The outlook of Employee Benefits Strategy in 2022
Employee benefits can be one of the most powerful differentiators in the marketplace. However, many organizations throw benefits at their workforce without any metrics of efficacy. The problem is that, often, benefits are pitched at the lowest common denominator of the workforce.
Recent data from Willis Towers Watson shows that today’s employers aren’t looking to step up their benefits strategy in 2022 but rather in 2024 to differentiate and customize benefits strategy within the next two years.
If your company lacks a comprehensive employee benefits plan, you may end up paying a big price in the form of high turnover among employees.
A Willis Watson study showed that 78% of workers would likely remain with their employer because of its benefits and values while 50% would leave their current job for better benefits.
When employees find out they are working for a company that does not offer a comprehensive benefits plan, their feelings about the company and its future success will likely be negative.
The cost of employee turnover
According to an IBM Institute for Business value, 47% of employees stated that their benefits are generic and often do not align with the employee’s needs or interests.
If you want to keep top talent around, you’ll need to make sure your company offers customizable benefits as a MetLife Employee Benefits Trend Study stated that it would increase their loyalty to their current employer by 78%.
Let’s do a little math to illustrate the point. According to research from Talent Management & HR, the cost of losing an employee depends upon their position.
- An entry-level employee turnover cost is between 30% and 50% of their
- A mid-level employee turnover costs 150% and above their annual salary
- A high-level or highly specialized employee cost approximately 400%
Let`s place that in a real–world scenario whereby, an organisation loses 12 employees in one year, averaging one per month.
- Six of these employees were entry-level, with an average salary of $40,000. It costs, on average, $16,000 to replace each employee at 40% of their annual salary, for $96,000 total.
- Four of these employees were mid-level, with an average salary of $80,000. It costs, on average, $120,000 to replace each employee at 150% of their annual salary, for $480,000 total.
- Two of these employees were senior, with an average salary of $120,000. At 400% of their annual salary to replace them, an organization would be looking at almost $1 million.
In conclusion, organization could be looking at operational losses from 40% to 400% This has yet to account for the indirect cost such as recruitment, on-boarding, training and lost of productivity.
Factor Revolving Employee Benefit
1. Resolving Internal Workforce Challenges
Globally organizations report that stress, burnout, and mental health issues constitute their top workforce challenge.
As COVID-19 has changed the landscape where we have working, it brought about unprecedented changes with the flexibility of working from home to avoid the spread of the disease.
However, not many employees have generally accepted this reality.They view a typical working environment to work and meet your colleagues, where you can share your ideas and learn from them. When working from home, you can’t do that.
As a result, employees productivity drops as they have fewer ideas to share and fewer learning opportunities.
Also, it is challenging when they don’t know where to turn for support. That is why many workers feel depressed, stressed, anxious, and even more lost as they wouldn’t know what we should do or where to turn.
In addition, the National Library of Medicine highlighted the effect of lock-down during COVID-19 on migraines and concluded that half the migraine patients reported worsening of their usual pain during the lock-down.
To further illustrate this point, we have developed a graph below and observed that whenever the government announced any restrictions or lockdowns to curb Covid-19, we observed that there’s a spike in migraine tickets utilization by employees.
We can only deduce that the pandemic and also changes in the workspace did have an impact on employees’ physical health as well as mental health.
Here are some of the issues that employees commonly reported on mental stress during the pandemic:
- Loss of a sense of purpose and direction
- Anxiety-related to the future and job security
- Work overload and pressure to do more work than usual
- Loneliness and isolation
- Difficulty in concentrating and making decisions
- Difficulty in falling asleep and staying asleep
2. Diversity, equity, and inclusion (DEI)
Gone are the days when people would go to work, come back home, and continue with their day-to-day activities. Now, they are more connected than ever before. Companies are now increasing efforts to treat employees fairly and equitably in all aspects of the employment deal, including benefits.
The pandemic and global social justice movements elevated the focus on DEI, prompting companies to increase efforts to treat employees fairly and equitably in all aspects of the employment deal, including their benefits.
A focus on DEI will help employers address today’s diverse workforce’s unique needs and preferences and shape a benefits portfolio that meets employees where they are.
3. Tight Labor Market
The talent competition is getting more intense as more companies and organisations hire the best and the brightest employees.
Companies are always on the lookout for new employees, and they are willing to pay them a lot of money to find the perfect person for their company.
As a result, the benefits structure and how it is communicated to employees are also changing. It has become increasingly important to understand the impact of external factors and develop an appropriate strategy to manage these changes.
Competitive labor markets are the second most important external factor affecting benefit strategy, cited by six in ten employers globally and states that fringe benefits play a critical role in helping attract and retain top talent as competition for talent intensifies.
4. Rising Healthcare Cost
Cost containment remains a critical factor in business strategy for employers in Pacific Asia, especially in the current global environment. The rising costs of labour and benefits (including salary, healthcare and retirement) continue to be major concerns for most employers.
