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Ways Employers Can Inflation-Proof Workforce Benefits

Filed under: Benefits

One way to help workers address inflation is to increase wages. And yet, while wages have risen in recent years, they are not keeping up with inflation. The past year’s inflation rate has quickly outpaced real earnings, negating the increase in additional take-home pay.

Another, perhaps more effective way to help workers address high prices without a significant increase to overhead is to bolster benefits. This tactic can help offset the impact of inflation without increasing worker payroll taxes.

The following benefits offer room for expansion to help workers maximize their household budget without having to increase payrolls.

Voluntary Benefits

Employers can offer lower group-rated prices on products and services that workers normally purchase anyway. While voluntary benefits are typically 100 percent paid for by workers, employers can offer them lower costs through group-priced benefits for various types of insurance. For example:

  • Vision
  • Dental
  • Life
  • Pet
  • Travel
  • Car
  • Homeowner’s
  • Identity Theft
  • Disability
  • Critical Illness
  • Hospital Indemnity
  • Long Term Care

Employee Discount Program

Create a win-win for workers along with local and franchise merchants by coordinating employee discounts for common household goods and services, such as retailers, restaurants, gyms, yoga studios, salons, entertainment venues, as well as tax, legal and financial services.

Inflation Bonus

Since inflation is a cyclical economic phenomenon, it will eventually subside – whereas a pay increase is generally permanent. Instead, consider inflation bonuses to offer temporary financial relief for a temporary situation. The compensation can be paid as a cash bonus or gift cards for specific high-inflation goods such as groceries and gas. Remember though, the IRS considers both as cash-equivalents that must be reported as wages on W-2 forms.

Emergency Savings Account

One way to address periodic inflation increases is to encourage workers to build and maintain an emergency savings account. This tactic not only helps with crisis cash, but also can supplement their household budget when gas prices rise, or their home insurance policy imposes a significant premium increase. Companies can support this effort through a payroll deduction program, partnering with a bank or credit union that offers favorable savings rates. Some employers even make after-tax matching or fixed contributions up to a certain threshold.

Lifestyle/Wellness Spending Account

Another compensation enhancement is an after-tax account funded exclusively by employers to pay for benefits and expenses of each worker’s choosing, such as a gym membership, athletic gear, insurance policies, mental and behavioral health support, etc. These spending accounts typically offer between $800 and $2,000 a year per worker.

PTO Conversion

Another way to help workers pay higher prices is to enable them to convert accrued PTO into cash. For example, convert up to one week of vacation per year to be converted to income. This cash payout even may be used to help pay back student loans.

WFH Arrangements

While working from home is often seen as a benefit unto itself, do not dismiss the savings workers enjoy by not having to go into the office on a regular basis. FlexJobs reports that the lack of a commute and other lifestyle shortcuts (e.g., commuting costs, dry cleaning expenses; making lunch at home, exercising at home) can result in up to $12,000 in savings each year for remote workers. Consider offering the WFH benefit periodically, such as during high inflation periods, to help workers save on gas and other expenses.

Special Equity Grants

A growing number of companies offer one-time or off-cycle equity award grants, such as a long-term incentive plan (LTIP) – even to workers not normally offered these awards.

Earned Wage Access

Some large employers have implemented an on-demand pay program in which workers can receive a portion of their paycheck ahead of their usual pay cycle. This can steer workers away from using high-cost payday loans, accruing credit card debt, or incurring overdraft fees if they become overextended. This is a particularly high-value benefit among employers who hire gig economy contractors and lower-income earners.

Family Planning Benefits

The current extended inflationary period has seen many couples delay having children until they are on more stable financial footing, particularly those who require expensive fertility treatment. Employers can help by offsetting some of the expense of intrauterine insemination (IUI), in vitro fertilization (IVF), gestational surrogacy, and egg freezing. One survey found that more than two-thirds of Millennials said they would change jobs specifically for fertility benefits.

Lifestyle Assistance

The same financial concerns delay may important lifestyle choices, such as mental health and/or substance abuse treatment, and legal services such as divorce, adoption, or drafting a will. This is a good time to offer and promote the free and discounted benefits of an Employee Assistance Program (EAP).

Housing Assistance

Considering the huge jump in home prices over the last few years, some employers have implemented benefits to help fund a down payment, as well as offer group rates for home warranty and homeowner insurance policies.

Financial Wellness‍

One of the best ways to help workers face inflation now and in the future, is to arm them with tools and knowledge to better manage the money they have. Financial wellness benefits should include counseling for stronger financial literacy related to creating and following a budget, paying down and avoiding debt, saving for short and long-term goals, and making investment decisions. Consider partnering with a financial services firm to offer one-on-one, personalized guidance by experienced financial professionals.

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