HR Management & Compliance

HR Teams Have the Power to Transform America’s Financial Health

The HR industry is on the front lines of America’s fight for financial health; it just doesn’t realize it yet.  Millions of lower- to middle-income Americans—including hourly wage earners and Gig Economy workers, are struggling with income volatility, low savings rates, and high personal debt. HR teams and executives have a unique opportunity to make an outsized positive impact on the financial health of these employees and contractors using the tools and roles already available to them.

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And yet, many HR managers don’t seem to appreciate (or use) this power for good.   A quick scan of any employee benefit onboarding experience reveals the overwhelming complexity that every employee faces. In evaluating one such experience, we found an internal site that listed 60+ menu options for all the available benefits accompanied by frequent recommendations to read the 320-page benefit manual.

Although well-intentioned, this HR manager likely did more harm than good.  The abundance of information buried in menu options incites the exact type of cognitive overload and choice complexity that has been shown to decrease timely decision-making versus encourage it.

So, how can we improve the experience?

One proven way HR managers can make a positive difference is in how a company offers retirement savings. HR managers who promote an auto enrollment process motivate an estimated 50% more employees to get a retirement account. This very small tweak to the form’s design has saved employees $29.6 billion.

The even better news? There is so much more low hanging fruit for HR managers. These powerful people can make a number of small changes to forms that, given existing research, should provide an outsized positive impact to their employee’s financial future.

Here are the five ways HR managers can make the biggest difference with the smallest effort.

  1. Give People a Reason to Act Today

Companies that don’t offer auto enrollment must combat procrastination. For employees, tomorrow is always a better day to sign up or change their retirement allocation. One way for HR managers to put retirement on top of a to-do list for today versus tomorrow is to add a deadline. Research shows that giving people a deadline, even an arbitrary one like many found on the back of gift cards, can create a sense of urgency that motivates people to act.

Life milestones are another form of deadline. Work at the Common Cents Lab and research done by Hal Hershfield suggests that when age-based milestones (such as entering your 40s or 50s) looms close, people are more likely to make changes in their life. HR managers may have a higher level of success getting people to enroll in benefits if they send e-mails to people who are celebrating their x9th birthday and remind them of the impeding milestone.

Giving the gift of a deadline (arbitrary- or milestone-based) can help people prioritize their long-term future.

  1. Use the Psychology of Free and Loss Aversion

To earn an employer match (which is literally free money that employers give away), employees must first contribute to their 401(k). Imagine an alternative world where the employer instead just deposited the annual match into an employee’s bank account. If the employee didn’t contribute to his or her 401(k), the match money would be withdrawn at the end of the year and go away. This is a small reframe but inserts a powerful feeling of loss if a person undercontributes. In that case, the employee loses money.

While this change may be too much to get a legal department’s buy-in, an HR manager looking to increase contributions using loss aversion could just reframe their communications from the typical gain frame (get 6% match) to a loss frame (you’re losing 6% match).

Tomorrow we’ll look at tips 3-5.


Kristen Berman is a cofounder of Duke’s Common Cents Lab with Professor Dan Ariely. Common Cents is generously supported by MetLife Foundation. Berman was on the founding team of Google’s behavioral economics team and was previously the founder of Irrational Labs, a behavioral economics nonprofit focused on health and happiness.

Bradley Swain is a behavioral researcher at the Common Cents Lab, where he uses behavioral economics to help low- and middle-income families make better financial decisions. Swain received his Master’s Degree from the University of Miami’s Abess Center for Ecosystems Science and Policy in 2016.

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