employees?brief=00000152-14a5-d1cc-a5fa-7cff48fe0001
4 questions to ask before adding biometric screenings
According to the Kaiser Family Foundation (KFF), fifty-two percent of large firms that provide employee health benefits offer workers the opportunity to complete a biometric screening. Continue reading this blog post to learn more.
A growing number of employers are adopting workplace wellness programs to improve employee health and subsequently lower their health insurance spend. As they do, benefit managers are tasked with vetting options that will deliver meaningful health and financial results for their companies.
This vetting process typically involves answering questions that range from which types of participation incentives their organization should offer to what type of wellness programs will yield the greatest health-improvement outcomes.
But there’s a problem: Very few benefits managers ask for details about wellness biometric testing, even though most programs are, at least in theory, designed around the information that screening provides. Biometric screening typically involves one or more laboratory tests as well as physical readings, such as blood pressure and body weight, to identify markers of health risks if not an actual disease.
According to the Kaiser Family Foundation, 52% of large firms that provide employee health benefits offer workers the opportunity to complete a biometric screening.
Just as workplace wellness programs are not all the same, biometric screening can vary. Failure to question the specific details of a proposed biometric screening program can lead to suboptimal results.
Before moving forward with biometric screenings as part of a workplace wellness program, benefit managers should pause to ask themselves certain questions. Doing so will enhance the likelihood of favorable outcomes — both for employee wellness and the financial bottom line.
1. Why should we screen?
It sounds simple, but setting clear goals for biometric screening is a step too many benefits managers overlook. This may be because they do not know how to anticipate the kind of actions that will be available to them and their employees given the results.
Based on my experience, the most compelling reason to provide biometric screening as part of a wellness program is to help individuals identify risks for several chronic conditions that, if caught early, may be prevented. With insights from a biometric screening, an individual may be better able to take steps to reduce health risks. Common goals may be to reduce body weight, exercise more or visit a physician for treatment.
Biometric screening often can reveal disease risks an individual may not otherwise know. A study published in the peer-reviewed journal PLoS ONE, for instance, found that one in three first-time participants in a company-sponsored, lab-based wellness program by Quest Diagnostics were not aware they were at risk for a serious medical condition, such as diabetes or heart disease, according to biometric screening results. Many of these individuals were in a health plan, suggesting that healthcare access alone does not guarantee preventive care to identify risk for common chronic health conditions.
Biometric screening also can help an employer identify programs to target at-risk employee segments based on the type of risk with appropriate interventions. Reliable insight into disease risks for a workforce population may also aid the prediction of future healthcare costs.
2. What should we screen for?
Ideally, biometric screening should provide enough information into disease risks for both individuals and the employer in order to take meaningful actions. Here, many employers miss the mark by implementing bare bones biometric screening options. The result is potentially misleading results — and missed opportunities to identify individuals at risk.
Take diabetes screening, for instance. A non-fasting fingerstick glucose screening really doesn’t tell us anything considering the variety of food individuals might have eaten, and how that may have affected their measurement.
A fasting fingerstick glucose test may help identify diabetes risk in some individuals and be less costly to perform than a hemoglobin A1c test, which involves a venipuncture blood draw. However, a study from Quest Diagnostics found that some individuals in a workforce population with normal fasting glucose results were still at higher risk for diabetes, and a glycated hemoglobin (HbA1c) test identified them.
In a similar manner, many employers overlook screening for chronic kidney disease, one of the major causes of kidney transplantation. Eighty-nine percent of participants identified as at risk for chronic kidney disease did not know it, according to the aforementioned PLoS ONE study. The estimated glomerular filtration rate (eGFR) lab test can help identify this condition very cost-effectively, but it’s often absent in biometric screening programs. Other conditions that laboratory tests can help identify include metabolic disorders, thyroid disease, and colorectal cancer, among others.
3. How often should we screen?
Annual biometric screening reinforces the importance of management places on employee wellness. It can also help identify health risks in individuals who are new to the organization. An annual program also provides a regular cadence of engagement that is not too onerous on employees while minimizing the confusion that can occur when screening happens less frequently.
