Why did you end 40 million workers leave their jobs last year and why are some employers having such a hard time filling vacancies?
Workers understand that there has been a monumental shift of power from employers to employees, but most organizations still don’t understand or want to admit it. Why has this happened during the pandemic and how can pension plan advisors help?
Employers gained ultimate power during the Industrial Revolution when expensive machinery and large factories were needed with workers tied and beholden to the company, literally a “cogwheel in the machine”. As we moved towards a knowledge-based industry, power began to shift to workers who could walk away with the most important asset: their knowledge and connections. Employee benefits, particularly defined benefit plans, have become an important tool for retaining workers.
Power has started shifting even more to employees in the information age with desktop computing forever changed by the advent of the internet and cloud-based systems where information is accessible anytime. and from anywhere. But the norm was still to come to the office five days a week. Employers said people needed to come together to meet and collaborate – it was also a way to track workers and retain a sense of power.
The pandemic hit almost overnight, leaving organizations scrambling to figure out how to continue with a 100% remote workforce. Those who pivoted quickly fared better realizing that much of what needed to be done could be accomplished remotely, and in fact more efficiently. People have become more productive working from home by quickly adapting to the world of Zoom meetings. Sure, something is lost with remote work, but a lot can be gained.
Most workers have enjoyed the flexibility of working from home, which is even better now that their children are returning to school. More travel, less clothing, dry cleaning and catering costs, but above all the freedom to work when and where they want. With COVID-19 as the catalyst, remote working, or at least hybrid working, seemed to happen overnight to become the norm.
Only 8% of Manhattan businesses currently require their employees to come to work every day. There is no doubt that the benefit of coming to work daily is far outweighed by the flexibility of the remote hybrid workplace. there is no turning back.
All of this encourages workers to quit for better jobs or even enter the gig economy not just for more money, but for more flexibility and more meaningful work.
We all understand why organizations have moved from DB plans to defined contribution plans shifting responsibility to workers, but DC plans actually encourage people to change jobs, not stay, that’s why there’s much more money in IRAs than in 401(k) plans.
How can we change this dynamic?
There are a number of simple solutions, but from a high level the benefits at work are cheaper than what someone can get on their own. A large majority of workers cannot afford traditional financial planning and, with all due respect to robo-advisors, asset allocation algorithms and infrequent access to a call center cannot replace a personal relationship with a financial advisor.
The most practical application of financial wellness is helping workers choose the right workplace benefits for them given their current family and financial situation. This allows employers to redesign benefits based on these needs. Isolating retirement plans is a huge mistake and a missed opportunity. Young workers don’t care about the term “retirement,” which can take 30 years because they’re saving for a stranger, their future self. Financial freedom is a goal everyone can relate to, regardless of age.
Older workers need advice on Social Security and how to turn their assets, including their account balance, into a paycheck that lasts the rest of their lives. Admittedly, many haven’t saved enough, which may require them to continue working to some degree, but given the hybrid and flexible workplace, that may not be so bad, especially if they can do something they really enjoy.
Other advantages to recruiting and retaining could include:
- Help with roll-ins to consolidate disparate retirement accounts
- Student loan debt repayment plans
- HSA with a match
- Debt Consolidation
- Grants for education, industrial training and apprenticeship
- Unlimited vacations – this shows that employers trust workers to do their jobs and manage their time effectively
- The acquisition of the match, which means that employers can increase it because a percentage will not remain
- Emergency savings to replace the need for loans
- Grants to replace the need for hardship withdrawals
- Child care allowances
- Comparisons between peers and champions
- Diversity and inclusion programs to expand the pool of potential workers
- Personalized communications based on age and financial status that get smarter with artificial intelligence
- Ongoing surveys—short and sweet
I know most RPPs will be overwhelmed, but it starts with realizing that their greatest value to plan sponsors isn’t pricing mid-cap value funds or saving 5 basis points on record keeping. The most sought-after advisors will help clients wake up to the new reality of work by using benefits to recruit and retain workers.
The pandemic has revealed that power has shifted from employers to their employees, which is a historic and dramatic paradigm shift. It would be a shame to spoil this crisis.
Fred Barstein is founder and CEO of TRAU, TPSU and 401kTV.