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Between a Rock and a Hard Place?Controlling wages and benefits while improving employee engagement—where’s your balance?

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Table of ContentsBetween a Rock and a Hard Place? Controlling wages and benefits while improving employee engagement—where’s your balance? ......................................................................1

Economy Coming Back … BUT ................................................................................................. 1

Higher Health Insurance Costs Increase Pressure .................................................................. 2

Employers See the Problem ........................................................................................................ 3

What Employees Say They Are Stressing Over....................................................................... 3

Are Financial Wellness Programs the Answer? ...................................................................... 4

Costly Financing Alternatives .................................................................................................... 4

What Employers Can Do to Lessen Financial Problems of Employees ............................... 5

Purchase Programs ...................................................................................................................... 5

Recent Survey Shows Strong Support for Employee Purchase Programs. ......................... 6

Win/Win/Win/Win ................................................................................................................... 6

PayCheck Direct—Helping Employees Do More With What They Have .......................... 7

It’s the smartest voluntary bene� t you’ll add this year!Most employees today–particularly low- and middle-income workers–are under � nancial stress and living paycheck to paycheck.

Progressive employers are responding with a voluntary bene� t that helps employees do more with the money they have: a purchasing program.

PayCheck Direct® is the premier purchase program that helps employees buy what they need through:

The program is easy to start up at any time and no out-of-pocket costs to implement. Contact us directly to get started today.

62777

Interest-free � nancing

Low convenient payroll deductions over 12 months

No credit checks

Call: 866-584-0542 | Email: [email protected]: www.mypaycheckdirect.com

Between a Rock and a Hard Place? Controlling wages bene its while improving employee engagement. Where’s your balance?

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Sponsored by

PayCheck Direct® is the premier purchase program that helps employees buy what they need then make interest-free payroll deduction payments over 12 months. And it’s easy to implement at any time.

www.mypaycheckdirect.com

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u Low wage offshore labor

u Immigration (legal and illegal) to the U.S. of people willing towork for lower wages

u Manufacturing automation

To remain competitive and profitable, businesses have had to man-age labor and benefits costs very carefully. Low- and middle-income employees have felt this squeeze most acutely. While top earners have seen steady and significant real wage growth, inflation-adjusted pay for workers in the bottom half of the income ladder tells another story.

Between a Rock and a Hard Place?Controlling wages and benefits while improving employee engagement—where’s your balance?

Are you controlling wage and benefit costs or are they controlling

you? Are you winning the battle for employee retention andengagement? There is a route to get you and your employees out from between the challenges of increasing financial burdens and improving employee wellness.

Economy Coming Back … BUTThe U.S. economy is in its best shape since the recession. Economic growth, while not spectacular, has been steady. Although acceler-ating, employment growth is inconsistent. The Labor Department, in its 2014 year-ending report, indicated employment increased by almost 3 million workers, the largest gain since 1999.

However, the same report said, average hourly wages dropped in the final month of 2014, continuing a trend of meager wage growth. Stagnant wages for many U.S. workers aren’t just a recent trend, and the causes are systemic:


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In the chart above, you can see that real wages for those at the top of the wage scale have gone up significantly; wages for those at the bot-tom of the scale have actually dropped.

The Financial Post in March of 2014 reported that since 2007 infla-tion-adjusted income has declined 9% for the bottom 40% of U.S. households. The bottom 90% experienced a decrease in income from 2009 to 2012, meaning their share of income gains was negative.

As a result of this income squeeze, low- and middle-income workers in this country increasingly find themselves struggling financially. The Consumer Financial Protection Bureau reported in 2014 that 68% of U.S. workers now live paycheck to paycheck. No surprise, studies suggest that similar proportions of Americans report that financial stress is their most common form of stress. (Source: http://files.consumerfinance.gov/f/201408_cfpb_report_financial-wellness-at-work.pdf)

Higher Health Insurance Costs Increase PressureTo compound the problem, company-sponsored health insurance is also evolving as a result of healthcare reform and a need to control costs. The principle changes include higher deductibles and co-insurance which lead to higher out-of-pocket costs for medi-cal care. USA Today reported in September 2014 that the average monthly health plan deductible has more than doubled in the past eight years to $1,217. Low-income Americans can earn vouchers and

* The xth-percentile wage is the wage at which x% of wage earners earn less and (100-x)% earn more.Source: EPI analysis of Current Population Survey Outgoing Rotation Group microdata

http://files.consumerfinance.gov/f/201408_cfpb_report_financial-wellness-at-work.pdf




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obtain other support under the new healthcare reform initiatives. Middle-class families most frequently make difficult choices about insurance coverage as evidenced by almost 50% of middle-class workers having either skipped healthcare services or suffered finan-cial hardship as a result of health expenses.

Employers See the ProblemU.S. companies are quickly becoming more aware of the extent of employee financial challenges as well as the impact on their businesses. A recent January 1, 2015 USA Today news article, for example, suggests that:

u 61% of HR professionals agree financial stress has an impact onemployee performance

u 20% of employees have missed work in the past year to dealwith a financial problem

u 24% admit personal finances have been a distraction at work.

What Employees Say They Are Stressing OverPWC’s 2014 Employee Financial Wellness Survey respondents listed their top financial concerns in the table below. No surprise, the differ-ent generations have somewhat different financial concerns.

