As worries about the economy grow, employees are starting to take a closer look at retirement planning and the services provided by their employers, according to the second annual State of the Workplace Financial Benefits Study from Morgan Stanley at Work.

As COVID-19 concerns fade, inflation, geopolitics and economic uncertainty have taken center stage—ushering in new anxieties, the study says. In response to these challenges, employees’ expectations of their employers are evolving, with data suggesting these expectations may be here to stay.

The survey of 1,000 employed adults and 600 human resources leaders revealed some disconnects between employees and employers. For example, when asked which types of retirement planning assistance would be most beneficial, more than half of employees cited working with a financial adviser, the study says. Yet access to a financial adviser tied for third choice among HR leaders, suggesting a disconnect between employers and employees.

All HR leaders said retirement planning assistance from financial professionals is a priority in retaining employees, with 76% citing this support as a top or high priority, the study says. Ninety-three percent of employees also view retirement planning assistance as a priority when choosing where to work.

Financial Benefits

HR leaders acknowledge the evolving needs of their employees, but companies lag in expectations, the study says. Most employees (84%) agree employers should be more involved with helping them through financial challenges—providing an opportunity for employers to build more meaningful connections with their employees.

Despite more HR leaders saying they offer quality financial benefits, 83% (up from 78% in 2021) can recall a recent time when they were unable to grant a specific benefits request. With 87% of HR leaders expressing concern over employees leaving due to unmet needs, employers must step up, the study says. Almost all HR leaders (96%) and employees (89%) recognize their company needs to do a better job helping employees understand how to maximize their financial benefits. Without ongoing education, vital resources may be underutilized and underappreciated.

The call to reassess financial benefits is growing, with 90% of employees and 96% of HR leaders placing a moderate to high priority status on their company reevaluating benefits, the study says. More than four in five HR leaders said employees will leave for another job if their company does not offer financial benefits that meet their needs.

Most (67%) HR leaders said their companies are not adequately meeting employee benefits expectations, the study say. HR leaders (96%) and employees (89%) overwhelmingly agree their companies need to improve on financial benefits support.

Equity Compensation

Employer perceptions of equity compensation are shifting, and many are starting to see the long-term value, the study says. A third of HR leaders identify the greatest benefit of equity compensation as its ability to help employees meet long-term investing goals (33%, up from 26% in 2021), while employee views are more mixed.

According to the study, employees and HR leaders both view equity compensation as an effective motivational strategy, with 95% of HR leaders (up from 92%) and 80% of employees (up from 75%) who agree that equity compensation and stock ownership is the most effective way for companies to keep employees motivated and engaged.

HR leaders now say helping employees meet long-term investing goals (33%, up from 26%) is the most important benefit of equity compensation, the study says. Validating an employee’s performance also increased to 22%, from 19% last year.

Employees still have a mixed view of the benefit, with 25% who say equity compensation gives them a stake in the success of the company, 24% who say it helps meet long-term investing goals and 22% who say it provides additional source of income, the survey says. Twelve percent (up from 9%) of employees felt there was no benefit to equity compensation benefits—the only response that increased year-over-year.

Financial Wellness

Because of the economic impact of inflation, 62% of employees reported that they’ve had to reduce contributions to their savings, with nearly a third (31%) reducing contributions to their 401(k) plans and more than a quarter (26%) scaling back on paying down debts, the study says. Nearly three in four employees (71%) reported that money-related stress negatively affects both their work and personal lives, up 7% from 2021. Nearly half (47%) of employees also reported that they have either never thought to or are unsure if they are allowed to reach out to their employer for assistance with their personal finances.

Over half (63%) of HR leaders said employees regularly mentioned experiences that indicate financial challenges, the study says. Financial issues employees have experienced over the past year include challenges paying off debt or loans (45%), a financial crisis (44%), drawing on emergency savings (38%) and being unable to manage money and finances (36%).

Many are cutting back on short- and long-term savings, with 62% of employees who have reduced contributions due to current economic conditions, the study says. Employees have reduced contributions to their 401(k) plans (31%), slowed down on paying debts and loans (26%), cut back on long-term savings (25%) and reduced their emergency and short-term savings (24%).

Financial stress affects workplace performance, with 84% of HR leaders who are worried that employees’ financial issues outside of the office has had an impact on their productivity, the study says. Up 7% from last year, 71% of employees reported that financial stress is negatively affecting their work and personal life.

The survey was conducted in July for Morgan Stanley at Work by Wakefield Research.