Financial Wellness Employee Benefits for Startups
Amidst layoffs and IPOs in 2020, executive teams and HR leaders are reevaluating their benefits offerings in 2021 with a newly critical eye.
Is your company’s employee benefit package:
- Competitive? It’s tougher and tougher to recruit and retain, at every seniority level, especially with new WFH flexibility creating an increased number of options for top talent across the country.
- Aiding diversity efforts? Whether across race, income level, educational background, or personal family responsibilities, it’s becoming increasingly clear that ping pong tables as a “perk” are just not cutting it anymore.
- Contributing to the bottom line? Is the ROI on each benefit offering demonstrable as we tighten budgets and set increasingly ambitious goals for growth?
- Aligned with company values and employer brand? Whether it’s providing educational and professional resources, or authentically contributing to employees’ well-being in a stressful year, are your benefits reflective of how your company approaches supporting productivity and employee happiness?
Why financial wellness? Why now?
Financial wellness is newly top of mind, given:
- The volatility of the stock market and anxiety around long-term financial decisions in the wake of COVID-19
- Tax and financial complexity around the increasing number of liquidity events (IPOs, acquisitions, mergers)
- Increasingly evident costs to the company as employees struggle with their personal finances and equity-related decisions.
Tech employees are facing uncharted territory when it comes to their financial situations — large liquidity events or planning around equity is not something that they can turn to a family member or a general CPA for help with. The company supplies equity as part of compensation, but it’s certainly not as straightforward as a cash salary — who is responsible for the tax and greater financial implications of how employees manage their equity?
Employees seek help from their peers, managers, and HR teams but none of these solutions is quite right — typically, there isn’t sufficient subject matter expertise in taxes or investments, and one of the most difficult things about financial decisions is that no advice really applies across the board. Everyone’s personal financial considerations are unique and a “best practice” for a coworker could be irrelevant or potentially detrimental to you.
The cost breakdown for the company
- Lower financial literacy means lower participation in employer-sponsored benefits such as 401(k)s, HSA, and FSAs, which result in increased payroll costs for the company and wasted money on the administrative fees for these vendors.
- Turnover as employees (repeatedly) jump ship for higher salaries without considering the value of their overall compensation package and equity at their current company.
- Loss of productivity as personal anxiety contributes to less focus, motivation, and engagement in their work.
- Particularly before, during, and after a liquidity event, employees are particularly sensitive to the tax and greater financial implications of the equity they hold. More information on that here: Managing Employees Through a Liquidity Event: How HR Can Help with Equity Decisions.
Top financial wellness employee benefits
Here are the top types of financial wellness offerings, with well-known vendors for startups in particular:
|Type of benefit||Vendors|
Human Interest 401(k)
|Budgeting and saving||Dreams
|Student loan repayment||Can be done as cash payments or 401(k) matches. This benefit is not as common as you’d think (for reference, pet insurance is twice as common as student loan repayment!).|
|Personal financial advising||Harness Wealth
Some major banks offer this benefit as sessions with their in-house advisors
|Tax services and advice on liquidity event planning (IPO, acquisition, merger)||Harness Wealth|
|Educational equity workshops||Harness Wealth|
Personalized financial advising as a custom solution
Many of the financial wellness benefits listed in the table above are “one-size-fits-all” and suitably so — for cost reasons, a standard benefit that fits a majority of the use cases for your employee base is usually the easiest solution.
However, financial advice works best when it’s custom to each employee. Harness for Employers has worked with several tech companies to provide the kind of robust financial wellness benefit that empowers employees and offloads the burden and risk from company leadership and HR onto expert financial and tax advisory firms.
High quality individual vs. generic advice: We’ve found that when each employee is able to access personalized advice, the baseline financial literacy of your employees improves significantly. When generic advice, particularly on equity, is shared with employees, it typically creates confusion (for example, is a specific tax regulation applicable to one employee but not another?).
Applicable to all employees: Many financial wellness benefits can be more or less relevant to certain demographics in your employee base (student loan repayment vs. FSAs for childcare expenses), and Harness for Employers’s approach of connecting employees to human advisors means that the benefit is highly effective for everyone from senior leadership to early career individuals.
Managing high-risk, high-reward equity decisions: Harness Wealth specializes in working with companies through major liquidity events, and we’re able to put our experience to good use by highlighting common patterns we see in employee behavior at other tech companies, how best to roll out new information and deadlines to employees, etc. so that HR can be in a great position to help employees make the most of their equity.
We hope you found this overview helpful, and for more information on the Harness for Employers benefit, click here.