How a potential recession is impacting employers and workers

While the U.S. economy has avoided a recession this year, many experts still feel one is looming on the horizon. Either way, LIMRA research reveals that employers and their employees are taking steps to prepare. 

A potential recession affects not only employers’ strategies regarding their growth plans and business investments, but also their talent strategies and related workplace benefits offerings. Likewise, a potential recession can hinder workers’ confidence and ability to participate in valued workplace benefits, including retirement savings plans and voluntary benefits that address insurance needs. 

How is an impending recession impacting employers and workers? According to LIMRA research, employers are delaying (or cancelling) hiring additional staff and delaying (or cancelling) making investments in the business, including business expansion plans. However, the most frequently cited step (reported by 4 in 10 employers) is reviewing their company’s workplace benefits package for possible changes.

Interestingly, while some employers are taking steps to curtail their benefits and related expenses, more often employers are looking to strengthen their benefits packages. As employer size increases, so does the likelihood that they are strengthening their benefits. A unique dynamic is currently at play: A key economic indicator — the unemployment rate — continues to be historically low, which is typically not the case when the economy enters a recession. As such, it remains an employee market, with employers needing to develop meaningful strategies to attract and retain workers, which often include providing appealing workplace benefits. Additionally, some employers are looking to shift costs to workers ― preferring to maintain a strong benefits package where costs are shared instead of cutting benefits outright. This provides opportunities to discuss voluntary benefits as part of the strategy for employers to offer a comprehensive benefits package, while controlling costs.

What is the current worker mindset? According to LIMRA’s new consumer sentiment research, 79% of U.S. workers are at least moderately concerned about the state of the economy; 20% are extremely concerned. Further, almost half (47%) have an unfavorable view of current economic conditions. While the increases in the consumer price index (i.e., inflation) have moderated, prices remain high, placing added pressure on today’s workers. It also reveals that almost two thirds (66%) of workers rate their stress level regarding their household finances as medium, somewhat, or very high. As workers feel financial stress due to inflation and economic uncertainty, workplace benefits provide valued coverages that offer financial protection in times of need.

As the fall open enrollment season approaches, brokers, carriers and other organizations must align their go-to-market strategies with the realities of today’s marketplace. How will conversations and communications be different in light of current mindsets and priorities? Are you helping employers address their business challenges as they relate to talent needs and benefits administration, particularly given the possibility of a recession? Are you aligning communications with employee concerns and providing benefits that can address their financial stress? 

While the future is questionable, one thing remains certain: Workplace benefits will continue to be essential for both employers and their workers. 

Patrick T. Leary is corporate vice president of workplace benefits research at LIMRA and LOMA.