Memo to the Boss: Forget My Raise, Give Me Better Benefits

By Dan Kadlec

December 20, 2017

Join a gym with raise in lieu of benefits

Would you rather have a more generous benefits package at work or a large enough pay raise to purchase an equal-value benefits package on the open market? Your answer says a lot about how confident you are handling money.

By a two-to-one margin, Americans would choose more generous benefits and less pay, according to a new survey from the American Benefits Council. In essence, most folks would rather be handed a standard set of benefits vetted by their employer than be given the money and responsibility for choosing themselves.

On the surface, this makes no sense. It even stumps corporate benefits executives, who as a group believe employees would prefer higher pay to more generous benefits, according to the survey. After all, designing your own benefits would allow you to, say, maximize child-care contributions in your 30s and 40s and favor something like a flexible work schedule in your 60s.

Why would anyone prefer a cookie-cutter benefits package over one that is tailored to their needs and has identical economic value? In part, at least, they must lack the confidence to make these kinds of money decisions.

That speaks to a lack of financial education in schools and the workplace. We are turning out generation after generation of individuals who are afraid to make decisions that will affect their financial future.

Just five states earned an A for financial literacy instruction in public schools, according to a recent study. A third of adults have no savings; 60% do not have a budget and 22% do not pay their bills on time.

Financial education: cash or benefits?

The one time individuals seem to prefer taking charge of their money is after winning the lottery—when they believe they have so much money it will never run out. But winners who choose a lump sum payout…

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…over a monthly check are more likely to go broke than the average American. Up to 70% of people who receive a cash windfall lose it all within three years, according to the National Endowment for Financial Education.

So, yes, workers are willing to punt on mega issues like retirement and healthcare. Hands down, these are their most prized benefits, according to the survey. A bad choice now could be devastating down the road. So, they are willing to forego more pay and the freedom to design their own benefits to receive less pay with the safety of employer-vetted benefits.

Workers generally trust their employer to do right by them. In the survey, they said they trusted their employer above all other stakeholders to make the right healthcare choice for them.

Adults get it: more onus on individuals

Yet employers score less well when it comes to trusting their retirement plan. On that issue, workers trust the financial services industry more, according to the survey. Which further prompts the question: Why wouldn’t workers swap lesser retirement benefits for higher pay that they could use to get a personal financial plan? A lack of financial confidence is the best explanation.

Employees understand they must ramp up their money smarts. Asked who will play a bigger role in their healthcare and retirement security over the next 10 years, “individuals” was the top answer. They expect employers to play a lesser role—perhaps acknowledging the decades-long shift of responsibility to individuals from government and corporations.

That acknowledgement is a good thing. It means employees should be more open to taking advantage of the financial wellness programs that are fast becoming part of the modern benefits package. Even as individuals choose to punt on big financial decisions they understand that important money choices will be landing in their lap more often. Now, if we can just get the education system to help prepare them.

More on financial wellness at work and in school:

Financial Confidence ‘Temperature’ Needs To Be Just Right

Amid Crippling Inaction at State Level, Financial Education May Bubble Up

Why Your Company Must Offer A Financial Wellness Program

 

Posted in Adults on December, 2017