Rising costs still a balancing act for employers
ARLINGTON, VA, July 13, 2023 — As companies grapple with attracting and retaining key talent, investment in employee benefits remains a key priority for most U.S. employers; however, many still face cost challenges as benefit expenses continue to rise, according to a new survey from leading global advisory, broking and solutions company WTW (NASDAQ: WTW).
WTW’s 2023 Benefit Trends Survey found that competition for talent (80%) and rising costs (67%) are the top two priorities influencing employers’ benefit strategies followed by focus on inclusion and diversity (41%) and rising mental health issues (39%).
While competition for talent has been a priority for the past few years, the survey found it to be top of mind in 2023. Almost two-thirds (65%) of employers feel that their current benefit plan is effective or highly effective in attracting and retaining key talent, and half (49%) are focused on their benefit plans meeting needs across all employees. As they look to meet these needs, employers plan to improve their benefits position in financial wellbeing (43%) and mental health support (37%).
“Employee benefits are significant differentiators in attracting and retaining key talent, and companies must prioritize in order to be an employer of choice,” said Courtney Stubblefield, managing director and Insights & Commercialization leader, Health & Benefits, WTW. “Employers must focus on what their workforce needs by assessing the value of benefits and their impact on employees. This can be challenging given the complexity of benefit programs and the need to simplify operations.”
As most (75%) companies look to focus on managing plan costs in their strategy, balancing employee needs might prove more difficult. Employers are anticipating cost to be a top challenge for benefit budgets in the next two years. Almost half (46%) are concerned about the persistence of higher inflation on their benefits budget, while 36% expect an impact from the weakening economy and current business environment.
In a bid to manage costs and simplify offerings, 66% of employers have taken action to improve vendor contract terms, while 83% are planning to do so. About one-third have taken action to bundle services into one package from a single vendor, while another third is planning to do so. About one-third of employers are mitigating retirement plan risk, and 36% have plans to do so. Alternatively, almost two-fifths (43%) have increased the employee share of cost, while another half (48%) are planning to do so.
For some employers, their only option is to evaluate strategically the benefits they offer in response to rising costs. Seven percent of employers have opted to reduce the generosity of their benefit programs overall, while 15% have plans to do so.
“The current state of both the economy and labor market is putting employers in a precarious position, balancing the competition for talent with the rising cost of services, while budgets remain tight,” said Debby Moorman, managing director and head of Health & Benefits, North America, WTW.
“The current state of both the economy and labor market is putting employers in a precarious position, balancing the competition for talent with the rising cost of services, while budgets remain tight,”
Debby Moorman | Managing director and head of Health & Benefits, North America, WTW
“This is especially challenging when employees are seeking benefit provisions that support the key areas of inclusive wellbeing, lifestyle and financial protection and are at the same time environmentally and socially conscious,” added Moorman.
WTW surveyed 595 U.S. organizations across a broad range of industries about their benefit strategies between March and April of 2023 for its 2023 Benefit Trends Survey.
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