Annual screening has an added benefit of allowing the employee to track her progress over time. Quest provides graphic charts that show changes in an individual’s numbers year over year. This is a powerful motivator for those who have adopted healthful behaviors to stay the course. And longitudinal changes also can reveal patterns, like modest annual weight gain, that the individual may otherwise dismiss until they see the cumulative effect.
4. How can we connect employees to care and intervention?
Screening is just one facet of a successful wellness program. Some individuals who identify health risks may proactively modify their behavior or consult a physician. But not all will. Employers can improve the odds of at-risk employees accessing the care they need following biometric screening.
Most employees in biometric programs receive a personalized report of their screening results. Additionally, many participants can consult over the phone with a third-party administered physician.
At Quest, for instance, we offer programs that help at-risk employees access behavioral change programs. If an individual’s screening results suggest evidence of prediabetes, that employee may participate free of charge in a 16-week, CDC-based diabetes prevention program that includes coaching and lifestyle modification. An individual with a problematic cholesterol result may be able to access a similar program for heart disease prevention.
Biometric screenings can be a powerful facet of an employee wellness program. Understanding the reasons to screen, which methods to use and how often to use them, and the paths to connect employees to care are key. Benefit managers who do this well will be rewarded with a wellness program that results in healthier employees and lower healthcare costs over time.
SOURCE: Goldberg, S. (21 February 2019) "4 questions to ask before adding biometric screenings" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/4-questions-to-ask-before-adding-biometric-screenings
Today’s workforce never learned how to handle personal finances
A bill was recently proposed in South Carolina that would require all students to take a personal finance course before they graduate. Continue reading to learn how this proposal could help today's workforce learn how to handle personal finances.
A bill was recently proposed in the South Carolina state legislature to require all students to take a half-credit personal finance course and pass a test by the end of the year in order to graduate.
This proposed legislation could prove to be a breakthrough idea because frankly, much of the high school-educated—or even college-educated—workforce has never had a formal education on how to take care of their personal finances, pay off their student loans, open an appropriate retirement account, select an insurance provider or generally prepare for personal financial success.
Without taking these now-required personal finance classes in high school, how is the current workforce expected to learn how to stay afloat and become financially stable?
For those in other states or for individuals who are past high school, the most logical solution for solving this problem is to put the onus on employers and business owners to teach their employees how to properly handle their financial well-being.
Having a staff full of financially prepared employees is in any businesses’ own interest, and there are statistics to show it. Numerous research studies have proven that companies with robust employee financial wellness programs are more productive because employees don’t have to spend company time handling personal financial problems. This results in an average three-to-one return for the organization on their financial wellness investment, according to studies from the Cambridge Credit Counseling Corp.
Employees who practice good financial wellness are also proven to stay with the company longer, be more engaged at work, less stressed and healthier—all of which add significant dollars to a company’s bottom line.
While understanding that HR, executives, and accounting have little time to spend teaching lessons in the workplace, how does a company go about offering financial wellness information to their employees?
There are several options available to companies when it comes to financial wellness. One of the most sought-after benefits in recent years is online financial wellness platforms that digitize the financial education process. This allows employees to work on their financial education on their own time from the privacy of their home computer, using a friendly and simple interface. And benefits solutions providers have access to a number of these resources – all companies need to do is inquire with their provider.
It is important to remember that not all financial wellness platforms are created equal in what they offer. Depending on the specific needs of an organization, they should assess the offerings available through each service provider to ensure they receive the program they intend to offer to their employees. Most platforms offer partial solutions and tools that could include financial assessments, game-based education, budgeting apps, student loan assistance, insurance options, savings programs, and even credit resources to help those who don’t have money saved to afford an emergency cost.
Not everyone goes to school to learn accounting, so we can’t assume that everyone knows what they are doing when it comes to personal finances. South Carolina is taking a major and important step towards improving their citizen’s futures by suggesting everyone take a personal finance course in high school. This could have a massive and positive effect on the economy in the future.
