Summary List Placement
It’s one thing for a leader to say they care about employees. It’s another thing for a leader to conduct a company-wide audit to find out how employees are fairing money-wise, and then take action when the results come back subpar.
That’s what PayPal CEO Dan Schulman did in 2018 after hearing employees were struggling to make ends meet. The CEO audited and analyzed employees’ financial health at the payments giant. The results prompted PayPal to make changes in 2020 that included raising wages across the company, cutting healthcare costs by 60%, and making every employee a shareholder.
Now, PayPal is leading an initiative calling on other CEOs to do the same: conduct an audit of their employees’ financial health, and then consider ways to improve their quality of life.
“The first thing every CEO, I believe, should do is understand the financial health of their own workforce, because before you can address external issues, I think you need to address what’s happening inside your company,” Schulman told Insider.
PayPal and Just Capital, in partnership with the Good Jobs Institute and the Financial Health Network, kicked off a program which will guide groups of CEOs through the process of examining their employees financial wellness.
In 2020, essential workers and racial inequity came into the spotlight, and both Just Capital and PayPal noted that conversations about employee wellness were coming up more often.
So the two companies partnered to standardize a process for how companies can take steps to measure and analyze their employees’ financial health.
“In the context of the pandemic and the nation’s racial reckoning, it’s been very clear that one of the core elements as we get to the other side of this has to be understanding if workers are getting by every month, and if they’re getting ahead,” Alison Omens, chief strategy officer at Just Capital, told Insider.
Just Capital is an independent, nonpartisan research firm established by the billionaire Paul Tudor Jones. Just Capital ranks the country’s largest publicly traded companies, evaluating them on ESG issues like employee wellness and environmental impact.
PayPal and Just Capital are currently leading talks with groups of US CEOs, offering guidance on how to evaluate workers financial health through audits and surveys. The initiative formally kicked off last October, and the first cohort of participating companies is expected to be announced this spring.
“Almost every conversation I have within my CEO peer groups is around employee financial health, because that’s something we can do,” Schulman said. “We don’t have to wait for anybody else to do that. It creates real competitive advantages for each of our companies to go and do that.”
Step one: measuring employees’ financial health
For participating companies, grounding evaluations of employee financial wealth in data is key.
“You can’t benchmark against the rest of the market and assume that your employees have financial health, that they’re not stressed about making ends meet,” Schulman said.
Currently, the program is asking CEOs to conduct one of three assessments. There’s a living wage assessment in partnership with MIT, using the university’s living wage calculator and guidance from professor Amy Glasmeier. There’s also a broader financial health assessment guided by the Financial Health Network and a benefits assessment.
“Part of what Just is trying to do is create an incentive and recognition that CEOs, at the very least, need this information,” Omens said. “Measuring this is leadership.”
Following the assessment period, it’s up to CEOs to decide how to act.
For PayPal, the metric used was net disposable income (NDI), meaning the amount of money employees take home after taxes and essential living expenses like housing and food.
The company found that many employees, especially hourly workers in call centers and support operations, had an average NDI of between 4% and 6%. Today, that average is up to 16%, with PayPal committing to a company-wide minimum 20% NDI by the end of this year.
To be sure, not every company will focus on NDI like PayPal. Some CEOs are more focused on retirement benefits, whereas others are thinking more about parental leave, Schulman said.
It’s all a part of a broader trend around stakeholder capitalism: the idea that companies are responsible for all their stakeholders, including employees, not just their shareholders.
For PayPal, the investment in employees has paid off. With more engaged employees and lower turnover, the company reported record performance in 2020 and quickly launched a slew of new products including crypto trading and QR code payments. Schulman credits much of that performance to heightened productivity of PayPal’s employees.
“Our employees are our single most important, competitive asset we have and taking care of them is the best investment that we can make to really aspire to become a great company over the medium to long-term,” Schulman said.