As the cost of living crisis rumbles on, employers need to unlock the power of the default mindset to deliver enhanced benefits for employees, argues Jon Rudoe, employee finance expert and co-founder of Nous.
When was the last time you were caught out by a rolling subscription you forgot you had? We’ve all been there; whether it was the free trial you forgot to cancel or that coffee subscription you thought you’d axed until it turned up at your door.
Research published last month by Citizens Advice found that a quarter of UK households accidentally carried on paying a subscription in the last 12 months because they didn’t get round to cancelling. And the problem is getting worse year on year. It’s all down to the power of the “default”: we’re much more likely to stick with something we’re already doing.
Clearly some companies are using the default mindset to squeeze money out of us. But it can also be a powerful way of helping your team. Just look at the success of government-mandated auto-enrolment pensions. As an employer, you can take this even further to drive real change, allowing teams to get the most out of workplace benefits and improve their wellbeing. Here’s how.
Auto-enrolment success
Auto-enrolment is a positive example of the default mindset in action. And increasingly companies are rolling out the concept for savings too. This means a percentage of an employee’s salary is automatically stashed in a pension or savings pot before it ever touches their bank account.
Auto-enrolment schemes are a powerful tool because once they’re set up employees don’t need a reason to save, they need a reason not to. They can be great vehicles for employees who struggle to get into a regular savings habit.
There’s a reason why auto-enrolment is so effective: it’s rare for employees to opt out of their pension or ask for their contributions to be reduced. We know these schemes are good for us, and it’s a hassle to change them. So we let them roll on, even if we’d quite like that extra cash in our pockets right now.
Default can be a trap too
On the flip side, companies can help staff avoid the instances where the “default trap” leaves people stuck in contracts or subscriptions where they are paying over the odds.
When was the last time you shopped around for a new energy or broadband deal, or re-evaluated how much you were paying for your car insurance? Shopping for deals is a hassle and takes time and mental effort. As a result, many of us end up paying more than we should for all kinds of bills. Employers can help.
But what if you didn’t have to do it on your own? Our online financial support service, called Nous, has been designed to help people avoid the default trap by monitoring their contracted bills, for example, gas and electric, insurance and broadband, and finding them fairer deals. The service then handles switching providers on their behalf. The technology is designed to protect employees against unnecessary spending.
This is powerful. At Nous our tool typically finds savings worth up to £500 per person per year across their household bills. For some team members, the savings opportunities identified are worth more than £1,000. At a time when rising prices are the number one source of concern for UK employees, this is a way employers can genuinely help.
Strategies to protect and serve
The default mindset is powerful and can be a help and a hindrance. Benefits strategies should enable staff to make the most of the positives, while protecting them against the pitfalls.
Salary sacrifice schemes, such as Cycle to Work benefits or programmes allowing people to buy electric cars, are more examples of harnessing the positive too. The money for a purchase that can really help people out is put aside automatically, which is much easier than trying to save into a pot each month.
By using the positive aspects of the default mindset and protecting against the negative, companies can help support the financial wellbeing of staff and improve take-up of employee benefits. But if it’s not working, don’t forget to opt out.
