Filling The Economic Void

Using The Next Generation of Voluntary Benefits To Improve Employee Financial Wellness

By Elizabeth Halkos

Ms. Halkos is the chief marketing officer with Purchasing Power, an employee purchase program that offers customers a financially responsible alternative to purchase a broad variety of products and services through the convenience of payroll deduction. She can be reached at [email protected].

While the economy continues to make modest strides, many consumers have yet to feel the positive impacts in their wallets. Increasing healthcare costs, credit card payments, student loans, and other unsecured debt are burdening U.S. households, leaving savings and checking accounts depleted.
With food and gas prices see-sawing, consumers are often forced to dig into their savings or pull out their credit cards to meet regular household expenses. In March of 2012 alone, consumer credit increased at an annual rate of 10.2 percent.

While some spike is expected after the holidays, many experts think higher credit card balances could also reflect previously suppressed demand for much-needed or aging household items, such as home appliances or computers.

With 40 percent of employees living paycheck to paycheck, according to a recent CareerBuilder survey, and another 37 percent of respondents saying they sometimes live paycheck to paycheck, making ends meet remains a challenge for millions of households.

Due to the negative effects that financial stress can have on workplace productivity, employers have begun to turn to voluntary benefits to help employees get back on firmer financial footing. Non-traditional voluntary benefits enable employers to offer worksite products such as pet insurance, eldercare assistance, prepaid legal plans, employee purchase programs, auto and homeowners insurance to their employees without increasing their benefits budget.

Employee purchase programs, in particular, have proven to be a viable, cost-effective alternative to other consumer purchase plans, such as employer discounts, layaway, rent-to-own and even credit cards, as employees are often able to participate in these programs based on easier qualifications than the traditional credit check.

“A purchase program is an extraordinary voluntary benefit that gives employees an alternative avenue to obtain goods that are important in their everyday lives,” said Michael R. Walters, executive vice president of marketing, The Excellence Benefit Group. “It gives them a way to leverage their cash or credit within a budget.”

Using an employee purchase program, employees can purchase much- needed or life-enhancing household items, such as computers, software, home appliances, electronics and furniture, from recognized brands and manufacturers. Employee purchase programs help workers secure these types of products through an employer-sponsored payroll deduction program.

The number of companies offering employee purchase programs are growing. In the last several years, employers have started to gain a better understanding of their workers’ overall financial needs. According to a 2011 Employee Benefit News survey, 17 percent of companies currently offer an employee purchase program. However, another 30 percent of employers who do not offer this benefit now believe their employees would have financial difficulty making major purchases.

And it’s not just employees benefiting. Employee purchase programs allow employers to offer a low-cost, easy-to-administer benefit that helps make benefits packages more unique and competitive. Employee Benefits News reported that HR professionals like today’s purchase programs, first and foremost, because they enhance their benefits packages (67 percent say), followed by the fact that there is minimal administration costs and no employer liability (44 percent say).

“It’s an extra benefit that most costs the employer nothing but provides a great option to the employee,” said Dale Smith, senior benefits consultant, Summit Safeguard. “Many employers know that their people are struggling and this program provides them with the option of purchasing products without the expense of rent-to-own or other high interest programs.”

So who are the employees more likely to use employee purchase programs? In January 2012, Purchasing Power and Harris Interactive conducted the industry’s first survey to gain a better understanding of which workers are using employee purchase programs, when, and what products they have a propensity to buy. The demographic details of users, and their motivations for participation, are important for benefit advisors to recognize which of their clients has the workforce composition that would most likely use an employee purchase program.

A purchase program is an extraordinary voluntary benefit that gives employees an alternative avenue to obtain goods that are important in their everyday lives

While the typical employee who uses an employee purchase program can be described as a 35-44 year old, married female, in a mid-income bracket with at least one child in the household, actual program participants are more diverse.

Age: Research shows that younger workers are most likely to use employee purchase programs. Forty-four percent of employees age 18-34 are at least somewhat likely to use purchase programs, while 38 percent of those age 35-44 show the same propensity for use. With technology ingrained in their DNA, workers from both these generations are big purchasers of computers and electronics. And, since many are striking out on their own for the first time or deciding to start a family, they also tend to purchase more home appliances and furniture than their older colleagues.

Marital Status: According to the Harris Interactive survey, single workers (those who have never been married) are most likely to use employee purchase programs. While they tend to spend their purchase dollars on electronic gadgets, computers, or fitness and recreation equipment, their married counterparts are more likely to out-purchase them on furniture, appliances and vacations.

Gender: 42 percent of females say they are likely to use an employee purchase program versus 38 percent of males.  Although males will be more apt to purchase items such as computers, electronics, furniture, appliances, etc. in the next 12 months, more than likely a female will ultimately be the driving force behind that purchase decision.

Income: Workers with incomes less than $35,000 are most likely to use employee purchase programs if they were available to them. However, once a company begins offering this benefit, the majority (65 percent) of those with incomes between $35,000 and $49,900 become the real power users.  Electronics, computers and furniture are the top-three items these power users are most likely to purchase.

Presence of Children: Raising a child is expensive, but employers who provide parents with more financial choices can keep them less stressed about their family’s budget, as well as their children’s future. Therefore, the likelihood of workers using employee purchase programs goes up with the size of their household, holding especially true for families with children, age 6 to 12. As you may personally know, having children drives up the need for electronics to keep them entertained; computers to give them a resource for school work; and appliances, such as washers and dryers, to keep the household operating efficiently.

Employee purchase programs are a win-win for employer and employee

Benefit advisors, employers and employees all benefit from having an employee purchase program included in a benefits plan. Employees receive a tangible benefit with an immediate payoff. Not only are they able to purchase a variety of products and services, 94 percent of Purchasing Power customers agree or somewhat agree that having access to Purchasing Power helps to reduce their financial pressures and stress.

However, the key to long-term value of employee purchase program, like other products that make up an employee benefits package, is communication. A company can offer the best benefits in the marketplace, but unless its employees understand how those benefits work and what value they bring, then those benefits are most likely underappreciated and underused.

Advising your clients to participate in year-round benefits communication offered by the vendor will educate workers on the benefits of employee purchase programs and how they can use the program throughout the year to obtain the true financial value of this offering.

“Purchasing Power provides all the marketing materials to me, and it’s very easy,” said Eileen Brown, director, recruitment and benefits, Valley Baptist Healthcare System. “Statistically, I believe we are about 15%, 16% utilization, which is a very high utilization rate for any kind of voluntary benefit. We are really happy with that.”

Benefit advisors now have a solution for employers to assist their employees who might be struggling financially. Employee purchase programs provide employees with the power to responsibly purchase what they want, when they need it, and they put companies well on their way to building a solid foundation of financial wellness for their workforce – while providing themselves with a recurring revenue stream.

To read more research on employee purchase programs, and start offering Purchasing Power to your clients, visit here.