Finding a financial wellness solution that checks most, if not all, of these boxes will enable employees to take the initiative to either continue what they’ve learned (in the case of South Carolina students) or start down the path of gaining financial independence. Implementing a complete financial wellness toolset to give employees the ability to prepare for financial success is a huge step towards significantly increasing productivity.
As an engaged employer who cares about the well-being of their employees, it is important to offer as many resources as possible to encourage employees to stay financially well, decrease stress, and increase productivity in the workplace.
7 principles for helping employees deal with financial stress
More than 60 percent of survey participants are seeking support from their employer for all aspects of health with financial health as their priority, according to a survey by Welltok. Read this blog post to learn more.
Employees are dealing with financial strain -- and they may want some help from their employer to address it.
The results of a recent survey on employer wellness programs from software company Welltok, reveals two important takeaways:
- More than 60% of survey participants are seeking support from their employer for all aspects of health with financial health as their first priority.
- If employers offered more personalized programming, 80% of respondents say they would more actively participate in their wellness offerings.
These findings attest to what we already know. First, there is no physical wellness without mental and emotional wellbeing and there is no mental and emotional wellbeing without financial wellness. Second, engagement demands personal relevance.
Today, Americans carry $2 trillion in consumer debt, student loan debt has overtaken credit card debt and 50% of consumers live paycheck-to-paycheck. Nearly half of Americans do not have $400 to cover an emergency. Over the past decade, consumers continually report that financial stress is the greatest challenge to their health and wellness.
Struggling with finances is a deeply stressful situation for employees, families, employers and communities nationwide. To date, programs to help employees address their financial concerns have been built on the assumption that if we just teach our employees financial literacy, their financial situations will improve. This ignores the fact that money is deeply emotional—a fact that any effort to change how we deal with our money must address.
When it comes to complex, emotionally-driven issues such as money, there is often a disconnect between knowing what to do, understanding how to do it and actually doing it. In this sense, financial wellness is similar to physical wellness. I may know I need to lose 20 lbs., I may even understand, in theory, how to lose weight. But I still have trouble acting on what I know.
With this in mind, there are seven core principles critical to helping employees make a real difference in their finances and their lives.
- Education alone is not enough. Education and financial literacy alone simply do not inspire or empower behavioral change.
- Personalization is key. People will engage with a solution when it feels like it’s about them and their particular situation. Support resources need to bring general financial principles home by addressing employees’ individual circumstances.
- Privacy matters. Money is a sensitive and emotional subject that is difficult to discuss — especially in a group setting. Support resources need to respect the need for privacy and empower participants to explore financial questions without fear of judgment.
- Take a comprehensive approach. Support resources must include participants’ full financial picture to ensure that each individual’s most important issues are identified and addressed.
- Behavior change is essential. Established principles of behavior change science work just as well for changing financial habits and decision making. Reinforcing social interaction, peer support, positive attitudes and outlooks, providing small steps and supporting regular accountability are key.
- Technology lowers barriers to action and change. Mobile access is key for reaching individuals, meeting them where they are and offering them self-paced, actionable advice in the moment they need it. Learning to deal with money can — and should — be gamified. It takes considerable effort to present complex financial principles in fun, friendly, accessible scenarios or modules that are easy for employees to digest. But the result is worth it: Finances are transformed from difficult and stressful to easy and even fun. Employees develop a sense of competence; their finances become something they feel confident about and want to tackle.
- Remember the human connection. Technology transforms the financial services landscape by expanding our ability to provide meaningful personalized advice, consistently and according to best practices. Still, nothing changes the importance of a human adviser who can create a relationship, connection, and the trust to empower behavioral change.
The time has come to give everyone the financial advice and tools they deserve, and that will engage and empower them to improve their situation. Fortunately, much of the necessary technology already exists — and it’s improving daily. At this point, then, it’s key to get these solutions into employees’ hands so they can start their journey.
Change won’t happen overnight, although the smallest insights — setting up your first budget, getting answers from a financial coach — can do wonders to relieve financial stressors. Step by step, change is possible, confidence grows and wellbeing improves.
