Rising costs squeeze employer benefit offerings despite retention concerns
Fifty-two percent of employers said employees' expectations of compensation packages largely impacts their ability to retain employees.
Health care costs are on the rise and both employers and employees have seen steady increases in health insurance costs over the last year. Now, organizations must grapple with rising expenses and how to prioritize employee wellbeing in a shifting labor market.
A new study by Optavise, an employee administration, benefits and HR solutions company, found that half of employers say inflation affected what benefits they are able to offer in 2024. Many employers say they want to offer more benefits but worry about cost amidst broader economic concerns. Sixty-two percent of employers said that cost was the biggest challenge in adding new benefits to their packages.
Other challenges included out-of-pocket costs for employees as well as economic uncertainty, reported by 46% of employers. Another quarter of employers said benefits administration, time and a lack of resources were barriers to adding benefits.
Rising costs also pose challenges for employees hoping to take advantage of their organization’s benefits programs. The study found that 75% of organizations with 50-499 employees say increased out-of-pocket costs are a barrier for getting employees to enroll in benefits programs. According to more than half of employers, a lack of understanding of the value of benefits amongst workers creates further obstacles to enrollment.
For many employees, benefits packages are complex and confusing. According to the study, a quarter of employees say a lack of resources to effectively communicate offerings and one-on-one benefits counseling are barriers to enrollment.
Read more: Navigating the post-open enrollment marathon for employee benefits
With retention as a major focus of employers, 84% of organizations with 500-5,000 employees have taken specific action to retain workers, according to the study. Fifty-two percent of employers said employees’ expectations of compensation packages largely impacts their ability to retain employees.
While over 30% of employers say they hope to add benefits such as financial wellness programs, physical wellness incentives and caregiving benefits or programs over the next one to two years, they will need to address rising inflation and growing economic concerns.