Millennials with benefits: Keeping workplace options open
Millenials value flexibility more than other generations
Nov 10, 2015
By Bobbi Rebell
NEW YORK (Reuters) — Kurtis Ofori was thrilled to start his new job writing grant applications at green energy startup Dawan Global in New York City. In addition to health insurance, Dawan Global offers the holy grail of benefits for young people: tuition reimbursement.
Ofori, who is working toward an MBA, receives as much as 100 per cent of his tuition on a sliding scale from his employer. The payout is tied to performance: A's get 100 per cent, B's receive 80 per cent. C's are reimbursed at 60 per cent. While that buys Ofori an education, it also buys Dawan his loyalty.
Not only was it a sought-after full-time job, but Ofori, 30, likes working for a socially conscious company.
"This company has great foresight in what they are doing, and they invest heavily in their people," Ofori said.
These types of benefits are making a difference as hiring power shifts from employers to the millennials they now need to bring onboard, according to Bruce Elliott, manager of compensation and benefits at the Society for Human Resource Management (SHRM). By the first third of this year, 74 per cent of young adults ages 18-34 — the age group defined as the millennial generation — were employed full-time, according to Pew Research. That is up from 70 per cent in 2009. Many millennial workers are getting the suite of standard benefits that come with full-time employment, including health insurance, retirement plans and flexible spending accounts. But new data from benefits consultant Mercer shows that more than any other age demographic, millennials want flexible benefits choices.
Overwhelmingly, 70 per cent of younger workers say they want more flexibility to reduce the value of some benefits, while increasing the value of others, according to Mercer's research. That compares to 59 per cent of 35- to 49-year-olds, and less than half of 50- to 64-year-olds. Betsy Dill, Mercer's global retirement strategist, said a one-size-fits-all benefits approach does not work for millennials because they are the most diverse generation in U.S. history, not only in terms of ethnicity but also in terms of socioeconomic status.
Employers now have to target their benefits to many different individual needs as well as across a multigenerational workforce. Just 10 per cent of millennials worry about saving for retirement, according to Mercer. That is half the number of Generation Xers, their peers aged 35-49.
Power of compounding
But by delaying retirement planning, younger workers miss out on the value of compounded returns. Typical 401(k) rates (a U.S. plan similar to a defined contribution plan in Canada) of return are five per cent to eight per cent with a typical allocation pattern, according to Investopedia's online calculator. As a result, Dill advises companies to raise awareness about the perks of corporate retirement plans, such as matching programs. For example, many millennial workers do not understand that by contributing anything less than the corporate match to a 401(k) they are leaving free money on the table.
For example, if a 22-year-old invests $10,000 and gets 8 percent annualized return, they will have $308,000 when they retire at age 65. If they wait until they are 45 years old to make that same investment, 20 years later - when they retire at 65 - it will be worth just $49,000. But for Ofori, who also hopes to get a Ph.D in sociology, getting tuition help is more important than other benefits, such as retirement or free yoga classes. He is looking forward to getting his first reimbursement in January.
"That check will free me up to live a life where I can do more than just go to school and go to work," Ofori said.
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