Are you an employer of choice?
Are you an employer of choice?
Financial advice as an employment benefit
An employer of choice is an employer that offers fantastic work culture, workplace environment & employee benefits that attracts & retains superior employees.
With low wage growth, the potential benefits to help to attract, retain key talent & improve employee productivity.
Employees are looking for more from their employers, rather than just a job.
Employers who see employee benefits as an opportunity to drive business objectives despite low wage growth stand out from their competitors.
Employers objectives have remained fairly consistent over time;
control costs
attract & retain employees
increase productivity
However, because the face of the workforce has changed over time, the strategies employers use to achieve these same objectives must also change.
Over 80% of working Australians believe employee benefits are an important consideration when joining an organisation. And when they think about benefits, they are not just thinking about the traditional benefits of health insurance, maternity/paternity leave and superannuation benefits, they often mean non-traditional ones, such as work/life balance, discounted health insurance, further education & financial advice.
Employers of choice must respond in non-traditional ways if they are to differentiate themselves & strengthen their brand.
In the current economic climate, financial pressures on employees are growing. Yet many employers are unaware of what their employees are looking for & are missing a valuable opportunity to support & help retain their workforce.
What employees value the most
Recently, Mercer released the ‘Benefits Outside the Square Study’, which is based on interviews with 600 employees & 150 employers.
One of the key findings of the study was the ongoing disconnect between the benefits employees are looking for & those employers think they are looking for.
The survey revealed many employers continue to underestimate the importance of benefits such as discounted private health, gym memberships, professional services & financial planning advice.
28% of employers surveyed offered or facilitated access to financial advice as an employee benefit. Yet, among employers who don’t currently offer this benefit, 42% thought their employees would value it.
In addition, when employers were asked how they could help employees aged over 50, the top response was to provide support for retirement & financial advice, which is closely aligned to older employees who are preparing for & transitioning to retirement.
The benefits of financial advice
Studies show that a large majority of employees are unaware if the compulsory 9.5% contribution paid by employers into their superannuation will be sufficient for a comfortable retirement.
ASIC released a consultation paper highlighting the issue:
“While compulsory superannuation has increased Australians’ level of retirement savings, most people do not fully engage with their superannuation. They have little idea of how much they will have when they retire & how this compares to the amount they will need.”
This statement is consistent with the findings of a recent study by Mercer which found more than 40% of those aged 50+ were unsure of how much they would need in retirement.
People nearing retirement are naturally more disposed towards financial advice & financial planning, with 65% of those over 50 who were surveyed have made some preparations for retirement.
However, while often associated with upcoming retirees, financial advice as a benefit has broad appeal across all ages & incomes.
A study by Rice Warner found, when comparing the return on cost of advice, young families ultimately returned the greatest financial return. There is also an emotional payback, which can be particularly important to employers. The research found peace of mind was the key intangible benefit resulting from having financial control as a result of seeking financial advice.
Another important result is the way employers can enhance their reputation & standing as an ‘Employer of Choice’ by showing themselves as open to new ways of working with their employees.
Initiatives such as providing financial advice can open up channels of communication within the workplace.
For example, in the case of one of our recent clients, offering financial advice to a workforce with a high proportion of staff aged 55+ allowed the company to start talking to these experienced employees about their futures, the number of days they wanted to work & how they could transfer their knowledge to others in the organisation.
Financial advice in the workplace
There are several ways to deliver financial advice in the workplace. However, delivery will be modified to suit the employers needs.
In the past Newcastle Advisors have delivered advice in the workplace in a combination of:
Education Services - specific seminars that can be run during lunch-time & tailored to key demographics
Personal Advice - one-on-one consultations with a Newcastle Financial Planner tailored to an individual’s circumstances, lifestyle, attitude to risk & financial goals.
Access to the Newcastle Advisors team - helpline & email - for any follow up questions or advice.
Many employers look only at the headline costs of providing financial advice in the workplace, without paying sufficient regard to the benefits it can provide to their employees & their business.
Employers who do not help by paying for advice programs could over time, be faced with an ageing workforce that cannot afford to retire and may consequently suffer from lower productivity and succession planning issues.
Other benefits for employers
Every company has invaluable employees they’d like to keep forever. Unfortunately, sometimes life circumstances such as injury or illness takes them away earlier than expected. Just as it is prudent to insure your business assets against loss, it is also important to insure specialists or skilled people who contribute significantly to the ongoing success of the business.
Key person insurance protects your business by not leaving it financially vulnerable if the key employees were to suffer injury, illness or pass away, by providing a timely injection of funds to minimise the financial impact to your business.
Who is a key person?
A key person may be a business owner/founder, partner, director, sales person or key employee that generates significant profits.
A key person is also someone whose sudden absence from management or day to day operations could cause financial loss to the business.
In addition, there will be employees whose skill set gives the business a competitive advantage. These employees may also be considered key people. Ideally, all key people identified should be covered, according to the scale & current risk status of your business.
How does key person insurance work?
Key person insurance can be used to cover the costs of replacing the key person associated expenses and/or income.
The insurance funds can be used to keep your business going;
Recruiting & training new employees, replacing lost profits, holding market share & protecting the brand, meeting existing contractual commitments, maintaining customers confidence with minimal disruptions, maintaining supplier confidence by continuing to meet financial obligations.
How much cover is enough?
There is no one formula to calculate the value of a key person, however you should consider the impact to both the business capital & revenue when calculating the sum insured.
Capital replacement - refers to the business balance sheet items. Calculations of the sum insured may include debt repayments, & replacing lost value which may occur from the loss of the key person.
Revenue replacement - calculation for the sum insured may include multiples of the key person’s remuneration, multiples of gross/net revenue generated by the key person or cost associated with replacing the key person.
NEWCASTLE ADVISORS
At Newcastle Advisors we approach financial planning differently to most.
We don’t tell you what you can achieve or where you can get financially. Instead, we listen to what your goals are & work with you to build your financial blueprint tailored to your lifestyle.
We focus on supporting you realise your goals, so you can feel confident that you have a financial plan to stay on track & retire on your terms.
We work with clients all over Australia & have offices in Newcastle & Sydney.
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