How to Promote Your Team’s Financial Well-Being
When it comes to supporting your employees’ financial wellness, the first solution that comes to mind is to raise salaries. More money means fewer money problems, right?
While good in theory, there are two main problems with this approach. First, your business revenue might not be sufficient for across-the-board raises. Secondly, what if employees would see greater benefit from res other than increased wages?
Showing your employees you care about their financial well-being doesn’t depend solely on the dollar figure on their paycheck. By exploring available tools and programs, you can provide affordable res to support your employees in achieving their financial goals.
1. Offer Res Through Payroll
More small businesses are moving their payroll from in-house to third-party payroll processors. To gain a competitive advantage in the field, payroll processors are continually adding more capabilities to their software apps and benefits packages. These features aren’t just for high-dollar corporate behemoths, either. Payroll software for small businesses can have an array of tools to help your employees improve their financial health.
Payroll processors almost universally offer the ability for employees to defer certain expenses pre-tax. These items include dependent child care, HSA contributions, and certain insurance coverage. But wait, don’t employees get to claim a deduction for HSA and child care expenditures on their tax returns anyway? Why mess with running them through payroll?
The benefit has to do with FICA tax. Claiming the deductions solely on their tax returns will save your employees federal income tax. Running the deductions pre-tax through payroll saves your employees federal income tax and 7.65% FICA taxes.
While 7.65% doesn’t seem like an impressive amount, it can really add up. An employee might have $5,000 a year in child care expenses and contribute $3,000 to an HSA. By running these expenses pre-tax through a payroll provider, the employee saves more than $600 otherwise owed in taxes.
Just make sure your employees understand how the pre-tax benefits work and how to use them. If you don’t, employees are less inclined to either use or appreciate them.
Other tools offered through modern payroll providers focus on access, organization, and tracking. Some processors have mobile apps that allow your employees to easily check their information and split their paychecks into multiple accounts. This can help automate their financial wellness strategies.
The technology also makes employee action more accessible. If employees want to change how much they divert to a savings account, they can log in and change it. If they don’t have to submit tedious paperwork to HR for every update, employees may be more inclined to take action.
Offering financial education opportunities in the office is a great way to show you care about your employees’ financial well-being. Employees might not be aware of how their existing benefits work or other options available to them outside the workplace. A simple way to provide instruction is to host lunch-and-learn meetings.
For these meetings, the employer typically orders lunch for interested employees and either shows an educational video or brings in an expert. The expert in question can be anyone capable of providing reliable and useful information, whether that’s an internal finance employee or an investment firm representative. Topics can include 529 college savings accounts, HSA investing, or even how to create a simple household budget. If the events are popular, send out surveys asking what your employees would be interested in learning about in the future.
If you would rather not coordinate the instruction yourself, you can engage a third-party instructional provider. Such providers offer more flexibility since they can provide online, event, and in-person instruction, depending on which one you choose.
Another benefit is that most providers will track the success of the program. Employees provide feedback throughout the process on their satisfaction, stress levels, and whether they are on track to meet their goals. If you’re ever curious as to whether or not the program is proving effective, the data is available to you.
Finance education is an effective way to provide an appreciated and relatively low-cost benefit. It can serve other purposes as well. Employees who have never learned how to responsibly handle money are more likely to feel like they never have enough. This can cause them to fixate on increasing their income instead of effectively stewarding their current salary. For you, that can lead to poor employee satisfaction and higher turnover.
Offer Bonuses When You Can
Employee raises can potentially devastate a small business budget due to their ongoing nature. Especially if your revenue is somewhat volatile from year to year, overhead expenditures should be carefully considered.
Sure, you can theoretically raise and decrease salaries from year to year, but few employers attempt this. Once employees receive raises, they are seldom amenable to going back down to their previous salary. Cutting employee wages is pretty much a guaranteed path to staffing exits and dissatisfaction from those who remain. It is typically a last resort for businesses struggling to avoid closure.
So when you find yourself with some extra funds set aside to spend on your employees, consider giving them bonuses. Bonus contributions can be in the form of wage bonuses, HSA funding, or discretionary retirement matches. Since these bonuses are not required every year, you can decrease or omit them during years when profits are down.
An extra perk of giving bonuses in the form of employer HSA contributions is that expenses related to salary are avoided. If you give an employee an extra $1,000 on their paycheck as a bonus, it comes to far more than just $1,000. You are also on the hook for employer taxes and any required retirement matching.
Putting that same $1,000 into an employee HSA account doesn’t carry those additional costs. As an added benefit to the employee, your HSA contribution won’t increase their taxable income like a cash bonus would.
Low Investment, Big Results
When it comes to improving your employees’ finances, offering raises might seem like the only action an employer can take. Thankfully there are plenty of other options available to you in supporting your employees’ financial health. With minimal investment, you can offer valued assistance without skyrocketing overhead costs.