Source: PWC’s 2014 Employee Financial Wellness Survey


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Looking at the chart, we can see that:

u Emergency savings and retirement are of greatest concern.

u Boomers (no surprise) are most worried about retirement, andGen Y workers are least worried.

u Boomers are also less worried about managing expenses, beinglaid off, and managing debt, while those are higher prioritiesfor Gen Y workers.

Are Financial Wellness Programs the Answer?Progressive U.S. businesses have responded to top concerns by rapidly rolling out financial wellness programs. These programs typically are built around financial education and counseling. Unfortunately, the benefits of these programs have been slow to materialize, and where the programs do exist, many human resource professionals say the programs are ineffective.

The problem may lie in this finding by the National Bureau of Economic Research published in 2012: “What evidence is there that financial education actually increases financial literacy? The evidence is more limited, and not as encouraging as one may expect.”

Costly Financing AlternativesLast year the Center for Responsible Lending reported that after households pay for housing, utilities, food, healthcare, debt payments (not including mortgage or auto payments), and other basic expenses, the typical U.S. family has just $100 left each month. Living paycheck to paycheck with a razor-thin margin for unexpected expenses has forced many households to opt for costly financing alternatives:

u Rent-to-Own is a fast growing $10 billion industry with 6 mil-lion customers per year. (Source: https://www.rtohq.org/about-rent-to-own)

u High-interest credit cards carried an average interest rate forimpaired credit customers of 22.3%. In 2012, the average creditcard debt for low- and middle-income Americans was $7,145.(Source: http://www.creditcards.com/credit-card-news/retail_card-stores-survey-apr_2014-1276.php)

u Payday Loans is a $50 billion business with 12 million borrowerseach year. (Source: http://www.businessinsider.com/outrageous-facts-about-payday-loans-2013-10). On averageit costs $520 in annual interest to borrow an average of $375.(Source) http://business.time.com/2012/07/20/12-million-americans-will-pay-520-in-interest-to-borrow-375-this-year)

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http://www.businessinsider.com/outrageous-facts-about-payday-loans-2013-10

http://www.businessinsider.com/outrageous-facts-about-payday-loans-2013-10


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Additionally, 401(k)/403(b) loans are increasingly being used to meet household expenses and emergencies. In the past 5 years, 21% of people with a 401(k) have taken an early withdrawal or loan to make ends meet.

What Employers Can Do to Lessen Financial Problems of EmployeesEmployers want to help employees address their financial chal-lenges, but employers still have to remain competitive and profitable. Because of that, many employers are not able to offer significant raises to employees this year, and many have also not offered raises in several years.

Fortunately, there are steps employers can take at no cost or rela-tively low cost, that can result in meaningful financial savings for employees. Creative companies are moving beyond financial well-ness to actual financial assistance.

Purchase ProgramsEmployee purchase programs are increasingly being implemented by U.S. companies to help employees do more with what they have. Purchase programs allow employees to buy major items like appliances, electronics (including computers and TVs), home goods (including mattresses, beds and other furniture), as well as many other items and pay through payroll deductions. Typically, no credit check is required and no interest is charged. There is also no risk of late fees or ballooning interest.

The convenience of making a major purchase and paying over time with convenient payroll deductions appeals to all employee income segments and participation is typically broad. Low- and mid-dle-income employees understandably find an employee purchase program particularly valuable.

The extent of the level of affinity for employee purchase programs is evident in the results of a recent survey of PayCheck Direct participants:

u 93% said they valued having access to the program and that itwas a good alternative to buying on credit

u 84% indicated it helped them make a purchase they couldn’thave otherwise made

u 88% said purchasing through the program reduced the finan-cial stress of the purchase

u Over two-thirds of participants also said the program helpedimprove their awareness of their financial situation


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Recent Survey Shows Strong Support for Employee Purchase Programs.The study conducted by PayCheck Direct also shows the dramatic effect that payroll deduction purchase programs create, especially for employees experiencing credit challenges.

The primary finding was that employees having a difficult time obtaining credit find purchase programs attractive. Additionally, those enrolled in purchase programs felt more positive about their financial situation and employers.

The findings also suggest employees who are credit challenged are far more likely to agree this program demonstrates their employer understands their needs (56%), and it makes them appreciate their employer more (48%).

Win/Win/Win/WinThe company sponsoring the purchase program suggests employ-ers benefit from higher productivity, fewer worries on the part of employees, increased loyalty, and stronger employee engagement.

It is also believed employees benefit in three ways: they reduce stress and gain the ability to buy things they wouldn’t otherwise be able to buy, and they avoid costly financial burdens such as paying exorbi-tant interest rates for payday loans.

[Note: PayCheck Direct is the sponsor of this white paper. For information about how to offer PayCheck Direct’s programs to your employees, see below.]

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PayCheck Direct—Helping Employees Do More With What They HavePayCheck Direct, the sponsor of this white paper, offers purchase programs that allow employees to buy major items like appliances, electronics (including computers and TVs), home goods (including mattresses, beds and other furniture), as well as many other items and pay through payroll deductions. No credit check is required and no interest is charged.

PayCheck Direct distinguishes itself by being a member of the Bluestem Brands family of businesses which includes Bluestem’s flagship brand, Fingerhut, and Gettington.com.

Bluestem’s unique mix of merchandising, credit and marketing com-petencies come together to deliver tremendous value to its customers and has propelled its growth well beyond the retailing indus-try norm. PayCheck Direct leverages these resources to build the employee purchase program industry’s premier offering.

For more information about PayCheck Direct’s programs, visit www.MyPayCheckDirect.com or call, 1-866-584-0542

http://www.MyPayCheckDirect.com

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