What Do Your Employees Need Right Now?
It goes without saying, but the pandemic has shaken up the world we live in; thinking back to this time one year ago, it would have been hard to imagine all the sweeping changes we’ve seen occur throughout the world in 2020. Among the myriad of negative effects created by the pandemic, the sudden financial shock created by national lockdowns highlighted the pervasive nature of financial insecurity in our country. After millions of Canadians suddenly found themselves without a steady source of income or paths to a new position elsewhere, it became clear how many Canadians were unprepared to weather an unexpected financial storm. Those who had little to no savings to fall back on suffered greatly, and still today may of those who lost their jobs in the spring have yet to find steady employment.
Even then, many of those who were able to keep their jobs have still likely felt the effects of the economic contraction elsewhere in their lives. For example, if someone’s partner lost their job or had to quit to watch their children, that household lost a source of income and immense pressure was then placed on the sole breadwinner to deliver. Data reflects this happened in countless households around the country, as the national labour participation rate dropped five percentage points between February and April 2020. As the labour participation rate correlates to the amount of people who have given up looking for work, this is a figure that one can assume is largely filled out by women who had to give up work to care for their children in the absence of school or child care programs. Canadians are more stressed out than ever, and even with the promise of a vaccine on the horizon in 2021, the economic future of our country is still uncertain. With all that in mind, Canadian employers should be asking themselves, what do my employees need right now?
Well, to put it simply, what the average Canadian employee needs right now is a consistent source of liquid cash and an emergency fund to insulate themselves from financial shock and insecurity over the coming year.
If you’re an employer, you are already fairly providing your employees with the first component, a source of liquid cash: that is, their income. However, in regards to the second component, the amount of Canadians who still have a full emergency fund at this point is minimal. Millions of Canadians never had one to begin with, and if they lost their jobs due to COVID, they may have relied upon programs like CERB to fill the gaps in the spring and summer. Still, even those who had diligently saved into their emergency funds pre-COVID have now been facing adverse economic conditions for months; many Canadians’ emergency savings have been depleted or completely drained by this point, and the magnitude of the financial strain the upcoming winter and spring will bring are still uncertain. Canadians need help to re-build their emergency funds, which is where their employers come into the picture.
Employers may be asking themselves, “why do I need to offer my employees a greater degree of financial support if I’m already paying their wages?”. The answer is multi-faceted, but to start, research shows that 28% of Canadians have had to pull money from their TFSA’s and RRSP’s in recent months to make ends meet due to COVID-related concerns. The implications of this data is problematic for our country as a whole; if people have to pre-maturely pull from their retirement savings to make ends meet now, that pushes their retirement date farther and farther into the future. The rate of Canadians working over the age of 65 had already increased by a major amount over the last few decades, and in 2015, already 1 in 5 Canadians over the age of 65 were still working. Over the next decade or so, we’ll see that rate continue to increase, as there will be an increased number of Canadians who must keep working past age 65 because they can’t afford to stop. Knowing that many of these people would have fairly saved into their retirement funds, only to see them slashed by the effects of COVID, is tough to grapple with.
Beyond just the fact that people who have saved for their retirement deserve to actually get to retire, if you're an employer, you have a clear stake in the overall wellbeing of your employees, which includes their financial health. The logic here is simple; happy, healthy employees are proven to be more productive, more engaged and more likely to stay driven to achieve their organization’s goals, while employees who are stressed and burnt out are more likely to be distracted at work, combative with their fellow team members or simply absent from their professional responsibilities. Canadian employers lose billions each year in lost productivity costs due to stress, and personal finance has been proven to be a top cause of stress amongst Canadian employees. It’s estimated that for an employer with 10,000 employees, the organization loses approximately $3.3 million in productivity costs each year. This number is even higher if an organization is made up largely of Millenials, as their demographic often has less savings to fall back on and is thus more vulnerable to financial stress.
We held a survey with a few of our users back in August, and asked them about their current opinions on saving money. We asked our participants, “if you had the option to build an emergency fund or save for retirement, which would be more important to you right now?”. Though saving for retirement is generally considered to be the single greatest financial goal of any working person’s life, 62.5% of respondents said they’d rather build an emergency fund than put money away for retirement. This is a great illustration of where Canadian employees’ focus has shifted over the past year.
As such, it’s clear that Canadians need help re-building their emergency funds so that they can both be better prepared for the unknowns of the coming winter and so that they aren’t forced to deplete their RRSP’s to the point of no return to stay afloat. Employers are perfectly positioned to offer extra financial support, and can do so by introducing a match-based financial benefits plan that focuses on providing employees with a source of liquid cash that they can call upon, penalty-free, in a short amount of time. In practice, employers match a portion of their employees savings in a similar fashion to how RRSP’s work, only the money that’s saved as isn’t earmarked specifically for retirement; instead, it can be used for any type of short-term necessity that employees may face in their day-to-day lives. Employers who already offer an RRSP program can continue to do so, perhaps offering a slightly lower contribution rate; though this seems counterintuitive to the ultimate goal of providing financial support, if employees don’t have to pull from their RRSP’s to cover their short-term needs, the amount they earn and save over time will even out to about the same (if not more). Through a match-based savings benefits program, employees can build an emergency fund as they earn income and be consistently growing a pool of money that will provide them with a cushion against future financial shocks.
Ultimately, it’s important to remember that even if you removed COVID from the picture entirely, every Canadian employee will still eventually run into their own financial emergency. It could be created by the need for unforeseen car service, unexpected healthcare costs or home repairs due to an accident. However, given the immense financial impacts of COVID, Canadians simply need more assistance getting back on track to ensure that our country’s overall economic recovery is as strong as possible. If employees know they have their match-based benefits fund to pull from as they need to, they’ll be able to manage the financial ups and downs of their lives confidently and return to their professional responsibilities without bringing their financial stress into the workplace. Though we may be looking at a tough winter ahead, working to ensure that Canadians employees have access to the support they need will help us all weather the storm.
If you’re a Canadian employer interested in adopting an innovative, impactful benefits package to retain your employees, reduce the effects of financial stress in the workplace and set yourself apart from your competitors, match-based saving benefits may be right for your business! QUBER is an industry leader in Canadian match-based savings and can offer employers a customized experience using the QUBER platform to facilitate match-based savings with their employees. If you’re interested in seeing a demo of how QUBER can help strengthen your relationship with your employees, send us an email at contactus@quber.ca or visit our Employers page and send us a message using the contact form found at the bottom of the page.
If you’re interested in receiving updates from our Employer Blog and more on financial benefits directly to your inbox,
click here to subscribe to our Employer Mailing List.