For years, HR leaders and business executives have been told that a robust benefits package is the key to a happy, productive, and loyal workforce. But what if the most expensive and innovative benefits are simply papering over a more fundamental problem: is your team paid enough to live?
A new report from the Financial Health Network, a US-based organisation, offers a provocative finding that challenges the conventional wisdom on employee financial wellbeing. Drawing on data from over 8,000 workers, the research found that the single most critical factor linked to improved financial health is earning a living wage. Put simply, if an employee earns enough to cover basic needs, they are, on average, significantly more financially healthy than those who do not.
This finding has profound implications for how companies design their total rewards and benefits packages. In both the UK and US, where the cost of living continues to rise, many businesses are adding a variety of benefits to help employees manage their finances, from emergency savings accounts to earned wage access (EWA). While these benefits can provide a short-term lifeline, the research suggests they may be a poor substitute for a decent base salary.
The UK’s Two-Tiered Approach
In the UK, the concept of a living wage is well-established, with the voluntary Real Living Wage calculated annually by the Living Wage Foundation. Unlike the government’s National Living Wage, this benchmark is based on the actual cost of living, providing a clearer picture of what people need to get by. Over 16,000 companies, including major brands like Lush, Nationwide, and Aviva, have committed to paying this rate.
This creates a clear divide. On one side are the employers who have made the fundamental commitment to paying a living wage, and on the other are those who rely on a patchwork of other benefits to make up for inadequate pay. The new research supports the view that the former group is likely to have a more financially resilient workforce, and in turn, see benefits in terms of productivity and retention. A recent study by the Money and Pensions Service revealed that a staggering 52% of employees feel financial pressure impacts their job performance.
From Innovation to Foundation
The Financial Health Network’s report doesn’t dismiss all benefits. It found that well-designed benefits like retirement plans with matching contributions are highly effective. The key is that these benefits should supplement a living wage, not compensate for a lack of one. When the foundation of pay is weak, no amount of financial coaching or loan products can fix a problem of systemic under-earning. In fact, the report notes that products like EWA are often used by those who are already struggling, and while they may help address immediate crises, they don’t help employees ‘climb the financial health ladder over time’.
For HR professionals and people leaders, this is a moment to re-evaluate. It’s a chance to move beyond the flashier, more ‘innovative’ benefits and ask a more challenging question: is our compensation strategy truly aligned with the needs of our people?
Rather than adding more layers to an already complex benefits programme, perhaps the most impactful step a company can take is to focus on the basics. An honest assessment of whether pay rates meet or exceed a living wage could be the most powerful financial wellbeing initiative an organisation ever launches. Investing in a truly fair wage is not just a socially responsible choice; it is a strategic one that underpins every other employee experience and engagement effort. It’s the essential benefit that makes all others meaningful.