Lifestyle Spending Accounts: 6 Keys to HR’s Competitive Advantage

Employees expect and need more from the organizations they work at to stay engaged, satisfied and present. However, most organizations don’t have a magical budget that scales with employees’ wants. Instead, it’s on business leaders to come up with effective and rewarding ways to improve the employee experience without breaking the bank.

Enter Lifestyle Spending Accounts (LSAs). These accounts give organizations the ability to offer flexible benefits that meet diverse employee needs without breaking any budgets.

I want to go over the what, why and how of LSAs to help you upgrade your offerings in a way that makes everyone happy.

What Are Lifestyle Spending Accounts?

LSAs are employer-funded accounts that give employees a certain amount of money to spend on approved expenses. Employers can fund them on a cadence of their choice, and the amount can be customized for each employee and automated to go out hassle free.

Approved expenses usually cover a wide range of purchases, including:

• Wellness. Gym memberships, fitness equipment, running shoes, yoga classes, massage therapy, etc.
• Home needs. Home office equipment, decor, groceries, pet insurance, etc.
• Education. Course fees, textbooks, public transportation, online classes, educational subscriptions, etc.
• Travel & leisure. Plane tickets, hotel stays, hobbies, recreational activities, etc.

The best part is organizations can decide whether to create a specific catalog for their LSAs or not. For example, if you want to encourage wellness, build an LSA around fitness and wellness, allowing employees to spend their funds on any health-related needs.

How Do LSAs Set Your Business Apart?

The benefits of LSAs should be starting to show themselves, but I want to make things clear by explaining the benefits my company, Awardco, has seen since implementing Lifestyle Spending Accounts.

More Flexibility in Benefits

It’s nearly impossible to provide benefits or perks that everyone will appreciate. For example, for every employee who appreciates a gym reimbursement program, another employee has no use for it.

LSAs have allowed us to reallocate our budgets to provide regular funds for all of our employees — funds that they can use on benefits, perks or expenses that are most meaningful for them. We’re no longer spending a good chunk of our budget on benefits only a percentage of people use or appreciate.

Greater Feelings of Engagement and Satisfaction

Because employees feel like the company is caring for their specific needs, they respond with greater engagement and satisfaction, lowering turnover and feelings of frustration. Employees feel valued and understood, and all it took was giving them more choice when it came to benefits.

Enhanced Recruiting and Retention

While our LSAs aren’t the biggest selling point of our culture, potential employees are always excited to hear about the points they get in our benefits program on a regular cadence. We’ve also set up our LSA to grow for employees the longer they stay, which has helped cut turnover and increase loyalty.

LSAs have transformed our culture, all without adding much to our budgets. The shocking thing is, according to a SHRM survey, only 4% of companies offer these accounts as a part of their benefits in 2024. 

Judging from what we’ve seen, I’m confident that any business that invests in LSAs won’t regret it.

3 Use Cases for LSAs

Let’s get into the actionable strategies to help make LSAs a reality at any company. Here are a few ideas for implementing an LSA to help you start the process.

1. General LSA Program

Like Awardco’s LSA program, organizations can choose to not restrict funds to specific categories or programs. Instead, tie the amount each employee gets to their tenure, give it out on a monthly cadence, and then let them spend that money on whatever they want. 

Movie tickets? Go for it! A dinner date? Great idea. Diapers for a newborn? What a relief! This type of program maximizes the freedom of LSAs and gives employees the most choice.

2. Professional Development Program

Developing employees leads to 11% greater profitability and two times greater employee retention. Use your LSA program to update and improve your professional development strategy by giving employees funds and providing them with approved channels to spend it on.

Online courses, workshop attendance, master class subscriptions and continuing education are all great ideas. Better yet, ask employees how they want to grow their careers, and then allow them to use their LSA funds on that.

3. Health & Wellness Program

31% of employees are emotionally exhausted and 26% of them are unmotivated. Life is stressful, and it’s hard to put effort into work while feeling stressed, burned out or overwhelmed. LSAs can empower employees to care for themselves and their families, helping them strike a healthy work-life balance that leads to greater productivity and engagement.

Allow employees to spend their funds on any health, wellness, or wellness-adjacent expenses that are meaningful to them. Gym memberships, fitness classes and exercise clothes are all great, but so are therapy sessions, childcare costs and healthy groceries.

Empower Employees’ Lifestyles

LSAs are all about supporting employees in the ways that they want to be supported. They give people more choice and more freedom, and by re-adjusting existing budgets, they don’t take shouldn’t increase your budget.

With that kind of affordable support, you can build a culture employees love and help increase employee engagement, retention and satisfaction.