Want financially resilient hourly workers? Follow PayPal’s example
PayPal CEO Dan Schulman isn’t the first business leader to recognize the impact of employee financial stress. But he is among the few dedicated to solving it. Join Chipotle CEO Brian Niccol on CNBC Scream BoxSchulman called the large percentage of American workers who struggle to pay their bills each month a “national crisis.”
The data backs up Schulman. More than 60% of employees said their financial stress has increased since the onset of COVID-19 according to PwC2021 Employee Financial Well-Being Survey. Even more alarming? Financial stress already dominated employee lives before the pandemic, more than even the stress of relationships or health issues.
All this financial stress weighs more than productivity and engagement. The mental health of employees is also suffering. Luminous PlanThe 2021 Wellness Barometer 2021 report estimates that employers collectively lose $ 4.7 billion per week. This is based on financially stressed employees who report working 15.3 hours per week at a reduced level of productivity and engagement. As for their mental health, 30% of employees said it had deteriorated in the same survey.
PayPal provides a good example of how businesses can relieve financial stress for workers in a way that benefits both employer and employee. The company took a candid look at the stress experienced by its hourly and entry-level employees. He then identified a goal that would impact both parties and supported it by launching the Employee Financial Health Program.
The initiative has helped employees take control of their financial lives – from improving access to healthcare to providing new financial benefits to Same – and led to measurable improvements in productivity and engagement.
1. Find out what is preventing your employees from being in better financial health
PayPal found in 2019 that despite above-market salaries, a large portion of its hourly and entry-level employees – around 30% of PayPal’s workforce at the time – struggled to pay their bills each month. The company also found that employees’ struggles were less about emergencies like medical bills than unforeseen day-to-day expenses.
PayPal began to realize this when it reviewed requests for its employee relief fund. Created in 2017, the fund provides immediate help to employees facing difficulties due to an unforeseen and upsetting personal event.
“We started to notice people coming in for things like car repairs and small home repairs. It’s not trivial, but it’s not a $ 10,000 medical bill, ”said Traci Memmott, Global Payroll Manager. “These types of expenses where people just needed the extra money for an extra expense in a month got us going in the direction of helping our people get money more frequently.”
To understand how it could better fulfill its internal mission with employees, PayPal devoted the year 2019 to understanding the financial stress that its hourly and entry-level employees were undergoing. His efforts included:
- PayPal Global Customer Operations Survey.
- Animation of a series of round tables with PayPal employees.
- Study industry best practices on employee financial health.
This analysis led PayPal to a basic metric that executives could focus on to improve employee financial resiliency: net disposable income, or NDI.
2. Identify a specific and measurable goal related to the financial health of employees
PayPal has targeted Net Disposable Income (NDI) as a basic measure of financial health because it shows how much money employees have left after taxes and living expenses. A higher NDI means employees have an easier time dodging paycheck to paycheck and avoiding predatory solutions like payday loans or high interest credit cards that lead to cyclical debt.
Analysis showed that hourly and entry-level employees at some US sites had an average of 4-6% NDI. PayPal has therefore set itself the goal of bringing all employees to at least 20% NDI. This would help team members better manage unforeseen expenses that arise between paychecks. It would also put employees in a better position to save. This means they could recover from emergencies with the money they already have.
3. Make changes that match your mission and culture, and show that the C-suite supports them.
PayPal mission is to democratize financial services for all, regardless of their background or economic situation. This mission applies to its employees as well as to its customers. So, whatever solution the company deploys to improve the financial health of workers, it had to uphold the same integrity that PayPal had put into its consumer products.
In October 2019, CEO Dan Schulman laid the groundwork for PayPal’s employee financial health program by announcing four changes for 2020:
- Reduce the cost of health care benefits.
- Make every full-time employee a shareholder.
- Increase wages where appropriate.
- Offer new financial education and counseling programs.
PayPal predicted that these changes would cause employees to 16% NDI in one year, going a long way toward achieving at least 20% NDI across its workforce. What’s particularly noteworthy is how PayPal approached benefits, compensation, and financial tools holistically, instead of trying to make an impact through standalone change.
4. Commit to the financial health of employees as a reactive and ongoing effort
PayPal envisioned its Employee Financial Health program as something that would continually evolve with the changing financial realities of employees. His first challenge came right away in COVID-19. The pandemic presented a challenge to the results predicted by PayPal executives.
In response to the new wave of financial stress brought by COVID-19, PayPal has expanded its program by:
- Granting of a second round of “welfare grants” equity awards to those who also received an initial grant.
- Launch access to earned wages (also known as EWA or Pay-On-Demand) to all U.S. employees through Same, and equivalent services to employees in other markets.
- Allowances to offset the costs of remote work for eligible employees.
By expanding the employee financial health program in response to COVID-19, PayPal has not only improved the financial health of its workforce during the pandemic, but is also moving closer to its 20% NDI target:
- Up to at least 18% NDI across all sites.
- $ 1.3 million of on-demand payment requests processed.
- Over $ 700 in emergency savings in six months among employees who signed up with the full Even platform.
“We’re also very happy with the level of savings people have racked up over the 8-9 months we’ve even put in place,” Memmott said. “The reason we wanted to partner with Even was that their goal wasn’t to keep paying instantly forever. It’s really about getting people to a space where they don’t need to.
PayPal has also suffered the effects of better financial health among employees. These include improved sentiment among employees and more team members expressing their intention to stay. Enrollments for health care benefits have increased, as have upgrades to existing plans. More and more team members are also taking advantage of PayPal’s 401 (k) benefit and employee stock purchase program.
Follow PayPal’s journey to make employee financial health a C suite priority
PayPal is not stopping its mission to improve the financial health of the workforce. Internally, the company plans to continue to evolve its program, including launching more financial benefits through Even, such as savings interest currently at 2X the national average *. Externally, PayPal CEO Dan Schulman is keen to help other companies build their own financially resilient workforces.
To do this, PayPal has partnered with JUST Capital and the Financial Health Network to launch the Worker Financial Wellness Initiative. The companies involved in the first cohort – Chipotle, Chobani, Even Prudential Financial, Verizon – represent around 260,000 workers. Each employer commits to performing at least one assessment of the financial well-being of their workforce over a 12-month period. They will learn about the unique financial vulnerabilities of their employees, then find solutions that build the long-term financial resilience of their workforce.
To learn more about the benefits of building a financially resilient workforce, visit Even.com.
*0.125% APY at 10/28/21. Compare to national rate. The APY is variable and can change at any time or after opening the account. Powered by Cross River Bank, FDIC member.