SOURCE: Dearing, C. (20 February 2019) "7 principles for helping employees deal with financial stress" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/how-employers-can-help-employees-deal-with-financial-stress
How to build a multigenerational benefits strategy
Employers and HR teams are now managing workforces that stretch across three to five different generations. Continue reading this blog post to learn more about why having a multigenerational benefits strategy is important.
Employers and HR teams are managing employees for a workforce that stretches across three to five generations. This workforce is complex, and its workers have varying needs from generation to generation. That’s why a multigenerational benefits strategy is in order.
Baby boomers preparing for retirement may have an ongoing relationship with doctors and a number of medical appointments in a given year. On the other hand, millennials and members of Generation Z— the latest generation to enter the workforce — may shy away from primary care doctors and focus more on options to pay off student loans and start saving for retirement.
Given these dynamics, it’s important that two separate departments, finance and HR, need to develop a benefits strategy that keeps costs as low as possible while being useful to employees. Finance leaders understand they need to retain employees — turnover is expensive — but they’re still interested in cost containment strategies.
Employers should approach their multigenerational benefits strategy on finding a balance between cost containment and employee engagement.
Cost containment
For the first time in six years, the number of employers offering only high-deductible health plans is set to drop 9%. But the idea of employee consumerism is here to stay as employers see modest rises in health insurance premiums.
To effectively contain costs, employers should first weigh the pros and cons of their funding model. While most companies start out with fully-insured models, employers should seriously evaluate a move toward self-funding. Sure, self-funding requires a larger appetite for risk, but it provides insight into claims and utilization data that you can leverage to make informed decisions about cost containment.
One way to move toward a self-funded model is with level-funding, which allows employers the benefit of claims data while paying a consistent premium each month. In a level-funded plan, employers work with a third-party administrator to determine their expected claims for the year. This number, plus administrative fees and stop-loss coverage, divided by 12, becomes the monthly premium.
A tiered contribution model might also help to contain costs without negatively affecting employees. In a typical benefit plan, employers cover a specific percentage and employees contribute the rest — say 90% and 10%, respectively. In a tiered contribution plan, employees with salaries under a certain dollar amount pay less than those high earners. That means your employee making $48,000 pays $50, while your employee making $112,000 pays more. It’s a way to distribute the contribution across the workforce that enables everyone to more easily shoulder the burden of rising healthcare costs.
Employee engagement
To create a roadmap that not only helps you gain control of your multigenerational benefits strategy but keeps employees of all ages happy, it’s necessary to consider employee engagement. While new options like student loan repayment could be useful to part of your workforce, it’s best to start much simpler with something that affects everyone: time away from work.
A more aggressive paid time off policy, telecommuting policies and paid family leave are becoming increasingly popular. Many companies are offering PTO just for employees to pursue charitable work — a benefit that resonates with younger workers and can improve company culture. And a generous telecommuting policy recognizes that employees have different needs and shows that employers understand their modern, diverse workforce. Beyond basic time away from work, an extended leave policy outside what the law guarantees is another tool that can keep employees engaged.
Making it easier for employees to get care is another trending benefit, which can keep employees happy and contribute to cost containment. Concierge telemedicine has been called the modern version of a doctor’s house call. This relatively inexpensive benefit provides your employees access to care 24/7 by phone or video chat, which is convenient regardless of the user’s generation.
Employees and other covered individuals can connect to a doctor to discuss symptoms and get advice, whether they are prescribed a medication or they need to seek further care. This is another benefit that’s useful for young workers who may not have a primary care doctor or older workers with families.
Finally, your tech-savvy workforce expects to access their plan information wherever they need it. Ensure your carrier offers a mobile app to house insurance cards, coverage and provider information.
When it comes to a multigenerational benefits strategy, creating harmony between finance and HR might seem like a daunting task. But considering some relatively small benefit changes could be what allows you to offer a benefits package that pleases both departments — and all of your employees.
