Employees’ lack of education on their workplace benefits—including 401(k)s, health savings accounts and financial wellness programs—is significantly curtailing their participation in them, finds new research from benefit automation tech firm Payroll Integrations.
The inaugural report reveals that human resources (HR) teams are spending a disproportionate amount of time on administration—and that is keeping them from making sure workers understand their benefits.
The second part of findings from the 2024 State of Employee Financial Wellness Report, released this week, reveals that nearly three-fourths (73%) of employees don’t feel completely educated about their company’s benefits.
As employers prepare for open enrollment season, employees’ education on benefits is directly impacting their participation. According to the report, employees that feel educated on company benefits are three times more likely (44%) to opt in for HSAs and Flexible Spending Accounts (FSAs) than those that don’t feel educated (15%).
Beyond HSA/FSAs, there’s a big jump in participation between employees that feel educated on benefits and those that don’t with lifestyle compensation and financial education and planning. Employees that feel educated on company benefits are participating five times more in lifestyle compensation than those who aren’t (15% and 3%, respectively) and three times more in financial education and planning (24% and 8%, respectively).
“… there’s little time left for teams to spend on higher-level, more strategic HR tasks like educating employees on what benefits they have, why they’re important and how to maximize their value.”
Doug Sabella, Payroll Integrations
And specific to 401(k)s, the research found 70% of benefit-educated employees participate in retirement plans, while only 52% of those who don’t feel educated participate.
“Many HR teams are dependent on the same manual tasks and processes that they’ve been using for decades—which means hours of unnecessary administrative work to onboard employees, manage payroll and benefits, make employer contributions, ensure adherence to regulations and more,” said Doug Sabella, CEO and Co-founder, Payroll Integrations. “This repetitive, time-consuming work not only puts a strain on HR teams, but impacts employees because there’s little time left for teams to spend on higher-level, more strategic HR tasks like educating employees on what benefits they have, why they’re important and how to maximize their value.”
HR managers say they spend 12 hours on average, or more than one-fourth of their week, on payroll and benefit-related administrative tasks—with 27% of them spending 20 hours or more. This overload of administrative work is hindering HR teams from focusing on more strategic work like educating employees on company benefits.
Generational breakdown
By generation, the research found Millennials feel the most educated on employee benefits. Thirty-one percent (31%) of Millennials (ages 27-42) say they feel completely educated on company benefits. Other generations all feel very similar in their education: 26% of Gen X + Y workers (ages 43-58) and 25% of Boomers (ages 59+) say they feel completely educated on benefits, and 24% of Gen Z workers (ages 18-26) say the same.
Gen Z employees participate the least in retirement benefits—likely because these workers are early in their career and the least educated on company benefits—but those that do contribute the most of all the generations. Only 36% of Gen Z workers (ages 18-26) are investing in their retirement plan—compared to 71% of Millennials, 74% of Gen X + Y workers and 59% of Boomers. But one-half (50%) of Gen Z workers contribute 11% or more of their salary to their 401(k) plan, compared to 37% of Millennials, 41% of Gen X + Y workers and 32% of Boomers.
The report said Gen Z workers typically have more disposable income than their colleagues across other generations, which allows them to contribute more.
SEE ALSO:
• Financial Wellness Disconnect: Employers, Workers Disagree on Level of Support
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
