Among the discussion of employee benefits, the question of financial wellness is gradually moving toward the front of the stage. Before the pandemic, it was a relatively low-key issue, subsumed by health benefits and workplace perks; but the upheavals of 2020 and 2021 have made a growing number of employers rethink the need to provide for their workforce's financial security.

“We are starting from a very low base,” commented Dimitris Efthyvoulou (above left), Principal at Mercer Singapore. “Our global research indicates that only one in every three individuals feel financially secure. And usually the main obstacle tends to be, 'I don't know how to save', or 'I'm not saving enough'.”

So how do employers address what's been traditionally seen as a very personal issue? Speaking at Mercer's 2021 Regional HR Conference, Aki Ranin (above right), Co-Founder and Chief Operating Officer of digital wealth management company Bambu, said that deferring income is one of the better solutions available.

“I think people's attitude towards deferred money is quite different,” he said, pointing out that if someone is scheduled to receive a large lump sum several years into the future, they are more likely to plan for using it to pay off liabilities such as their mortgage, or to invest it. “Whereas if I give you $50,000 right now, you are more likely to go and buy something expensive that you don't really need...I think the behaviour of being relatively irresponsible with money, the instant gratification, is just the way humans are built.”

How does deferred money actually work?

Deferred income might sound like a shady practice, but it is not actually about withholding employees' salary for a later date. In fact, Ranin said, many listed companies already have simple deferred income as an employee benefit in the form of stock options programmes.

There are also more complex options, such as signing employees up for programmes that contribute a certain amount of money to investments that can accumulate compound interest over time. That contribution can be linked to existing retirement fund contributions, such as Singapore's CPF; it can be made by the employer; it can be taken from employees' salary or bonuses; or any combination.

“At the end of the day, you're taking money that they can't spend, and you're putting it into a place where that money will accumulate compound interest over a long period of time, and give them more wealth in the future to hopefully make their lives better,” Ranin said.

He also pointed out that there are even more sophisticated options available on the market today, including automated solutions based on present-day investment and financial planning algorithms. Of these two use cases, Ranin recommends financial planning over investment purely because it is more likely to meet employees' financial needs in the long term.

“Financial planning is about helping people understand how much they actually need,” he said. “The important question isn't whether to buy Dogecoin or Cardano or Bitcoin or Ethereum or ETFs. It isn't whether to invest in Asia Pacific equity versus Europe equity. Forget it. That's really not the point.”

“The question is, what do you actually need for retirement? What age are you retiring at and what is your cost of living? Do you have children – do you need to put them into public or private education? Do you own your own home? What are your tax rates going to be in retirement, where are you going to retire, how much social security do you have, will you need private healthcare?”

This combination of financial planning and savings discipline is where employers can come in, Ranin said, firstly by getting employees access to the kind of programmes and options that they might not normally consider. Secondly, employers can incentivise the use of these programmes in various ways, including making the programmes a part of the overall rewards and benefits strategy.

“Increasingly, firms that provide automated passive investing are offering solutions directly to employers,” he commented. “So if you're a responsible employer and you think about your employees' financial well-being, you effectively have these options available as well.”

People Matters is the exclusive media partner for Mercer's 2021 Regional HR Virtual Conference.