Sustained low unemployment has forced U.S. employers to offer richer compensation and benefits in order to attract and retain top talent. According to the Gallagher’s 2019 Benefits Strategy & Benchmarking Survey, the largest survey of its kind in the U.S., nearly three quarters (73 percent) of employers increased employee compensation this year, and more than half (52 percent) enhanced medical benefits.
Even with compensation enhancements, voluntary employee turnover remains a stubborn challenge, with one-third (32 percent) of employers reporting full-time turnover in excess of 15 percent in 2018. That figure has increased by 8 percentage points from 2016. In light of this, attracting and retaining a competitive workforce remains the top priority for both operational and human resources executives.
“More employers appear to be thinking strategically about their benefit and compensation strategies to win the war for talent, but there’s a question about whether these efforts are ultimately paying off,” said William F. Ziebell, CEO of Gallagher Employee Benefits Consulting and Brokerage. “Our 2019 Benefits Strategy & Benchmarking Survey finds successful employers create and communicate stronger cultural attachment points that resonate with the wants and needs of talent — in support of their employees’ health, financial security and career growth.”
Employers Leaning into High-Deductible Health Plans and Technology to Curb Medical Costs
According to the Gallagher survey, employers and employees believe the high costs of medical services (67 percent) and prescription drugs (42 percent) continue to put a significant burden on their budgets. For more than a decade, employers used cost-sharing methods to keep their expenses in check, but the tight labor market has slowed this trend. Almost half (47 percent) did not increase their employees’ cost-share spend in 2019.
As an alternative, forward-thinking employers are creating health-plan structures based on incentives and value. For example, 2019 marked the first time the majority (51 percent) of employers offered high-deductible health plans (HDHPs), which allow employees to pay lower premiums. The trend has resonated with employees, and employers note HDHPs had the second-highest enrollment (24 percent) among their employees in 2019.
While high prescription drug prices are a cause for concern, the survey surprisingly found many employers fail to capitalize on tactics that could significantly reduce costs. For example, more than half of organizations do not have or are not aware of whether they have tactics in place to manage specialty-drug costs. And many that have deployed tactics are not tracking the results, often deferring to their health plan or pharmacy benefit manager instead. Additionally, specialty pharmacy mandates that require employees to purchase specialty drugs through a specific pharmacy have relatively low adoption rates (20 percent). By exploring options such as this, employers will help to curb their organizations and their employees’ prescription drug expenses.
Creative Voluntary and Wellbeing Benefits Allow Employers to Stand Out
More than two-thirds of employers offer resources to promote employee health or wellbeing. However, employers are moving beyond traditional wellness benefits that focus solely on employees’ physical health, such as flu shots, tobacco cessation and biometric screenings. Rather, 20 percent have come to understand the need for a comprehensive whole-health and wellbeing strategy to attract and retain talent in a tight labor market.
In addition, the survey found between 31 percent and 40 percent of employers have revamped their total-rewards offering by enhancing supplemental and voluntary benefits, expanding leave policies, adding wellbeing initiatives and/or enriching retirement benefits as a way to appeal to their existing and prospective employees. The most-often covered supplemental health insurance electives in 2019 include autism treatment (64 percent), hearing aids (48 percent), bariatric surgery (47 percent) and infertility services or fertility treatment (46 percent).
For a significant number of employers, taking a holistic approach to benefits and compensation offerings includes an emphasis on employees’ financial wellbeing, as personal financial struggles can negatively impact productivity. Since 2017, 41 percent of employers indicate they have increased their emphasis on their employees’ financial wellbeing. Nearly 7 in 10 of employers provide employees with access to financial advisors, which is a 7 point increase from 2018. More than half (54 percent) offer financial-literacy education opportunities, a 7 point increase from the previous year.
Creativity and flexibility on the part of the employer have gone a long way to align organizational goals with employees’ lifestyle needs. As a result, more than 1 in 4 employers allow telecommuting either full-time or part time. Additionally, more than half of organizations offer flextime, the ability for employees to transfer hours from one day or work shift to another.