Thanks to Congress extending the payroll tax cut, millions of Americans will continue to receive a fatter paycheck. However, a recent National Foundation for Credit Counseling (NFCC) poll revealed that 66 percent of workers did not realize that their paychecks were larger, in spite of the 2 percent payroll tax cut having been in place for more than a year.
In 2012, the maximum amount of earnings subject to the Social Security tax increased to $110,100 — up from $106,800 in 2011. The tax cut will put a significant amount of money back into the hands of consumers. For example, for those earning the maximum, the two percent reduction translates into a tax savings of more than $2200 annually. Even workers making $50,000 – approximately half of that amount – will see an additional $1,000 in their paychecks over the course of the year. This is money that can be put to good use, but only if consumers are aware it’s there.
This leaves employers with a unique opportunity to exercise corporate responsibility by offering financial education to their employees, starting with a solid understanding of how the payroll tax cut funds can be put to good use.
MMI challenges businesses to act upon this opportunity, noting that it offers advantages for not only the employee, but also the employer. In fact, the financial educators at MMI have made it easy for employers to offer their employees financial education through our comprehensive Financial Solutions program.
The program is designed to help employers, credit unions, banks and community organizations assist their employees, members and customers by providing financial education programs that address the most prevalent financial hardships and issues impacting individuals and families.
- Benefits that employers can realize by providing financial education include the following:
- Positions the employer as a trusted resource for financial information.
- Demonstrates that the employer is concerned about the financial well-being of the employee.
- Creates a more financially stable employee, one who is not distracted by financial concerns, collection calls while at work, or continually requesting advances from their paycheck.
- Provides an opportunity to educate the employee on the benefits of contributing to the employee retirement plan, something they may not have previously been able to do.
- Provides a platform for emphasizing the importance of saving, as using this money to begin or add to a savings account could provide a safety net for future financial emergencies.
Debt is often the main stumbling block standing between an employee and financial stability. A financial education workshop is the ideal place to illustrate the meaningful impact that putting the payroll tax cut money toward debt repayment can have on overall financial health.
Money Management International is a member of the NFCC. The NFCC is the nation’s largest and longest serving national nonprofit credit counseling organization. NFCC Members annually help over three million consumers through close to 800 community-based offices nationwide.