In the midst of historically high inflation and ahead of a possible recession, it’s important for employers to offer benefits like financial counselling and flexible spending accounts to support employees’ financial and mental well-being.
Mercer Canada predicts a 40 per cent chance of heading into a recession, according to feedback from investment managers and relevant data. However, it would likely be a “shallow” recession, says Jillian Kennedy, partner in wealth at Mercer Canada, as the consultancy is still seeing very strong labour and consumption numbers.
Employees who are nearing retirement will be most impacted by inflation and a possible recession, she adds. “Those nearing retirement are experiencing an erosion of their retirement savings . . . and the cost of living is going up so it’s a double whammy. Some people [will likely] adjust their way of living in retirement and accept it and some might decide to work longer and get more retirement savings.”
Kennedy suggests employers determine which employers are getting closer to retirement and then try to support them with more communications and other tools to ensure retirement readiness. She also highlights a systemic issue with financial literacy and wellness.
“To help with financial wellness, employers can provide support with things other than retirement. Helping [employees] manage debt, seek financial counselling and become more literate will be more important than ever. We need to take action before people get to retirement.”
Inflation poses a problem for benefits as well, especially since cost can be a major barrier for employees seeking access to mental-health services, says C.J. Gordon, senior associate and health innovation leader at Mercer Canada. “Employers are typically only offering $500 for the bucket of mental-health practitioners, which is considered low even without inflation and it doesn’t go very far. However, more employers are pushing to increase this maximum to $1,000 or more over the last two years with the [coronavirus] pandemic.”
Gordon is also seeing more employers expand the scope of paramedical practitioners covered under the mental-health category to include psychotherapists and clinical counsellors. The cost of seeing a psychotherapist or clinical counsellor is lower than a psychologist, he adds, noting this means the paramedical amount of money that’s allotted to employees will go further.
Offering different spending accounts, like a health-care spending account and a wellness account, can also help because they’re much more flexible. “When you’re financially strained, sometimes [wellness] gets put on the back burner,” says Gordon. “For example, an employee really wants to keep their gym membership, but with inflation they might feel it’s more of a luxury. So having a bucket set aside for wellness-related initiatives relieves some of that pressure.
“This has a trickle-down effect on the benefits plan and the general happiness and health of employees.”