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Between the onset of new technologies such as artificial intelligence (AI), the ongoing ripple effects of a global pandemic, and the emergence of the gig economy, the workforce today can seem like an entirely different world. As with any new field of exploration, it’s full of both opportunities and pitfalls.
Employers are supporting their workers to ensure higher productivity and a happier workforce, and employees are understanding how to balance different aspects of their lives for their own benefit — but the learning curve can be steep.
Social and economic trends like working remotely and the rise of inflation can have a measurable effect on employees. In 2023, a record proportion of workers requested hardship distributions from their long-term retirement accounts. Not only do these withdrawals increase the time it will take to save up a healthy retirement fund, but they also typically involve tax penalties and fees.
Many employers are seeing the value in a more robust and diversified financial benefits package, one that helps employees with not just long-term savings goals (such as saving for retirement) but also with more immediate needs, such as emergency savings accounts. Anticipating change or upheaval before it arrives and taking steps to prepare for a wider range of possibilities can help both employers and employees navigate change more easily.
Like in many other areas of society, the changes taking place in the workforce are manifesting more quickly than ever before. Five years ago, most companies were not actively using AI, and automating workflows was a relatively new concept. Today, automation has become a standard part of many roles, and more and more companies are learning how to include AI components.
Both automation and AI can eliminate some of the more repetitive administrative tasks involved in all kinds of jobs, freeing up employees to focus on higher-level responsibilities. As a result, employees are feeling the need to “upskill” by learning how to become more efficient and effective at their jobs, branching out into new areas, and discovering how to use technology to its best advantage in their specific role.
As employees hone their abilities, there has been a correlating workforce shift toward skills-based hiring and continuous learning. Companies want to hire employees who understand how to adapt to changing workforce trends. And employees are eager to increase their expertise and test out experiences that can help them become eligible for promotions and raises.
The coronavirus pandemic arguably changed remote and hybrid work environments forever. As more organizations learned how to manage teams and collaborate across departments effectively without physically occupying the same space, employees embraced new levels of flexibility and work-life balance. This has also influenced financial planning for employees, who might not be spending as much time and money on their commute, but who may be taking less lucrative roles in exchange for the opportunity to work remotely.
The gig economy has had a ripple effect in the traditional workforce. Remote and hybrid work allowed many employees to learn about and take advantage of new part-time employment opportunities, and some skilled workers have decided to turn to freelance work, finding and maintaining contract relationships with a wide range of different employers.
While this can be a good thing for both organizations (in terms of accessing a wider range of contract workers with highly specialized skills) and workers (in terms of allowing them to work on a project-by-project basis), there are also financial implications for everyone involved. Companies may need to set aside larger freelance budgets, and contract workers are always on the lookout for a company offering better working conditions and perks.
All of these trends are instigating financial changes at organizational, management, and individual levels. The changing job market means that income stability can be more difficult for employees to find, though it remains a critical variable for every worker. There are ample opportunities to learn new skills and apply them at work, but employees who struggle with understanding new technology or who cling to manual workflows and processes can find themselves falling behind in terms of promotions or seeking new jobs at different companies.
Longer lifespans and uncertainties in pension schemes in savings strategies are also having an impact on how (and how much) employees save for retirement. More people who are at or past the traditional retirement age (65) are continuing to work, many of them shifting to part-time or self-employed work. A longer life expectancy means more money must be saved to reach retirement in order to accommodate health care needs and other retirement-age financial expenses.
As the gig economy and remote or hybrid work have both become more robust, the most adept contract workers are seeking benefits beyond simply per-project pay from a variety of companies. Organizations that can provide health care plans at a national level (to accommodate remote workers everywhere), or that can offer perks such as savings plans or other financial benefits to even part-time workers, are more attractive employers to every kind of worker. Furthermore, while gig work can provide higher levels of flexibility and work-life balance, many gig workers find it more difficult to manage their day-to-day finances, and many also struggle to earn as much as their full-time counterparts.
Financial stress is problematic not just for employees; employers also suffer when their workforce is distracted and unfocused. An American Psychological Association study found that most respondents (64%) are stressed about the economy and about money (63%). For respondents who feel stress around their finances, 55% said that paying for unexpected expenses was causing at least part of this stress.
Financially resilient individuals are able to accommodate shifts even as change is happening. They know how to set specific and time-bound goals that will increase their ability to manage uncertain situations and environments, and they can create and stick to a budget — one that includes variable income streams and can track a number of different savings accounts.
Debt management and saving for an emergency are vitally important to help build a solid financial foundation. Paying down high-interest debt (or refinancing whenever possible) can yield significant savings over time. Emergency funds can alleviate the potential impact of an unexpected financial crisis, allowing employees to avoid falling deeper into debt in order to pay for an emergency, and also protecting long-term savings accounts from hardship withdrawals.
Understanding possibilities for diversifying income sources helps workers become more financially healthy. Getting a second job or a side gig can help build emergency savings accounts more quickly, providing a cushion against loss and debt. When employees are constantly looking for ways to become more efficient at work by utilizing new tools and technologies, such as automation and AI, they’re ensuring their relevance in a dynamic job market as well as carving out room for more earning opportunities for themselves.
Continuing education and growth are paramount to financial wellness. Not everyone understands financial goal-setting or budgeting, so offering education and tailored financial counseling or budgeting programs to employees can be a potent way for organizations to support their employees’ financial health.
Meeting the need for more flexible and diversified financial benefits, especially savings programs, is another powerful option for employers to facilitate better financial habits for their employees. Organizations should explore beyond a standard 401(k) and evaluate other savings program options, such as a workplace emergency savings account, health savings account, or flexible spending account. Emergency savings in particular can have a profound effect on an individual’s financial resilience.
One of the best ways that employers can show up for their employees is to prioritize health and wellness in general by creating a supportive work environment. These environments accommodate varying levels of employee stress, offer assistance and encouragement, and empower employees to feel capable of managing their finances, even in the face of continuous change.
Change is a constant in both life and in the workplace. While being prepared for change has been standard advice for centuries, the pace of that change has rapidly increased in recent years, which means that to thrive both inside and outside of work, employees have had to learn how to adapt more quickly — all while traditional concepts of employment are being redefined and the path to financial stability is being rebuilt under their feet.
Technological advancements, economic shifts, and evolving societal norms have all been enormous drivers of both workplace and lifestyle changes, even as financial health remains a consistent goal for individual earners and entire organizations. By anticipating change, preparing for it, and offering employees a wide range of options and opportunities to do the same, employers can ensure that their workforce is a happier and financially healthier place for workers.