Companies increasingly want their employee benefit programs to say what they stand for to stakeholders and build a resilient workforce.
Figure 1 shows how employers best describe the role of employee benefits within their organization today and in three years time.
Our annual survey of Priorities for Employee Benefits: a global HQ perspective shows this shift has been evident for the past few years with increasing prevalence of minimum standards for parental leave, and for benefits such as life cover and retirement and healthcare provisions among multinationals. From 2019 to now, the number of companies that have established minimum standards has increased from 36% to 70%. The global COVID-19 (coronavirus) pandemic highlighted the important role benefits play in wellbeing of employees and resilience of the workforce as a whole.
When economic and business uncertainties make managing costs and risks of employee benefits the top priority, organizations will need to make room and redirect their benefits spend on what matters. To do this, companies need to understand what employees prefer and value, eliminate underutilized and less relevant benefits, and focus on improving wellbeing outcomes without throwing money at the problem.
So, what are global employee benefits teams focused on in terms of the portfolio of benefits they offer, how they finance benefits costs and risks, and deliver their benefit programs to employees?
Being market competitive remains the priority for the majority (67%). Equally, companies increasingly are focused on wellbeing (61%) and, equitable and inclusive benefits (56%).
Our research on peoples’ attitudes towards employee benefits confirms that protection and security matters. Retirement and healthcare benefits consistently rank among the top 5 drivers of both attraction and retention worldwide. So, it is good to see rising prevalence of minimum standards among multinationals to ensure a baseline protection for all employees.
Surprisingly, relatively few organizations are focused on flexibility/choice (28%) and aligning benefit programs with what employees want (27%). Employee populations as well as individual needs and preferences are becoming more diverse. This means understanding what employees want, ability to flex benefits coverage and costs, and offering a portfolio of voluntary/flexible benefits should be important.
Only 24% of organizations say environmentally conscious benefits as a high priority. As consumer and investor sentiments evolve, companies may need to do this more to signal what they stand for.
Given the economic and business uncertainties, benefits costs and risks are a priority for both at the HQ and local operations. However, companies appear to acknowledge that this is best done by aligning total rewards costs with what employees value and getting rid of under-utilized or under-valued benefits (46%).
It is surprising that more companies aren’t doing this. Where else is significant capital expenditure made without understanding what the consumers value and the tradeoff they are willing to make?
We’re also surprised to see fewer organizations are focused on risk management given the potential opportunity to transfer risks (e.g., pension liabilities) in light of the high interest rate environment and rising costs of healthcare due to general inflation, utilization and costs of new treatments / medicines.
All the money companies spend on benefits is for nothing if employees aren’t using them properly. Employee experience matters and is becoming more important for HQs. Surprisingly, the local operations don’t appear to consider this a priority.
The traditional focus on promoting benefits (61%) and decision-making support (49%) are a priority for many. Fewer report focusing on health and financial literacy and helping employees navigate the use of programs using technology.
For employees to engage in their benefit programs and improve their health and financial outcomes, they need to become more engaged consumers of benefits, make good choices, manage change and utilize benefits effectively when they need them. Leading companies focus on understanding the consumer, creating easy to follow content, greater personalization using multiple channels and using data to measure and refine.
Data protection and security is becoming a high priority (69%). Otherwise, most companies appear to let local operations administer benefits without significant intervention. This is a miss in our view, given technology, automation, vendor consolidation, centers of expertise and outsourced solutions will allow companies to do more with smaller teams.
We anticipate that advances in technology and data science will likely blur the boundaries between strategic and operational silos that currently exist. Natural language processing and generative AI will help employees become smarter and more efficient consumers of benefits. Machine and deep learning along with data integration will help companies understand sources of costs and employee behaviors leading to interventions and better cost management.
If the future ambitions of using benefits to represent what companies stand for and improving employees’ physical, financial, emotional and social health are real, companies must listen to employees. Currently, only 37% of companies report it as a priority. On the other hand, monitoring regulations (59%) and benchmarking insights (57%) seem to be higher priority.
While it is good to see many companies focus on utilization data (51%) and cost drivers (44%), with rapid advances in data science, we would have expected these numbers to be higher.
Having access to meaningful analytics – and the experience and expertise to interpret them – will be key to designing and delivering programs at lower costs. This is an area where centralized teams can create significant value for local operations.
Managing benefits for multinational companies is complex because of their geographic footprint, local country social benefits, regulations and norms, and number of stakeholders and vendors. They also have significant variations in size of operations, costs and resources.
We find that many companies have established global guidelines. However, HQ involvement – which ranges from exercising control by reviewing any misalignments of programs with global guidelines to allowing local discretion – varies by company and also by what is being managed. For example, 57% of respondents in this year’s survey exercise control over benefits design while 35% exercise control over employee listening and experience.
Q: How important are the following priorities to your organization’s benefits strategy over the next two years?
Local units Q: What are the key business issues influencing your organization’s strategy for benefits? (Select at most 3).
Sources: WTW 2023 HQ Priorities Survey and WTW 2023 Benefits Trends Survey, Global
So, given the differences between the local and the HQ priorities, how can HQ-based benefits functions create value?
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