An Intro to Match-based Saving
In our latest Money Talks post, we outlined financial insecurity in Canada and how the issue affects the lives of millions of people in our country (if you missed it, you can read it here). There are a staggering number of Canadians who have trouble covering their basic expenses and often find themselves fearful about what they’ll do if they’re hit with one too many unexpected expenses. This stress often follows them into the workplace, and prohibits them from performing their jobs to the best of their abilities.
Why should this matter to employers? Employers already pay their staff’s wages, which is the primary source of financial support the average person receives (not to mention one of the largest line items on any business’s financial statements). However, financial insecurity has a real, measurable impact on how people are able to perform their jobs and contribute to their team. According to a 2018 report by PwC, 30% of employees are distracted at work due to financial stress, and 46% of those employees say they spend three hours or more at work per week focused on their financial problems. The same report estimates that this distraction at work translates to a loss of over $3.3 million per year for an employer with 10,000 workers. This figure is even higher is that workforce is populated by a high number of Millennials, as their demographic reports experiencing financial stress at a rate increasing faster than other age groups.
Beyond the clear loss of revenue as a result of financial stress, financial insecurity also impacts the way that people perceive their employers and the degree of loyalty they feel towards their job. In a 2020 study by Build Commonwealth, 65% of respondents agreed that their employers should be doing more to help combat financial insecurity. This is particularly true of people who do not earn high-level wages, as they are more likely to experience financial insecurity and have trouble keeping up with the rising cost of living. This especially rings true for workers who live in Canada’s major cities, as the cost of living is much more expensive in places like Toronto and Vancouver than it is in most smaller towns. As such, those who feel that employers should be doing more to help protect their staff from financial insecurity are going to be more likely to look for other more beneficial professional opportunities and generally feel less connected to (and thus less motivated to excel at) their jobs.
One of the best ways that employers can mitigate these issues is to introduce a financial benefits package for their employees. There are a variety of financial benefits packages available today, including the ever-popular RRSP. Financial benefits packages have long been recognized by employers as a great way to offer their staff a greater degree of financial support, retain strong employees and to differentiate themselves from their competitors when trying to attract talented new candidates. Employees agree: according to Morgan Stanley, 74% of workers agree that it’s important for their employer to offer financial benefits, and PwC reported that 72% of employees stressed about their finances take advantage of financial benefits if their employer offers them. With that in mind, the Canadian group benefits industry is going through a time of progressive change. One of the newer, more innovative financial benefits programs now available to employers in Canada is match-based saving. Though match-based saving has been around for a long time and has been successful in numerous other countries like the United States, the concept hasn’t yet become widely adopted here in Canada.
A match-based saving benefits package starts with an employer selecting a target amount of money they want each of their employees to individually save. This amount should be proportional to what their employees are earning; it should be challenging, but still achievable for each member of their team to meet the goal. From there, they encourage their employees to start saving a set amount of their paycheck towards that goal in regular instalments (ex. $60 from every paycheck). Though an employer can offer their employees a small degree of choice in how they’d like to save (ex. $25 bi-weekly versus $50 monthly), the overall schedule and amount to save will be pre-determined. The money that the employees save still belongs entirely to them, but must be saved in a third-party account; this is so it can be confirmed at any given time that each employee is saving the amount they’ve pledged to.
Once the employee hits the saving target, the employer matches their progress with a monetary contribution towards their savings (ex. a $100 incentive for reaching a $500 target). Employees must save the pre-determined amount each pay period to receive their cash incentive; if they fail to make their contribution one pay period, they are still entitled to claim all the money they’ve saved whenever they choose, but must restart from zero in order to be considered eligible for the incentive. As the saving process is tied to a schedule, there is a pre-set maximum amount that the employer can offer each employee in rewards per year.
Match-based savings benefits are an excellent opportunity to help employees combat financial insecurity, as they not only offer people the opportunity to earn extra income but to earn it while also improving their financial habits. As participants have to save towards their target over a long period of time, they are essentially forced to adopt the habit of saving money on a regular basis (employees can’t opt to simply transfer the total required to earn the incentive to their employer’s benefits account in one lump sum). In this way, participants also learn to spend less on non-essential items and to plan for their necessary expenses more carefully. Regular saving is one of the cornerstones to achieving financial security, and can really help those suffering from financial insecurity turn their situation around.
What makes match-based saving different than a standard RRSP benefits package? As part of an RRSP, an employer pledges to match a portion of their employee’s contributions to their retirement fund up to a certain annual limit. A match-based saving program offers the same kind of contribution matching, only the money isn’t designated for retirement specifically; the money saved by the employee and the reward offered by the employer can be put towards anything the employee wants it to be for, and can be cashed out with relative speed. This is a much more valuable benefits program for employees who don’t earn high-level wages, as it offers them the flexibility to better manage their more immediate financial needs while also learning to improve their financial habits.
As an employer, there are a number benefits generated by offering your employees a match-based saving benefits package. First, by reducing your employees’ financial stress levels, you can boost your team’s productivity; an employee who doesn't have to stress about money anymore can direct their focus towards providing excellent quality work for your business. Second, by offering your employees additional financial support and cash incentives, you’ll be showing them that you value them as essential components of your business’s success. This forges a deeper sense of loyalty between your employees and your business, giving them a reason to stay with you long into the future and push themselves to work hard; this can greatly improve your employee retention rate! Finally, through match-based savings, you can promote financial literacy and increase your employees’ savings. A happy, healthy employee will always make better choices, and a team of happy, healthy employees can really push your business to the next level!
So, if you’re an employer interested in adopting an innovative, impactful benefits package to retain your employees, reduce the effects of financial stress in the workplace and set yourself apart from your competitors, match-based saving benefits may be right for your business! QUBER is an industry leader in Canadian match-based savings and can offer Canadian employers a customized experience using the QUBER platform to facilitate match-based savings with their employees. If you’re interested in seeing a demo of how QUBER can help strengthen your relationship with your employees, send us an email at contactus@quber.ca or visit our Employers page and send us a message using the contact form found at the bottom of the page.
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