Pioneering research offers the first data-backed roadmap for designing compensation strategies that actually improve worker financial health
As the nation prepares to honor Labor Day, the Financial Health Network is unveiling a groundbreaking report that provides employers with unprecedented clarity on how to support employee financial health. Essential Benefits: A New North Star for Wage and Benefit Design is the first study of its kind to use rigorous multivariate analysis to pinpoint which components of wages and benefits are most likely to improve worker financial health, and those that have room for improvement and innovation.
This new visibility comes at a critical time. U.S. employers spend trillions annually on wages and benefits, yet 70% of American workers remain financially unhealthy. Until now, most companies lacked the data to know which investments truly deliver value for employees and business outcomes like retention, productivity, and earnings.
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“This is the first time we can say with a deeper understanding which benefits move the needle on financial health,” said Matt Bahl, Vice President of Workplace Solutions at the Financial Health Network. “At a time when resources are limited, leaders need to know how to best design their total reward offering so that it drives the greatest return in workforce stability, productivity, and retention. This report and new framework help businesses cut through the noise and optimize their wage and benefit spend on what really improves financial health outcomes.”
Drawing on responses from over 8,000 U.S. workers, the report features a robust multivariate analysis that identifies which compensation elements most directly correlate with better financial health outcomes. At the core is the concept of a living wage, defined as the minimum household earnings necessary for a family of four to cover basic needs, adjusted geographically. Employees earning at or above this living wage consistently score significantly higher on key measures of financial health.
Among the study’s key findings:
- Earning a living wage is the most critical factor linked to improved financial health. Workers earning above this threshold score 6 points higher on the FinHealth Score®, on average yet only 47% of workers do.
- Benefit design matters more than access alone. For example, workers offered a retirement plan with a matching contribution are 21% more likely to participate, and significantly more financially healthy, than those offered a plan without a match.
- Emerging benefits show promise. Childcare subsidies, emergency savings accounts, financial coaching, and home-buying assistance are among the newer offerings with positive associations to financial health.
- Not all benefits show a strong link to financial health, but context matters. Offerings like earned wage access (EWA) and employer-sponsored loan products are often used by workers earning less than a living wage who face chronic financial hardship. These workers tend to have lower levels of financial health to begin with, and while these products may help address immediate challenges, they are unlikely to help people climb the financial health ladder over time. There is plenty of nuance that needs to be unpacked around these solutions, and additional research is needed to better understand the relationship of these solutions to financial health.
The report also introduces practical tools to help employers refine their compensation strategies, including:
- A replicable modeling framework enabling HR and benefit leaders to assess the real-world impact of their total rewards packages.
- A geographically grounded living wage benchmark that employers can use to determine whether their wage structures adequately support employees’ basic financial needs.
- A case study from Bangor Savings Bank illustrates how the Essential Benefits framework can be leveraged, in the real world, to optimize and prioritize employer wage and benefit spending on solutions that are most likely to improve financial health.
Additionally, the report underscores the significant gap in benefit access faced by nontraditional workers, including independent contractors, small business owners, and gig workers. It emphasizes the urgent need for employers and policymakers to innovate and realign benefit structures to reflect the realities of today’s diverse workforce.
With this research, the Financial Health Network will continue to develop specific guidance for workplaces on ways to optimize their benefit spend on high-impact solutions – leading to better prioritization and outcomes for all stakeholders. In the meantime, FHN invites employers to prioritize thoughtful benefit design, focus on proven and promising strategies, and explore innovative approaches to compensation. Investing effectively in workers is both socially responsible and strategically essential for long-term business success.
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