A company retirement plan used to be an optional benefit for employees. But it turns out that investing in your workers’ financial future can have a direct impact on your bottom line.
Today, 53 percent of Americans are stressed about their finances, according to PwC’s 2017 Employee Financial Wellness Survey. And nearly half of those employees say that their concerns distract them during the workday for three or more hours each week. They are also more likely to miss work days or suffer from stress-related health issues, which could further impact your performance and productivity as a company.
That’s why offering savings tools and financial education is both a practical decision and a positive tool for employee recruitment and retention. In fact, 59 percent of employers said they planned to emphasize financial well-being in the coming year, according to research by Aon Hewitt.
But to be successful, employers should consider strategies that go beyond a company 401(k) plan and actually encourage workers to save for retirement, health and emergency costs. Below are a few strategies that I often use to boost my clients’ employee engagement and financial stability:
Make it automatic. Simply offering a 401(k) plan isn’t enough. Data from the U.S. Census and Bloomberg show that two thirds of Americans don’t invest in their company retirement plan at all. Although income level and eligibility play a significant role in participation, the research indicates that many workers also aren’t aware the plan exists or are intimidated by the paperwork and investment decisions required. Automatically enrolling all eligible participants — requiring them to intentionally opt-out if they choose not to participate — can address this part of the issue.
But even auto-enrollment isn’t the best solution, because it doesn’t encourage higher savings. I have seen employees get comfortable and assume the default savings will cover them for retirement, when in fact they need to save much more. Implementing an auto-escalation feature will regularly increase employees’ savings by as little as one percentage point a year. If it’s timed with a year-end bonus or raise, they might not even notice the increase – but their bank account will. The New York Times calculated that saving an additional 1 percentage point a year could boost retirement savings by up to six figures.