When accounting and consulting firm KPMG revisited its benefits offerings for 2022, company leaders took into account a number of things: the ongoing stress of employees due to the pandemic, a hot job market that inspired more competitive offerings and rising inflation levels, which they knew were worrying employees.
The latter factor, especially, resulted in one big change for the year: reducing employee healthcare premiums by 10% in 2022, with no change in benefit levels.
“People are always complaining about healthcare premiums. What our people told us is they wanted more money in their pocket,” says Darren Burton, the firm’s chief people officer. “The reaction [among employees] has been tremendous.”
KPMG is not alone in thinking about, and addressing, rising inflation rates. The annual rate of inflation in the United States hit 6.8% in November 2021, the highest in more than three decades, as measured by the Consumer Price Index. With those big increases impacting employees in all facets of life, employers are–and should be–thinking about how they can help, says Stephanie Naznitsky, an executive director with human resource consulting firm Robert Half. That urgency is felt more strongly in today’s hot job market, where scores of employees have few qualms about leaving their current jobs for competitive pay and better benefits that can help with rising costs.
“The rising cost of living is impacting the entire workforce,” she says. “Employers should address this.”
Rising inflation rates–among many other factors brought on by the pandemic–have led workers to re-evaluate their current situation, Naznitsky explains. “Right now, we’re in a candidate-driven market. There are more job openings than there are people to fill them. With the rise in cost of living, workers know they can go out into the market to find other opportunities that would help better their situation and offset some of the personal living expenses that have increased in recent months.”
Many employers are turning to a tried and true strategy when addressing rising inflation rates: compensation changes, including through bonuses and salary increases. A recent XpertHR survey found that the median percentage change for total salary budgets from 2021 to 2022 is an increase of 3%.
A survey by the Conference Board revealed an even bigger increase in store: It found that companies are setting aside an average 3.9% of total payroll for wage increases next year, the most since 2008. Though those increases are higher than previous years, smart employers will likely go further.
“Forward-looking companies that are eager to overcome the labor shortage may want to consider increasing their projected salary budgets by more than 3%, or potentially examine how benefits beyond compensation can contribute to a positive employee experience,” says Andrew Hellwege, surveys editor for XpertHR.
Reexamining employee healthcare costs, like KPMG did, is one way employers often address rising inflation, says Julie Stich, vice president of content for the International Foundation of Employee Benefit Plans, a nonpartisan group that counts more than 8,200 organizations and 32,000 individuals as members. That’s a big conversation this year with the recent inflation figures–on top of pandemic challenges that are resulting in staffing challenges and supply chain issues, which also are expected to increase healthcare costs.
“With the anticipated healthcare cost increases, employers need to discuss whether to pass those increases on to their employees,” she says. “Employers may be reluctant to increase cost-sharing in this tough job market.”
An increasing number of firms are also looking to get creative with their benefit offerings to help with rising costs. Employers may want to consider investing in benefits like student loan assistance, daycare subsidies or fertility benefits–offerings that can directly help an employee’s pocketbook. Those investments usually pay off for organizations, Stich says.
“The return on attracting and retaining key employees can quickly outweigh any utilization costs,” she explains. “As always, the importance of communication can’t be understated. Employers need to stress the value of the benefits they provide to their employees.”
Flexibility and offering remote work can also combat rising cost of living, Naznitsky says, as employees can be more in control of moving away from expensive cities, for instance, or can cut down on commuting to save on gas or other transportation expenses.
“If you can help in those areas, maybe you are saving your employees from a stressful commute and commuting costs, or providing discounts that can help with other expenses,” she says. “Ultimately, the conversation begins with starting salary and sign-on bonuses, but we’ve seen companies get creative in order to help their workers and overall retain top talent.”
No matter what employers do, there’s much more at stake this year.
“Retention is key, and if employers aren’t keeping up with rising expenses and adjusting salaries or bonus structure, then they risk losing top talent,” Naznitsky says. “In today’s market, finding talent to add to your team is challenging. You don’t want to find yourself in a situation where employee turnover is affecting morale and you have to replace talent as well.”