In addition, the region continues to struggle with the impacts of the Covid-19 pandemic on its workforce and economy. Employers’ cost containment strategies are driven by a desire to retain talent, keep their staff engaged, and remain competitive.
The graph above is derived from Willis Towers Watson 2022 Trends, which displays organizations across the globe and their aspect to focus on their employee experience.
The biggest takeaway is the majority of them are looking into improving their workforce wellbeing as it directly attributed towards increased resilience, better employee engagement and higher performance and productivity.
Five Dimension Benefits Strategy Priorities
In this segment, we will focus on what organisations should be focusing on 2022.
1. Benefit Portfolio
As employee well-being is top of mind, more employers are focusing on integrating well-being initiatives supporting better mental health into the benefits portfolio.
Additionally, corporates are looking to enhance broader benefits, including expanding flexibility and choice.
Well-being priorities
A majority of employers globally plan to boost their support for mental health by providing an Employee Assistance Program(EAP) which offers counselling and support to your employees. EAP is an important benefit for employees.
When your company provides the services of an EAP, it not only helps employees who are dealing with stress and personal problems but also helps your company in several other ways.
An EAP can help your company to prevent problems before they start and can provide assistance when they arise. In addition, it is one of the best ways to keep your staff focused on what is most important to you: your company and your employees.
Broader benefits
To deliver value to a diverse workforce, over half of the employers globally plan to add or enhance the choice and flexibility in their benefits.
Additionally, four in ten employers globally plan to enhance their voluntary benefits, perks and discounts.
Employee Benefits And Compensation Ideas That You Can Provide To Your Employees in 2022
- Insurance Plans
- Paid Sick Leaves
- Disability Insurance
- Office Perks
- Tuition Reimbursement
- Childcare Facilities
- Corporate Discounts Retirement Plans
- Wellness Programs
- Profit-Sharing
Best Employee Benefits For Millennials
- Student Loan Assistance
- Remove The 9 to 5 System
- Work-Life balance
- Remote Working
- Personal Growth Development
- CSR Initiatives
2. Employees Experience
The employee experience emerges as the top focus area for employers out of the five dimensions of benefits strategy. Employers recognise the importance of deepening employees’ understanding and appreciation of their benefits through improved use of technology, manager support and enhanced communication.
Employers are looking to take action in several critical areas to improve the employee experience.
I. Digital tools and technology
Employers overall are planning or considering increasing their use of a range of tools, including digital hubs, navigator tools and mobile apps.
II. Communication
To improve their benefits communication, 42% of employers globally are looking to personalise communications to specific segments of the workforce.
In addition to personalization, approximately four in ten employers globally are looking to improve their communications through educational and promotional campaigns.
III. Support
Half of the employers globally are planning or considering manager training to identify and assist employees with their well-being. Four in ten are looking to use digital tools and technology to help employees be productive and feel connected.
3. Benefit financing
The rising cost of benefits especially healthcare continues to be an issue. Employers are looking to use a combination of tactics, from care navigation support to managing premiums, to mitigate the impact of cost increases.
i. Concerns about increases in costs or premiums
Employers globally are planning or considering taking the following measures to manage healthcare costs:
- Use Care Navigation Support (32%)
- Use Condition Specific Care (30%)
- Manage Premiums Paid To Insurance Providers/Vendors (29%)
4. Administration and operations
The least effective benefit area based on employers’ self- reporting is administration and operations.
The areas within administration and operations where employers globally show the greatest weakness is in the use of market-leading technology for administrative purposes and the use of streamlined internal operations.
I. Setting priorities
Over half of employers globally and across all regions are making the streamlining of internal operations their number one priority.
For employers in the Asia Pacific, the top priority is reviewing the effectiveness of operational policies and procedures, and internal efficiency ranks second.
II. Taking Action
The top actions employers overall are looking to improve benefits administration and operations include:
- Assess internal operations (34%)
- Assess the performance of vendors and providers
- Update documentation (31%)
5. Analytics
Analytics and insights help employers better understand the wants and needs of different employees and make data-driven decisions critical to delivering a personalised employee experience.
Employers globally gave themselves low to middling effectiveness scores across key aspects of analytics. While over four in ten employers indicate they access the latest information to understand market trends and legislative development, only 38% say they use data and analytics to understand program effectiveness.
Additionally, many employers globally are overlooking the value of listening strategies. Fewer than three in ten report using surveys and focus groups to understand employee wants and needs.
I. Taking action
Close to two in five employers globally are looking to deploy listening strategies to better understand employees’ views on benefits by planning or considering the following measures:
- Using predictive analytics to forecast costs and risks (34%)
- Using data to identify at-risk employees (35%)
- Connecting health and wealth (33%)
Conclusion
A comprehensive benefits strategy is the best way to ensure you’re not losing your best employees to the competition. When it comes to benefits, you can’t just put something out there and expect people to use it.
Benefits should be designed to benefit the employees, not the employer. If your business is growing, you need to take the time to assess and strategise how to provide a better benefits package to your employees.
It has to be relevant, easy to use, and accessible to all employees. By understanding what your employees want, you’ll be able to create a strategy that works for your company.