SOURCE: Blemlek, G. (26 February 2019) "How to build a multigenerational benefits strategy" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/opinion/how-to-build-a-multigenerational-benefits-strategy?brief=00000152-146e-d1cc-a5fa-7cff8fee0000
Younger generations driving lifestyle benefits
Millennials will make up seventy-five percent of the U.S. workforce by 2025, according to a study by Forbes. The self-confidence of younger generations is pushing companies to adopt more non-traditional benefits. Continue reading to learn more.
Younger generations are often characterized as entitled and demanding — but that self-confidence in their work is pushing companies to adopt benefits outside the traditional healthcare and retirement packages.
By 2025, millennials will make up 75% of the U.S. workforce, according to a study by Forbes. The first wave of Generation Z — millennials’ younger siblings — graduated college and entered the workforce last year. With these younger generations flooding the workplace, benefit advisers need to steer clients toward innovative benefits to attract and retain talent, according to panelists during a lifestyle benefits discussion at Workplace Benefits Renaissance, a broker convention hosted by Employee Benefit Adviser.
“Millennials came into the workforce with a level of entitlement — which is actually a good thing,” said Lindsay Ryan Bailey, founder and CEO of Fitpros, during the panel discussion. “They’re bringing their outside life into the workplace because they value being a well-rounded person.”
Catering benefits to younger generations doesn’t necessarily exclude the older ones, the panelists said, in a discussion led by Employee Benefit Adviser Associate Editor Caroline Hroncich. Older generations are accustomed to receiving traditional benefits, but that doesn’t mean they won’t appreciate new ones introduced by younger generations.
“Baby boomers put their heads down and get stuff done without asking for more — that’s just how they’ve always done things,” Bailey said. “But they see what millennials are getting and are demanding the same.”
In a job market where there are more vacant positions than available talent to fill them, the panelists said it’s important now, more than ever, to advise clients to pursue lifestyle benefits. While a comprehensive medical and retirement package is attractive, benefits that help employees live a more balanced life will attract and retain the best employees, the panelists said.
“Once you’ve taken care of their basic needs, have clients look at [lifestyle benefits],” said Dave Freedman, general manager of group plans at LegalZoom. “These benefits demonstrate to workers that the employer has their back.”
The most attractive lifestyle benefits are wellness centered, the panelists said. Wellness benefits include everything from gym memberships, maternity and paternity leave, flexible hours and experiences like acupuncture and facials. But no matter which program employers decide to offer, if it’s not easily accessible, employees won’t use it, the panel said.
“Traditional gym memberships can be a nightmare with all the paperwork,” said Paul O’Reilly-Hyland, CEO and founder of Zeamo, a digital company connecting users with gym memberships. “[Younger employees] want easy access and choices — they don’t want to be locked into contracts.
Freedman said brokers should suggest clients offer benefits catered to people based on life stages. He says there are four distinct stages: Starting out, planting roots, career growth and retirement. Providing benefits that help entry-level employees pay down student debt, buy their first car or rent their first apartment will give companies access to the best new talent.
To retain older employees, Freedman suggests offering programs to help employees buy their first house, in addition to offering time off to bond with their child when they start having families. The career growth phase is when most divorces happen and kids start going to college, Freedman said. Offering legal and financial planning services can help reduce employee burdens in these situations. And, of course, offering a comprehensive retirement plan is a great incentive for employees to stay with a company, Freedman said.
Clients may balk at the additional costs of implementing lifestyle benefits, but they help safeguard against low employee morale and job turnover. Replacing existing employees can cost companies significant amounts of money, the panelists said.
“Offering these benefits is a soft dollar investment,” Freedman said. “Studies show it helps companies save money, but employers have to be in the mindset that this is the right thing to do.”
SOURCE: Webster, K. (25 February 2019) "Younger generations driving lifestyle benefits" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/news/younger-generations-driving-lifestyle-benefits?brief=00000152-1443-d1cc-a5fa-7cfba3c60000
4 FAQs about W-2 business email compromise attacks during tax season
Has your business been a victim of tax season cyber attacks? The most popular time of the year for W-2 related cyber attacks is during tax season. Read this blog post to learn more.
