Financial Stress And Inadequate Benefits: The Mounting Challenges For Hourly Workers

Flexibility in wage access and scheduling is the need of the hour

The realities facing hourly workers in America have reached a critical inflection point. Of course, there were always circumstances that made hourly positions challenging—many of these jobs are labor-intensive for minimal pay and threadbare benefits. But as a number of external forces have set in, including the pandemic and competition from gig economy jobs, more and more hourly workers are turning away from these positions entirely.

A recent survey of 1,000 hourly workers conducted by Wakefield Research in conjunction with Even has revealed a number of dire conditions facing hourly workers from financial stress to disparities in benefits among workers, to clear disconnects between the needs of hourly workers and the benefits they’re offered. If employers of hourly workers fail to address these key concerns urgently, we may see not only a prolonged labor shortage in key sectors, but a working-class falling further behind financially.

In the midst of this Great Resignation, many employers have been looking for answers in addressing the concerns of hourly workers. It’s no secret that the circumstances facing hourly employees have been challenging for decades; with low wages, poor benefits, and a lack of flexibility in hours, millions of workers are choosing to either shift career paths or more broadly opt-out of the hourly workforce.

The reality is that hourly workers are financially strapped. According to the survey, 87% of respondents indicated that they felt some level of financial stress, with one in five indicating that they felt significant stress. More than three in five (63%) workers are at least somewhat concerned about getting into or out of a debt cycle.

Because of this financial stress, hourly workers have been pushed to make inadvisable decisions just to get by. These include borrowing money from friends and family to pay bills (36%) and overdrafting their accounts (31%). About one in five have taken extreme measures, such as maxing out their credit cards (23%), turning to a food bank for groceries (22%), or taking a payday loan (21%).

The way benefits are currently approached tends to favor salaried employees. When an hourly worker is living paycheck-to-paycheck, the proposition of a 401k or other savings plan can be unrealistic or downright insulting. It’s tough to think about future finances when the immediate needs of putting food on the table or gas in the car are a daily source of stress.

In reality, half of the hourly workers surveyed claimed that the benefits offered by their company don't fit their financial needs. The disparity between salaried and hourly benefits is also a point of contention, with about 1 in 4 hourly workers (26%) revealing that their current benefits package is more useful for salaried workers rather than hourly workers like themselves.

Perhaps because of this disparity in benefits, many hourly employees choose to leave their benefits unclaimed. Nearly two-thirds (65%) of hourly workers don’t use the financial benefits their company offers them. Further, about one in four hourly workers with benefits packages say they don’t use all their benefits because they want to keep as much money in their paycheck as possible (25%) or their financial situation limits them from using their benefits (23%).

The entire hiring landscape is competitive right now. Companies looking to hire need to do the most they can to attract top talent. For salaried workers, this competition tends to equate to higher wages, flexible vacation days, better access to childcare, expanded mental health services, and a host of other voluntary benefits.

Employers need to shift the focus of their benefits to meet the immediate needs of hourly workers. These immediate needs translate to better flexibility and transparency in how and when employees are paid.

Many hourly workers that have dropped out of the hourly workforce have migrated to gig economy jobs that offer better flexibility in wage access and scheduling. Employers should take this reality as a sign and begin offering early wage access as a benefit. The current predicament for hourly workers tends to mean inconsistent hours and income volatility. It’s difficult to plan finances when one paycheck is $300 and the next is $800. Gig economy jobs typically allow workers to access their income almost immediately after a job is done.

By offering early wage access, employers remove the bureaucratic holding period of the two-week paycheck and enable workers to control their funds more immediately. Further, this benefit should be covered by the employer at no cost to the employee. Workers tend to agree: nearly three in four (73%) hourly workers say their company should offer and pay for benefits that allow them to access their paycheck early.

Flexibility in scheduling is also a benefit employers need to champion to attract hourly workers. With many hourly employees struggling to find childcare or adequate transportation to and from their job, rigidity in scheduling can cause missed shifts and loss of hours and essential income.

Transparency is also key when it comes to how employees are paid. Paycheck predictors that allow workers to understand how much they’re going to make in a given pay period can help make major strides towards long-term financial planning.

The circumstances facing hourly workers are creating financial stresses that are in turn producing cycles of debt that can take years to overcome. While this burden is felt on a personal level by millions of workers, it’s also impacting employers. As more and more employees become dissatisfied with the wages and benefits associated with hourly work, we may continue to see these essential workers migrate to gig economy jobs or leave the workforce entirely.

By addressing the immediate needs of hourly workers through wage access, flexibility and transparency, and other benefits like emergency savings, employers can attract talent at a time when it’s needed the most while also doing the most good for the most people.