As part of HR of an organisation it becomes their foremost responsibility to carry out these 2 functions:
- To find the best talent for the job
- Retaining the right talent for the job
One of the major mistakes that organisations make is in determining an attractive benefits package. Paying an employee well, providing them with good health benefits and helping them plan their retirement may not be enough to help them financially.
Employers want their employees to be taken care of, so they end up paying high compensation. They assume that there should be a line clearly drawn between work and personal life, and all the personal money matters fall well beyond the line. Employers feel it is not their responsibility to deal with what happens to the salary once the pay-checks are issued.
Generally, that’s the right approach. An employer will never advise their employees to spend or not to spend money enjoying their weekends, just because it might look slightly out of the budget. However, to think, any financial decision taken by the employee, should not be a concern for the employers might not be the correct approach.
If an employee makes any kind of decision with their money, and if that was to go wrong, he/she may end up having various financial issues, which in turn will start affecting their performance at work due to the stress caused.
Many organisations think, having a one-hour session on PF or EPF contributes towards “the employees financial education”. It does not.
Educating employees on asset allocation doesn’t help them if they don’t know how much they should be investing against their debts, how much they should set aside for the educational purpose of their kids, and how much they need in insurance to take care of their families in case of an emergency situation.
78% of the employees believe that employers should assist them in achieving financial wellness during their wellness years. However, the HRs fail to realise the one factor that would help an employee tie everything to their benefits (i.e. salary, insurance, and retirement plans) together in a personalised manner – a complete end to end financial plan.
A comprehensive financial plan tells much more than where one should invest money, it gives a whole picture of the financials and how to manage it in a more efficient manner. Here are 5 reasons why the HR department should consider Financial Planning as a crucial part of employee benefits:
- Employees will not think of investing if they don’t know what a monthly budget looks like
Most employees have experienced this situation. They spend what they earn each month. Sometimes, even spend more. This is the most basic piece of a block for tackling financial education, and it can help employees get their finances on track.
- Employees don’t know how much they need to save to retire comfortably
The most commonly set aside component is a percentage of their salary as EPF and PF because that’s what most employees think would be enough for them to retire after working for 30 years. If they’re older employees who did not save enough, he/she will need to set aside even more. Employees are concerned with two questions when it comes to their retirement:
– When can I retire?
– How much do I need to save in order to retire when I want?If they can’t answer the above two questions, then the rest becomes a wasteful, academic exercise full of general hand-waving an “I’ll get there eventually” exasperated hopes.
- If an employee has any financial problems there is a high chance he/she will bring it to work
It could be as simple as paying the routine monthly EMIs and bills or being stressed about the oncoming financial burdens, an employee will not give 100% effort at his job if he has any financial problem back at home. Even if they cannot solve their problems immediately, the employer, can help put the employee on a path towards financial security, address concerns, reduce stress, and aid that employee in giving complete focus on the job at hand.
- Employees would be able to save tax and increase his take-home income
Creating a solid financial plan will also incorporate a lot of tax saving schemes which would not only help create that extra corpus for their financial goals but also keep a check on the taxable income, thereby saving money and increasing your take-home salary and giving employees that little extra bit of financial freedom.
- He/she would be more financially stable and won’t look out opportunities elsewhere
Research shows that 7 out of 10 employees who decide to leave the organisation for greener pastures in terms of salary. If a company is able to take care of its employees in creating some kind of financial stability, the chances of that employee leaving also reduces, thereby reducing the attrition rate. If the employees know that the company is willing to address their financial issues it gives them more confidence to stick around for a longer period giving their 100% towards their job.
This could be an inexpensive method to retain the employees and increase their productivity at work. If you are an HR manager who would want to educate their employees on how a comprehensive financial plan is beneficial, you can get in touch with us and we would be more than happy to conduct a seminar at your campus.
Interested in knowing more about how we can help your employees financially fit? We would love to have a word with you.
Written & Published by:
Prashanth Prabhu, Founder & Principal Investment Adviser – 29k Group
Rohit Nair, Marketing Lead – 29k Investment Advisers Pvt. Ltd