The most likely cyber attack a company will face will come in the form of an email. One of the most common forms of email attack is the business email compromise (BEC), and the most popular time of the year for the W-2 version of BEC is right now — tax season.
A BEC attack involves attackers sending emails disguised as coming from high-level executives within a company, such as the CEO, to lower level personnel. During tax season, the spoof email will often request that W-2s for employees be provided by return email.
While the email looks identical to the executive’s email, it is coming from — and then returned to — the criminal, not the executive, along with the W-2s and the personal information associated with the documents.
If an employee falls for the scam, the company now has experienced a serious data breach and must comply with certain legal requirements. Worse yet, the company’s employees’ sensitive personal information has been given to the attackers and they have this problem to worry about instead of performing their job. The disruption is substantial in their personal lives and for the company’s operations.
How do attackers use W-2 information?
In most cases, once the attackers have that W-2 information, they use it to attempt to file fraudulent tax returns for those employees and have their tax refunds sent to them instead of the employee. They also use it for traditional identity theft.
The attackers act very quickly once the information is obtained. In some cases, they have begun to fraudulently use the information on the same day they obtained the W-2 information from the company. Time is truly of the essence in responding to these attacks and legal assistance is necessary for properly responding to these data breach events.
Why do so many attacks happen during tax season?
Law enforcement officers and cybersecurity professionals report a drastic increase in these types of attacks during the beginning of each year because of tax season. This is consistent with what is seen in helping companies with these cases in past years, as well. The reason this type of attack is so common during tax season is because of the tax-related fraud aspect of this type of attack. That is, the attackers monetize their attacks by using the fraudulently obtained information to file fraudulent tax returns and obtain refunds from innocent victims.
And the sooner they can do this, the better their chances are of getting the refund before the taxpayer files and receives their tax refund.
If a company has not yet been targeted, it is likely that it will be very soon so it is important to be prepared.
What can you do to protect your company?
Educating employees is critical because they will be the ones who receive the emails from the attackers.
- Make them aware of this issue by sharing the information in this article with them so that they understand the threat, how it works and how it could affect them personally.
- Train them by having appropriate personnel discuss this threat with them and help them understand that they should be very suspicious of any requests to email out anything of this nature (or make payments, such as with the very similar wire transfer version of the BEC).
Have appropriate internal controls in place to protect against these types of attacks. These controls can include:
- Limit who has access to your company’s W-2s and other sensitive information as well as who has the authority to submit or approve wire payments.
- Have established procedures in place for sending W-2 information or other sensitive information as well as for submitting or approving wire payments so that dual approvals are required for these activities.
- Require employees to use an alternative means of confirming the identity of the person making the request. If the request is by email, the employee should talk to the requestor in-person or call and speak to the requestor using a known telephone number to get verbal confirmation. If the request is by telephone or fax (many times they are), then use email to confirm by using an email address known to be correct to confirm with the purported requestor. Never reply to one of these emails or call using a telephone number that is provided in one of these emails, faxes, or telephone calls.
What to do if your company is hit by an attack
- Immediately contact experienced legal counsel who understands how to guide a company through these incidents and, ideally, has appropriate contacts with law enforcement and the IRS to assist in reporting this incident quickly.
- Report the incident to the FBI or Secret Service and appropriate IRS investigators so that the IRS can implement appropriate procedures to protect the employees whose information was exposed in the W-2s.
- Prepare appropriate notifications to the people whose information was exposed and comply with all legal and regulatory reporting requirements. This should be a part of an existing incident response plan. Companies should have such a procedure in place to be better prepared if and when a security breach occurs.
- Inform employees that the IRS will never contact them directly, for the first time, via email, telephone, text message, social media or any way other than through a written “snail mail” letter.
SOURCE: Tuma, S. (19 February 2019) "4 FAQs about W-2 business email compromise attacks during tax season" (Web Blog Post). Retrieved from https://www.benefitspro.com/2019/02/19/4-faqs-about-w-2-business-email-compromise-attacks-during-tax-season/