The Evolving Landscape of Employee Benefits
By Julie Norwell
In three short years, the Covid-19 pandemic profoundly reshaped the way we work and the priorities of employers and employees. As organizations and people have adapted to the new normal, needs both inside and outside the workplace have evolved – sometimes dramatically. As needs have changed, so, too, have employee benefits.
Employee benefits are a vital part of an employee’s compensation package, designed to add value to the overall work life experience. They also serve to attract and retain top talent, improve productivity, and demonstrate employer commitment to employee well-being. The specific benefits offered can vary by company and industry.
Some experts say that employee benefits are even more essential than before. And well they should. Since the pandemic, the importance of employee benefits has grown significantly. In its annual survey, the Society for Human Resources Management (SHRM) asked human resources professionals to rate benefits categories on how important they believed each one was to their workforce. Among the top six categories, the percentage of respondents selecting each as “very important” or “extremely important” has leapt since 2019.
In rank order, they are:
Health: 75% (2019) 🡪 89% (2023)
Retirement savings & planning: 66% (2019) 🡪 81% (2023)
Leave: 65% (2019) 🡪 81% (2023)
Flexible work: 49% (2019) 🡪 70% (2023)
Family Care: 52% (2019) 🡪 68% (2023)
Professional & career development: 51% (2019) 🡪 67% (2023)
Employers, rightly, increasingly view benefits as an important means of attracting talent. In today’s employee-driven labor market, the onus is on employers to find a compelling mix of incentives to recruit, engage, and keep high quality workers. And they must do that within a budget, while accommodating the diverse needs of their employees. This task is even more challenging in the face of sobering economic conditions.
To complicate the picture, employees aren’t happy with current benefit offerings. According to a Forbes Advisor survey, only about half of Americans are content with their employer-provided benefits. MetLife reports that benefits satisfaction has fallen to its lowest point in the last decade, highlighting the disparity between employer efforts to expand benefits and employee expectations.
So, what do employee benefits look like now and where are they trending? Here is a look at that evolving landscape.
All in the Family
When it comes to employee benefits, the “big daddies” continue to be health insurance, company-sponsored retirement or savings plans, and paid vacation and sick leave. Those are all essentially universally offered and relatively unchanged. In the past three years, however, other benefits have developed in ways that show greater support for families, not just individuals. Flexible work arrangements and family-friendly policies have become increasingly desirable for employees, and employers are paying attention.
The share of organizations offering paid family leave options climbed again. After a brief spike during the pandemic, those numbers dropped sharply back to pre-pandemic levels in 2021. But, clearly, employers now recognize that returning to the status quo won’t cut it. Employee values have changed fundamentally, and employees want employers to step up.
Maternity and paternity leave is up five percentage points each from 2022. Parental leave and adoption leave both rose six percentage points, and paid foster child leave was also up. The share of employers offering paid family leave options now exceeds pre-pandemic levels across the board.
Four out of ten employers now offer paid maternity and parental leave (which is separate from the unpaid family leave required by federal law that 83% of employers provide). And, if expecting parents – especially women – have their way, we will see this number rise even more in the future.
“The need for heightened family support during the pandemic seems to have evolved into long-term parental benefits,” reported SHRM in June.
Non-parenting types of family benefits are growing as well. According to SHRM, 33% of employers now offer paid leave for employees to care for an immediate family member, and 18% offer paid leave to care for extended family. Even pets are benefiting! Nearly 19% of employers are offering pet insurance, up from 14% in 2022.
Rivaling family care benefits in popularity are flexible work arrangements. While the numbers appear to be leveling off, six out of ten employers now offer hybrid work opportunities and subsidize the cost of at-home office equipment. As many as 70% of employers say flexible work is very or extremely important – up from 49% pre-pandemic. Like paid family leave, flexible work arrangements are here to stay.
How to Communicate “We Care”
Most HR leaders understand the importance of communicating “we care” to employees and strive to telegraph it in their benefits lineup. It’s interesting, therefore, to observe what is new or changed in organizational benefit offerings.
Health-related benefits have seen some notable changes. Coverage for weight loss surgery climbed to 28%, reflecting a growing recognition of the impact of obesity on health. The recognition of mental health as a crucial aspect of overall well-being has gained traction among employers. This year 19% of them offer paid mental health days (separate from sick days). And paid travel expenses for medical care has emerged on the scene, with 11% of employers reimbursing employees for domestic travel related to seeking medical care.
Underscoring their commitment to invest in employees, nearly 8 in 10 employers provide formal training or education for upskilling/reskilling (79%) and keeping skills current (82%). Moreover, 23% of employers are offering retention bonuses, up from 15% in 2019. And, in recognition of the value of networking relationships, nearly 60% are offering referral bonuses, up from 53% in 2019.
In a bid to support employees’ growing appetite for financial planning, employers have boosted benefits for nonretirement financial advice by 10 percentage points to 31% since last year.
The Shadow of Economic Uncertainty
Not all developments in employee benefits are rosy, though. As the shadow of economic uncertainty darkens the horizon of the employee benefits landscape, employees are increasingly looking to squeeze more out of their financial benefits. According to a recent Morgan Stanley study, 69% of employees are seeking more competitive financial benefits when considering staying at their current companies, up from 60% last year.
High inflation and tumultuous markets have strained employees’ household budgeting. They have pushed many employees to reduce contributions to savings compared to last year. And financial stress has impacted their productivity. Employees want more support from their employers. The problem, though, is that a whopping 88% of employees are requesting benefits that their company doesn’t offer. That number is up from 78% in 2021.
Unfortunately, HR leaders are facing similar pressures. They must do more with less as corporate budgets tighten. They aren’t at all confident they can provide packages attractive enough to retain employees. In fact, the Morgan Stanley report finds that 27% of companies are even cutting back employee benefits due to recession fears. Virtually all HR leaders worry that employees will walk if they cannot offer the benefits that employees demand. (And three out of four employees say they would consider it!)
Savvy employers know they will need to get even more creative about leveraging benefits if they want to attract, engage, and retain talent during these challenging times. Failing to do so risks reduced productivity, low morale, and increased employee turnover. As employers strive to improve the employee experience, we can anticipate even more evolution in the landscape of employee benefits in the coming years.
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