Why Employers Can't Ignore Employees' Financial Challenges
Thanks to ADP Marketplace partner Compt for this article.
In the face of crisis, it's a common belief you have two choices: fight or flight.
But in reality, there's a third choice, the third "F," which is "flex."
How can you flex and adapt to changes around you instead of potentially making a poor reactionary decision? In today's world, where outside economic forces are creating ongoing priority shifts, HR leaders who are poised to make a true difference to their people must take a step back and flex their thinking.
This has become all the more apparent in the face of the current affordability climate, where recent reports paint an increasingly difficult picture for many employees that employers should consider:
- Half of U.S. tenants can't afford to pay their rent, with the median rent increasing by 22 percent since 2019
- Roughly two-thirds of families needing childcare already dedicate 27 percent of their annual household income toward paying for it, up 3 percent from just the previous year.
- 13.5 percent (roughly 18 million U.S. households) were food insecure in 2023, up from 10.2 percent in 2021, with the cost of groceries rising 25 percent since the pandemic.
According to ADP's People at Work 2024: A Global Workforce View, pay is the No. 1 priority (and source of pain) for employees globally. What's more, the report shows that pay expectations are outpacing what many employers are willing to give, with expectations averaging more than 5 percent. Yet, despite the need, more than a quarter of workers reported no change in their wages, showing a clear need for employers to step up.
How employers can help employees with financial wellness
While employers can't change macroeconomics, they are in a unique position to do what they can to offer support to their employees financially. And though a company-wide bonus or salary increase would be great, it's not the reality for many employers that may be just as bootstrapped. There's flexibility in how you can structure and define what "compensation" means in your business.
When considering monetary benefits, you could add that amount directly to a paycheck as a bonus, but if it's a nominal amount (say $25-100), this paycheck addition will likely go unnoticed (and unappreciated). Especially because traditional paper pay stubs, where employees can see their line items, are increasingly rare.
Instead, employers can call out this benefit through an employee stipend program, a type of benefit where companies provide funds for employees to spend on various perks and benefits. By labeling the benefit, you're helping to empower employees to make choices based on their needs and increasing the perceived value of a benefit that doesn't cost your company that much more on their bottom line.
Employee stipend programs are a type of benefit where companies provide funds for employees to spend on various perks and benefits.
How employee stipend programs work
- Employees receive a set amount of money to use on company-approved categories (e.g., health and wellness, family, food).
- To claim the benefit, employees make purchases that they want and need within these categories and then submit receipts.
- Once approved, the company reimburses the employee in their next paycheck.
While some companies manage stipends manually, software can streamline approvals and ensure accuracy and tax compliance.
Unlike traditional benefit and perks programs where employees are offered point solutions that may not suit them, stipends allow employees to choose from multiple categories, helping them to use the benefit in ways most relevant to their needs.
Personalized lifestyle benefits in the form of reimbursable stipends can help employees be more financially secure in areas that matter, like groceries, childcare, or housing expenses.
According to the Mid-Year Lifestyle Benefits Benchmark Report from Compt, a lifestyle benefits platform, food (18 percent) and family (10 percent) represent more than a quarter of employee spending across all categories, showing a growing need for these kinds of benefits across workforces in all industries and of all sizes.
Reaching employees where it matters most
To offer the right kind of benefits and support for employees, employers need to be flexible, understanding that different employees have different needs and situations.
"For some parents, having care at a job site is a convenient benefit, but for others it might make more sense to keep their kids at their current childcare centers or to use a home-based provider. What's more, different programs can be better fits for different kids, like for those with special needs or who don't speak English as a first language," the article reports.
Outside of the traditional and voluntary benefits many companies provide, employers who show care and consideration for their employees' day-to-day lives will be more likely to keep an engaged workforce. So, think about what your employees encounter and how you can help.
For example:
- Their daily commute. How are they getting to work? Many typical commuter options, like a bus or train, don't operate overnight, so can you offer a stipend to reimburse for gas or parking? Can you go a step further and earmark funds for car maintenance to reflect the wear and tear on their vehicle?
- Childcare costs. Think about the language used for this so it can go to any kind of childcare cost, not just daycares or licensed facilities. Babysitters and family count, too! NPR recently wrote about Sachin Shivaram, a Wisconsin-based CEO who, after trying to find several solutions to support his employees with childcare, decided to give them a $400 monthly stipend, which about 100 of his employees currently use.
- Food insecurity. Many employees may be self-conscious about admitting that putting healthy food on the table for their family is an issue. An umbrella stipend simply labeled "Food" can be used on anything from groceries to food delivery and meal planning. Employers can opt to keep stipend reimbursements private, so their peers never need to know what is being spent.
A stipend program that can be tailored and "flex" with employee needs is the one your people can turn to for a wide range of support on everything from groceries to childcare and more. Companies can allocate budget for these benefits without an upfront cost, making it a wallet-friendly investment for businesses as well as for your people.
A final note: Don't make assumptions about your workforce without asking first. Employers can find out what matters most to their employees through an anonymized benefits feedback survey, or by digging into the data behind usage and participation so they aren't blindly offering benefits that won't make a difference.
In difficult times, it can be tempting to sit back and wait for it to pass. But the affordability situation at hand offers an incredible opportunity for employers to step up to the plate and give their employees a helping hand when they need it most, by delivering financial support that truly makes a difference in their everyday lives.
About ADP Marketplace
ADP Marketplace is a digital HR storefront that helps you connect and share data across your HR solutions. Choose from easy- to-use solutions that connect to your ADP platform or access ADP APIs to build custom integrations. For more information visit apps.adp.com.
About Compt
Compt is a lifestyle and work-style benefits platform that scales global benefits programs with products, services, and experiences that meet employees' evolving needs from lifestyle benefits to wellbeing stipends, culture-building recognition programs, and everything in between.
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