Benefits and Compensation

Focus on Finance When it Comes to Gen Z Benefits Packages

While segmenting employee populations by generation is “old hat” at this point, the rise of the latest cohort, Generation Z, requires a new focus. Gen Z (individuals born after 1997) makes up more than one-fifth (21%) of the world’s working-age population and is expected to grow to 30% of the U.S. workforce by 2030. At the same time, 1 in 5 U.S. residents will reach retirement age in 2030, creating a looming inflection point for the workforce. Knowing that Gen Z will become such a large percentage of the employee pool in less than 10 years, HR should prioritize attracting and retaining these young workers now.

gen z
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The benefits package should be a vital part of an employer’s attraction and retention strategy. Gen Z is a financially motivated generation, having grown up watching their millennial predecessors struggle under the weight of enormous student loans and credit card debt. In fact, a recent survey indicated that Gen Z’s three most desired benefits are health insurance (32%), remote work (25%), and 401k/retirement benefits (25%).

With college graduations behind us for the year and new members of the workforce starting the job hunt, employers must package their benefits offerings to prospective Gen Z employees in a way that resonates with them—and stands out in a hot job market.

Talk About Benefits that Matter Most to Gen Z

Where baby boomers are more focused on retirement, Gen Zers want to custom-tailor their benefits coverage, especially when it comes to financial wellness. Almost three-quarters (73%) of Gen Z employees will have student loans to pay off, with most owing between $25,000 and $50,000, according to a 2020 Handshake survey of college students. It’s no surprise that student loan debt is a significant driver for Gen Z career choices, with half of Gen Z respondents saying they would take the first job they’re offered, and nearly two-thirds (62%) reporting financial pressure as the reason.

For this reason, employers that center financial wellness in their benefits packages will have a leg up in recruiting Gen Z talent. According to Prudential Financial’s Pulse of the American Worker survey, 8 in 10 workers want their company to provide benefits central to their economic well-being, and 40% would consider accepting a job with a new company that offered better benefits. So a financial wellness approach to talent acquisition will translate well across all generations.

The Prudential Financial study also found that workers consider benefits such as retirement plans; health, disability, and life insurance; paid family medical leave; and emergency savings programs as critical to their financial resilience. In addition to these, employers should consider offering:

  • 401(k) retirement plans, with or without a match;
  • Access to financial counseling;
  • Tuition reimbursement;
  • Student loan repayment assistance;
  • 529 College Savings Plans;
  • Unlimited PTO (paid time off); and
  • Flexible work arrangements.

Surprisingly, according to the 2020 SoFi survey, 30% of employers do not offer any of the benefits listed above. That means that employers who offer these benefits will stand apart from other companies in today’s hot job market.

Explain the Financial Impact of Healthcare Offerings

Benefits related to student loans and retirement are not the only ones crucial to employees’ financial wellness. Employers need to emphasize the financial impact of employees’ healthcare decision-making, from which benefits employees select to how they use those benefits. Employers need to communicate the importance of choosing the right benefits with the best coverage, and what resources they provide to make those decisions easier. For instance:

  • Choosing the right plan. Employers need to communicate that choosing the right health plan and benefits will help Gen Z prospects/employees maximize their coverage and minimize their out-of-pocket spending. Providing resources such as benefits educators—who can walk employees through the enrollment process and answer questions about their specific health situations—will assure that individuals choose the most cost-effective plan, while ensuring employees feel supported.
  • Using plans effectively. Understanding how to shop for healthcare with the right coverage can have a huge and immediate impact on employees’ wallets. The lowest-premium plan is not always the most cost-effective, and a test done at the hospital down the street could cost hundreds, if not thousands, of dollars more than the same test done at a stand-alone testing center 15 minutes away. To guide Gen Z as they use what in many cases may be their first employer-sponsored plans, employers can offer transparency services and enlist healthcare advocates to provide comparison reports, outlining the different options, providers, and prices available to the employee. With this data in hand, employees can start making more cost-effective decisions and see their savings start to add up. 

Leverage Social Media and Text Messages to Communicate About Benefits Year-Round

To ensure employees take advantage of their benefits, employers must communicate about them clearly and consistently throughout the year, using the channels that Gen Z pays attention to most. They grew up online, so educating them through online tools, as well as text messaging, is worth considering. They are accustomed to seamless, digital experiences as consumers, and have come to expect the same in their workplaces. For instance, because 73% of Gen Z say they prefer brands to contact them through Instagram, with Snapchat following as the preferred method at roughly 50%, employers should try leveraging these two channels. Sending two-way text messages is also a preferred option for Gen Z and will most likely ensure communications are seen, given that this generation spends hours on their smartphones every day. Liberal use of images and “bite-sized” bits of information will help capture their attention.

The cadence of these communications also matters. Because healthcare knowledge is often “use it or lose it,” employees are less likely to remember the resources at their fingertips or best practices for making cost-effective decisions about their care if they don’t receive frequent reinforcement. Employers certainly can’t expect employees to remember months later the information they were given during open enrollment. Year-round benefits communication not only educates Gen Z employees about their benefits, but also ensures they know where they can go to find out more, whether it’s a website with interactive resources or internal portal with videos, articles, glossaries, and more.

By sharing consistent, year-round communications over Gen Z’s preferred channels, employers can create a modern benefits ecosystem that becomes a value-add for prospects. 

Benefits are complicated, no matter what the employee’s age, generation, or background, but they can be especially daunting for those new to the workforce and who lack any prior education on the topic. Employers that acknowledge Gen Z’s financial priorities and invest in their benefits education will impress prospects seeking a personalized compensation package and an employer who supports them.