The American Bankers Association (ABA) recently announced a new benefit to assist its employees with repaying student debt. Beginning next month, ABA will provide each eligible employee up to $1,200 per year toward the payment of student debt, in addition to their current compensation. According to the Society for Human Resource Management, only four percent of employers nationwide offer this benefit.
Is this an altruistic statement regarding the $1.4 trillion of student debt in America, or a prudent employee benefit targeting recent college graduates that each average $30,000 in student debt?
I recently proposed this topic for my firm's podcast, This Month In Banking, which is released on the last Wednesday of every month. Shot down. Too boring. But hey, I have a blog too! And I think it is an extremely important topic in talent acquisition and retention.
According to the Bureau of Labor Statistics June 2016 report, salaries, commissions and bonus accounted for 68.6% of total compensation, and benefits accounted for the remaining 31.4%. This is an increase from 29.9% in 2013. So benefits is a large, and increasing proportion of total compensation.
What makes the ABA announcement interesting is: 1) it is a benefit specific for those that carry student debt, meaning mostly millennials, and 2) that they felt they should announce it.
I don't think it is a mystery that bank employees seem to be getting older. And that succession planning in our industry is an issue. Since the financial crisis our industry's brand as a go-to employer has been hurt. And hurt badly.
How do we attract quality, younger people and then retain them to be the future leaders of our industry?
What employees value is in the eye of the beholder. Younger workers, for example, value cash on the barrel-head. Less important would be insurance (health or life), and retirement benefits. Not that it is unimportant. According to the Willis Towers Watson Global Benefit Attitudes Survey (What a mouthful! Some marketing person should revisit that title.), only 42% of US respondents said they would opt for more pay/bonus as opposed to other benefits if they had the choice (see chart). So other employees have different priorities.
Gradifi, that focuses on student loan paydown. Imagine the recruitment and retention with this benefit!
But as this benefit becomes less important to employees, perhaps a migration to something more meaningful, such as a greater 401k match, a more robust health plan, or life insurance benefits. Is it practical to earmark certain benefits dollars per full-time employee, and let them select, in menu fashion, what is important to them? For example, the recent college graduate may opt for a student loan paydown benefit, and take a high-deductible HSA health insurance option, rather than the traditional plan.
I think what is clear is that benefits that are important to your employees differ over different times in their life cycle.
Can bankers devise a cost-effective benefits program that recognizes this, would help them attract the best talent, and keep them?