Benevate Blog

FEB 2016
Mind the Benefits Gap
By Jason Rusnak

As seen here on

Many of today’s employee benefits are not applicable or are underutilized by younger employees. The reason is simple, most of today’s employee benefits are not designed for the persona of a “pre-nester:” single, no children, healthy, high student debt, and living with their parents. For employers that recognize this disconnect and offer employee benefits that address the “pre-nester” challenges, they will enjoy a competitive advantage in not only attracting and retaining “pre-nester” talent, but also improving their employment brand in the market.

If you are single and have no children how interested are you in life insurance or dependent care flexible spending accounts, or parental leave? If you are struggling to either pay off your student loan debt or move out of your parent’s basement, how much extra money do you have in your paycheck to contribute to a Flexible Spending Account, Health Savings Account or a 401K plan? If you are healthy and, like 51% of millennials, visit a doctor less than once per year, how excited are you to participate in your employer’s health insurance plan knowing that you will be subsidizing older, less healthy employees?

All of the aforementioned employee benefits are important, but they are more relevant once you have a spouse or a child or more discretionary income. In other words, they become more relevant once you evolve out of the “pre-nester” persona. So what “mainstream” employee benefits are designed specifically to address the needs of a “pre-nester?” None- and therein lies the employee benefits gap!

The Benefit Gap is Growing.

The employee benefits gap is not new; it’s just more visible now because it’s growing. The reason the gap is growing is because it is taking longer for employees to move past the “pre-nester” persona. In 1970, 49% of the population between 18-34 years old was married with children. Today, only 20% of the population between 18-34 years old is married with children. Today’s younger generations are waiting longer to get married, to have children, to buy a house. Some of this delay might be an ideological shift, but some of it is out of financial necessity. Over the past 10 years, the cost of a college education and the cost of an existing home have far outpaced wage growth. The result is historic levels of student loan debt and the lowest level of home ownership in U.S. history.

Home Ownership by Age, 1995-2015

Source: US Census
Student Loan Debt per Borrower, 1995-2015

Source: Edvisor, 2015

Consider for a moment that a recent college graduate averages $35k in student loan debt and that almost 49% of 25 year olds live with their parents today – both historic highs. These factors have elongated the time for family formation and consequently extended the time that an employee spends in the “pre-nester” persona. Whereas in the past an employee might spend 5 years in the “pre-nester” persona, today they may spend upwards of 10 years. That is a long time to spend in a stage where many of an employer’s benefits are not relevant.

The Path Forward

Given these facts, what is the proper course of action? The right strategy is not to figure out how to move employees faster through the “pre-nester” persona, but rather to offer employee benefits that particularly address the unique needs of a “pre-nester.” Student Loan Assistance (SLA) and Employer Assisted Housing (EAH) are just two examples of employee benefits that resonate with “pre-nesters.” In a 2015 iontuition survey, 75% of student loan holders would prefer to work at a company that offers a SLA benefit. In a Trulia survey, 80% of millennials view homeownership as part of their “American dream,” despite a large majority of them indicating that it is not immediately achievable because they lack the funds for a down payment.

A Measureable Return on Investment

Not only are SLA and EAH benefits in demand, they also provide employers with a measurable return on investment in the form of lower cost per hire and higher employee retention.

Imagine being at a college recruiting event where your booth is directly across from your top competitor. For the most part your pitches are very similar, except your company now offers a SLA and/or EAH employee benefits. So while your competitor is talking about their 401k match or their parental leave policy, you can talk about how your company is helping recent graduates pay off their student loans and/or helping them move out of their parents’ basement. Which company do you think is going to be more appealing? Which company is going to have greater success recruiting top talent and lowering their cost per hire?

There is also a strong retention component to SLA and EAH employee benefits if they are structured as a forgivable loan. In a forgivable loan, an employer provides an employee with an upfront lump sum of money to either pay down a student loan debt or to provide a down payment for a house. The loan is forgiven over a specified period of time as long as the employee fulfills agreed upon requirements (e.g. retention, performance). If an employee leaves early, they must pay back the unforgiven amount of the loan, plus interest. This repayment “stick” has a consistent track record of driving higher employee retention.

Attracting and retaining top talent, especially young talent, is a strategic imperative for all organizations. For HR leaders, closing the benefits gap is a strategic opportunity that will not only provide a measurable ROI, but will also establish your organization as an employer of choice for the large and growing “pre-nester” workforce.