As labor pressures tighten, focus sharpens on total rewards

If the tumultuous labor market of the last two years hasn’t forced U.S. employers to reassess their approaches to getting and keeping good people – without breaking the bank on benefits that count – there’s still time to act. Relief isn’t likely for another two or three years. If then.

The environment is unprecedented.

Job openings are at record highs. We have 5 million fewer jobs than before the pandemic, but 5 million fewer people are even looking. Record numbers are quitting their jobs – 4.4 million in October after hitting 4.3 million in August. Meanwhile, as inflation climbs it threatens to eat away at pay gains of as much as 10% in some markets.

It’s an environment where employees are rethinking their expectations for jobs, careers and life, prompting employers to do the same to stay in the game. Benefits play a pivotal role in recruitment, but, increasingly, in retention, too – a concern when 55% of those in the workforce now likely will be hunting for new jobs in 2022.

Employers will have to stay on their toes to balance the pressures in 2022. Here are some of the prevalent trends in benefits they’ll be dealing with.

1. Winning workers’ hearts and minds

It’s no longer just about the money for U.S. workers, so companies whose hiring and retention strategies revolve strictly around compensation may be spinning their wheels.

Various forces are at play as people reassess their jobs and careers, and those should guide how employers re-evaluate their benefit offerings to respond in 2022. Some look to enriched medical benefits, for example. But not everyone sees the value, a factor that keeps the going participation rates at 54%.

To meet current and future employees’ expectations may take reconfiguring value propositions as total rewards. This shifts the focus to the bigger compensation package, not just pay, but benefits, work arrangements and other factors. Importantly, total rewards should strike a better balance between tangible benefits, like health and life insurance and leave policies, and less tangible ones like child care, mental health services and leadership coaching.

In this evolving environment, a company culture that inspires and motivates will make the difference in successful recruitment and retention. Total rewards are instrumental to winning employees’ hearts and minds in 2022.

2. Looking for options in balancing health insurance costs

Sweetening the benefits mix may have a downside of increasing benefits costs, and employers’ greatest pain and opportunity may lie in their health insurance plans.

Alternatives to traditional plans will continue to gain traction in 2022, with top options including:

• Self-funded plans: Improved cost control and lowered exposure to high-cost claims give ample cause to consider them. At least one such plan was offered by 13% of small businesses and 29% of mid-sized firms in 2018.
• Employee benefit captives: When employers group by size or interest in these insurance captives, they have been better able to control claims volatility and improve drug cost management.
• Individual Coverage Health Reimbursement Arrangements (ICHRAs): Through this option, employers can meet Affordable Care Act (ACA) mandates while giving younger workers an affordable option as they opt out of traditional health plans.

Such alternatives are worth investigating with the proviso: They are complex to put in place and need to be handled properly so employee satisfaction isn’t jeopardized. Enlist appropriate experts to smooth the way.

3. Personalized benefits – the core of total rewards

Personalized benefits will be an increasingly important way for employers to gain a competitive advantage in differentiating themselves in a challenging labor market. The tools are there for forward-thinking HR departments to apply.

“Personalized benefits” are benefits packages that command better engagement, access and experience. Comprising the core of a total rewards approach, they’re based on understanding which benefits make a difference to specific employee segments.

Building such plans takes HR data analytics combined with workforce persona analysis. The former delves into benefits usage to uncover gaps that need to be bridged. Persona analysis provides a sharper perspective of employee segments than typical segmentation.

Combined they form the basis for personalized benefits that are more relevant to the workforce and cost-effective for everyone.

4. Locking in on absence management

Leave policies are important to a holistic benefits strategy, not to mention recruitment and retention initiatives. That was brought home by COVID-19, and is prompting changing absence management policies into 2022.

Research by HUB International found that the pandemic influenced how three-fourths of small and mid-sized employers approach leave management, and 40% say their policies fall short. Heading into the new year, 25% have already changed their paid-time-off programs.

Where most, 75%, fall short and 85% don’t plan to change is in paid parental leave. Giving the massive shift in employee values, that may be a mistake. The new realities of working from home have put a premium on how much of their time there is spent with family through leave.

In 2022, employers will struggle to find and retain the best people, a challenge requiring them to find and leverage every possible competitive advantage. One solution lies in total rewards comprised of benefits that matter, and are more personalized than ever before.

Linda Keller is the National COO and Employee Benefits Practice Leader for global employee benefits insurance brokerage Hub International. She has nearly thirty years of experience in the design and implementation of strategic health and benefits programs. She is a certified Healthcare Reform Specialist by the Healthcare Reform Center & Policy Institute. She also earned a Global Benefits Associate certification from the International Foundation of Employee Benefit Plans.

Jeff Faber is the Chief Strategy Officer for global insurance brokerage HUB International’s Employee Benefits Practice. He is responsible for the development and execution of cutting-edge cost-containment, risk-reduction and employment-enhancing initiatives. He leverages data into information and information into action to help clients realize their objectives and find new frontiers.