HR’s Role In Financial Security

Ken Moore Associates 

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HR’s Role In Financial Security

Employee financial security is a concern for all business executives and owners.  Countless studies have proved that providing financial security allows employees to focus on their work rather than how they are going to pay their bills.  There are certain actins that HR can take to help employees achieve financial security.  However, they must be done in concert with the employee’s individual effort.  

In most companies, the Human Resources team directs the compensation and reward programs based upon sound business practices in order to attract, develop and retain high performing employees and sustain a competitive advantage as an employer of choice:

 Compensation:   Employee compensation is typically based upon external competitiveness, internal equity, and the company’s ability and willingness to pay for employee services.  Local, regional and national surveys are conducted frequently to compare comparable positions and responsibilities.  Once the external wages are identified for a particular position, it is then evaluated for internal equity – similar pay for similar work and responsibilities within the company. Finally, once a salary range is identified, decisions are made as to whether the company can afford to pay these salaries based upon their financial position.  Care must be taken not to assume that a salary or wage is the determining factor on employee satisfaction.  Many non-profit organizations such as homeless associations and the Red Cross may not be able to pay competitive wages, but they make up for it with psychological compensation – the satisfaction of doing one’s work in an organization whose mission is to help others who cannot help themselves.

Pensions:  A well defined pension plan is a crucial element in attracting and retaining good employees.  Pension plans are designed to provide a source of income for retired employees who cannot or are not permitted to work beyond a certain age.  They are designed to supplement any government or other pensions that the employee is entitled to. For companies, the failure to provide a reasonable pension plan shifts the burden of retirement to the government or the community in which the employee and his family reside.  This places a burden on the community resources and typically results in higher taxes in order to pay for such services.  When taxes increase, so does the cost of doing business within a geographic territory.  This forces companies to re-evaluate its business model and the competitive advantages that employees provide.

Health Care:  A good healthcare plan is a key ingredient to attracting and retaining above average talent.  Like compensation, a good health care plan allows to employee to concentrate on his or her work rather than worry about whether he can afford the necessary drugs or treatment for his daughter or son’s illness or chronic medical condition.  Paying for it, however, has serious consequences for both the employee and the company, and the country if healthcare is subsidized by the government. Worldwide, healthcare is provided by government supported or private, for-profit, health organizations. While many countries provide world class health care, access to such care and the ability to pay for this care is problematic, to say the least. Despite best efforts, health care costs continue to increase and efforts to control these costs have very limited success.  In the United States, Congress recently passed, and President Obama has signed, a national health care bill over strong opposition and one that will go through numerous legal and legislative challenges before any benefits are realized.  The overriding concerns on health care in the US are:  access, delivery, and cost. There are no simple solutions, even though the desire to provide such care is universally appealing.  

Financial education:  The biggest factor in employee financial security is education.  Unfortunately, many companies do not share financial performance information with their employees.  As a result, they are kept ignorant of the cost factors involved in their financial security and subject to rumors, innuendo, and falsehoods that they read on the Internet.  Everything in business has a cost which must be weighted against the benefits.  Several years ago, I negotiated a new health care plan for my employer.  After my team had evaluated all of the data and made our decisions, I flew across the country to a dozen employee sites.   There, I discussed with them the cost factors that we evaluated and weighed the pros and the cons of each factor in order to come up with the plan that we did.  I began each meeting by saying: “The good news is that we are now able to provide full medical, dental and mental health care for you and your eligible dependents.  The bad news is that we will have to lay off 50% of you to pay for it.”  While the employees grumbled about the shifting of some of the costs to them, they were universal in their praise for my discussion of the financial factors that we as a company faced.  Prior to those meetings, they assumed that the company was a bottomless pit of money to which they were entitled without penalty.

What can HR do to help employees gain financial security?

  1. Re-evaluate your compensation and reward strategies and then candidly discuss it with the employees.  Teach them basic financial skills and then encourage them to become part of the design, negotiation and decision making process.  The more the employees know about these factors, the more willing they will be to work with you to address the issues constructively;
  2. HR should provide opportunities for employees to improve their financial and business acumen.  Local schools, universities, trade associations and consultants will be happy to teach your people basic personal and business finance.  Internally, HR can coordinate with the finance and accounting departments to develop a program discussing the company’s financial performance, its pressures, and its strategies – without giving away confidential information.
  3. Re-evaluate job descriptions and performance evaluations to include a section on personal and professional development.  Managers should be held accountable for the development of their subordinates.  Continuing education courses should be a mandatory requirement of all employees.  
  4. Frequently publicize the availability of low cost or no cost financial security training programs and tutorials available through the Internet, libraries, and other local sources.  “Lunch and learn” events are a popular way to provide short programs that extend in multiple segments.  Be prepared to evaluate the cost factors so that they can be included in your or any other department’s budget.

Remember, it is not HR’s or the company’s job to provide financial security for its employees.  It is HR’s job to help employees articulate their own definition of financial security and guide them to the resources necessary for them to achieve their goals.

 

 

 

 

 

 

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