The Service Industry Needs Financial Education Now More Than Ever

Many workers in the hospitality industry deal with fluctuating – or variable – income. Mismanaging unpredictable pay can lead to high levels of debt, increased stress, and poor performance at work.

A recent survey of 1,400 workers conducted by financial wellness platform BrightPlan reveals that employees lose “7 hours of productivity each week” because of worries over personal finances. In that same study, more than 8 in 10 Gen Z employees report feeling “stressed about their financial situation.”

This stress is compounded with the additional factor of fluctuating income typically associated with the service industry.

Depending on the season, month, or even the day, the service industry can experience huge variations in revenue. Intense weather can discourage guests from dining out, or even close businesses altogether. Golf resorts close in the summer or winter, so employees have to supplement paychecks. Snowbirds leave their residential neighborhoods – and local restaurants – for months at a time, so servers lose reliable guests.

Hospitality workers that do not have steady annual salaries need to make their flexible pay cover unavoidable fixed expenses like housing, transportation, and other costs of living.

Research has proven that many Americans don’t understand basic financial concepts like inflation, compound interest, and claiming Social Security benefits – despite the fact that these issues directly affect their wallets.

When employees don’t know how to budget, or have no knowledge or guidance on how to save for emergencies, it not only results in distracting stress but also impacts the bottom line. By focusing on their own financial health, employees can ditch the stress and focus on increasing productivity.

What’s more, employees want to be financially literate. Forbes reports that “financial wellness programs are now the number one most-wanted benefit among employees.” Personal finances affect mental and emotional health – all factors that contribute to a person’s overall well-being.

This is where employers can step in and lend a helping hand. Providing a financial wellness program with financial literacy lessons can help employees manage their variable income through information and support. Decreasing stress and increasing productivity sounds like a win-win for the service industry and its employees.

Here are three important areas to focus on when introducing financial wellness programs as a workplace benefit for hospitality workers:

1.  Creating a Budget

The essential first step to handling unpredictable income is preparing for the worst. Teach employees the basics of budgeting, like balancing income and expenses. When counting income, the lowest amount expected should be the number they work from to figure out how to cover expenses.

Spending targets work great for fluctuating expenses, and this strategy can also be applied to fluctuating income. Add up the net income totals from the past 3 months, then divide by 3 to get an average total of pay. That’s the number to work with. Remind employees to estimate income on the low end and expenses on the high end.

Also, share tools like spreadsheets, online programs, and apps – it’s easy to perform a budgeting exercise in real time, which will inspire participants to cut down on discretionary spending and make the most of their pay.

2.  Avoiding Debt

Getting into major credit card debt is a pitfall for people regardless of income and employment status. The service workforce needs to learn about how interest works, as well as how it compounds. Making only minimum payments will cost more in the long run.

Paying off insurmountable debt – especially with an income that changes depending on circumstances outside of the employee’s control – can create a level of stress that’s hard to shake, especially at work. Introductory credit courses that educate employees of all ages on the basics are much needed.

Don’t assume that employees know how to manage loans and credit cards – knowledge is the key to financial literacy. All types of hospitality roles would benefit from learning how to spend responsibly.

3.   Saving for Retirement

Saving is essential to reaching financial goals, like owning a home or going back to school for higher education and professional development. But what about those golden post-work years?

According to Bankrate, half of working Americans feel like they’re behind on retirement savings. Jobs like servers, bartenders, and other tip-focused positions often do not get offered an employee-sponsored retirement plan, especially if they work “part-time” shifts. This is where employers need to provide materials and support to help employees plan for retirement, as well as show what is available to them through different types of retirement savings accounts.

Staff should also be made aware of savings milestones. What do employees want their retirement years to look like? At what age should they have saved what amounts? This is crucial information that, once determined, can help staff save for the future while achieving present peace of mind.

When employees have access to education and support, they can understand the differences between a steady fixed income and a uniquely challenging variable income. Whether it’s preparing financial literacy workshops in-house or outsourcing through a financial education portal, employers can (and should) help the service workforce build a foundation for their personal success.