Voluntary benefit discount offers are actually making financial resilience worse, not better says Wealth Wizards account director Philip Blows
Speaking to companies about the reward strategies they should put in place for their employees is like deciding what food to give to children – it is the choice between short-term gratification or something that will leave them in good health over the long term. Do you make sure they get what they need or do you give them what they want?
Reviewing many of the voluntary reward platforms provided by employers it is interesting to see what benefits consistently rank most popular amongst employees. One provider in this market shows their top rewards are discount cinema tickets, 2-for-1 restaurant vouchers, discount coffee, savings on high street store cards and discounts on Apple products. Not one of their most popular rewards has anything to do with improving the health, wellbeing or finances of staff. They all satisfy people’s bias towards instant gratification and support the propensity to live beyond ones needs.
I understand that as an employer you want to keep staff happy. But at what cost? As anyone feeding a toddler knows, they are happier and easier to deal with if you simply feed them chocolate. But this is just a short-term fix. Ignoring the long-term consequences of a poor diet can be disastrous – and this is no less true when it comes to rewarding employees.
By allowing short term gratification to dominate a reward strategy, staff are incentivised to spend money on experiences that if anything will lead them to save less and in many cases fall further into debt. Many of these platforms, when they sell their services to employees, use the magic words of employee engagement to get through the door. But the cost of this engagement is often a financially stressed and unhealthy workforce.
A survey by the Money Advice Service has found that four in 10 adults in the UK do not have £500 or more in savings. Another by ING bank suggests 28 per cent of UK adults have nothing at all in the bank. I would argue that, given the state of the finances of employees, incentivising them with discount offers to spend more than they can often afford is irresponsible.
So what is the solution? Our approach is to look at three metrics to analyse the financial health of a workforce. The first is the percentage of the workforce who have trouble paying off high interest debt. The second, the percentage who have a 3-month cash buffer and the third is whether someone is maximising the matching their employer is willing to give them. As an online financial adviser we provide personalised recommendations to help employees, and utilise online tools that provide detailed management information to track the success of a financial wellness strategy ensuring any spend in this area is having a measurable impact.
Helping your employees put together a budget that manages short term emergency funding needs as well as a long term savings plan is not easy but it has never been easier to give employees access to online advice and tools to help them on their financial journey.
I understand that giving employees what they are asking for seems to make sense but there must always be a balance between giving someone what they want against what they need. A focus on the short term desires of staff is a recipe for disaster, whether it be in their health or finances and it is the duty of responsible employers to encourage positive change in both areas.