U.S. companies are planning to offer their employees better financial benefits even as the economy struggles to escape the recession and out-of-work Americans scramble to find jobs, according to a Bank of America Merrill Lynch study released Tuesday.
When asked whether they plan to enhance the financial benefit plans they offer during the next two years, many of the 650 chief executives and benefits decision-makers surveyed in the BofA Merrill’s Workplace Benefits Report said they are likely to improve:
- Defined contribution plans (78%)
- Flexible savings accounts (74%)
- Health savings accounts (72%)
- Non-qualified deferred compensation plans (58%)
- Defined benefit plans (47%)
- Equity plans (39%)
Since the recession began, 47% of companies have seen more prospective employees inquire about their benefit plan offerings and 59% of companies feel greater responsibility toward helping employees meet their financial goals, according to the study conducted in April by independent research firm Market Strategies International.
However, in light of the persistently high rate of unemployment and lack of U.S. job creation, financial benefits are a relatively minor part of the picture, says Susan Stehlik, clinical assistant professor of management communication, New York University Stern School of Business.
“We’ve lost a lot of loyalty in our workplace," Stehlik said. "A company should have a good fair base wage, a good base benefit for health care and good management. And then the rest of the benefits are wonderful, but financial benefits are not the top priority. You can’t make up for a bad manager with a good benefit. People will leave for less pay with a civil environment.”
Andy Sieg, head of Retirement Services for Bank of America Merrill Lynch, countered that argument, saying that while too many people are now looking for too few jobs, evidence points to a "long-term, massive gap" in U.S. employment in the years 2020 to 2030.
"We could be as many as 20 million workers short in terms of filling the demand for skilled workers of all types," Sieg said, adding that demand for a skilled workforce, rapidly approaching boomer retirements and "a free agent-oriented workforce" are putting enormous pressure on benefits managers to attract and retain talent.
“Benefits programs are far and away more important than managers in attracting and retaining talent," Sieg said.
The BofA Merrill’s Workplace Benefits Report showed that when asked why they offer financial benefit plans, beyond helping attract and retain talent, nearly seven out of 10 employers cited doing so out of concern for their employees’ financial well-being. Remaining competitive and helping employees be more productive were also among the top reasons.
Given the uncertainty about the future of Social Security, and with employers moving away from traditional pension plans, companies surveyed believe that employees may become increasingly reliant on defined contribution plans such as 401(k)s when saving and investing for the future.
Assuming this trend continues, benefits planners indicated that most employers, or 75%, anticipate that a greater number of employees will enroll in 401(k) plans or increase their contribution rates. Even more employers, 79%, anticipate increased demand for access to 401(k) saving and investment advice. And for older workers, 84% of companies expect them to work longer to extend their plan benefits.
Companies represented in the survey earned total 2010 revenues of between $5 million and $2 billion and employed at least 100 workers.
Longer life expectancies and baby boomers’ desire or need to keep working are leading to an aging population of American employees that will require more age-friendly workplaces and benefit plans designed to meet the unique needs of multiple generations,” Seig said in a statement
The report also found that the vast majority of employers, 94%, believe it is important to retain older employees for a longer period before they retire in light of the talent and skills they offer.
To retain these employees, 50% of employers surveyed offer flexible or customized work schedules, 33% were implementing education around retirement income and health-care topics and 22% gave employees the opportunity to work remotely.
Employers were almost unanimously, at 98%, in saying that attracting younger employees is important in order to broaden the talent and skills of their workforce.
NYU Stern's Stehlik called the 98% figure "a no-brainer," adding that companies also want to retain older workers because many young people coming into the workplace haven’t been properly mentored.
"That’s definitely something we see our students talking about: 'Who am I going to learn the most from?' You have to mentor these young people. The workplace is changing so rapidly that dealing with the ambiguity of change is difficult for young people. They need direction from the older people who have the perspective of change over time. That dynamic makes for a strong workforce.”
Read Top 20 ETFs Held in 401(k) Plans: BrightScope at AdvisorOne.com.