As businesses contend with geopolitical issues, interest rate hikes and a shifting labor force, improving the employee experience is key for retention, the findings in a new report suggest.
Consequently, the significant role employee benefits play is more important than ever, according to the latest Principal Financial Well-Being Index, which examines the financial well-being of American workers and business employers. It found that 37% of employers note that they are increasing the quality of benefits they already offer to help with employee recruitment.
The top three benefits employers expect to increase include:
- training and education (45%);
- health care benefits (40%); and
- retirement benefits (40%).
These findings come as the financial status for many small and midsized businesses has improved from last year, but other challenges are raising concerns. Overall, 68% of businesses report financial improvement compared to this time last year, including 61% of small businesses. But as business and cost-of-living expenses continue to rise, both employers and employees rated inflation as their No. 1 concern.
“Employers are keeping a close eye on inflation, weighing the impact of rising costs of doing business with how much they can invest in talent—for both recruitment and retention. They’re looking at expenses and prioritizing salaries and benefits, when able,” explains Amy Friedrich, President of U.S. Insurance Solutions at Principal. “Increasing costs have prompted businesses to get more creative in how they attract new talent and improve the employee experience as they boost hiring efforts.”
Recruitment and Retention
Businesses are also feeling pressured to increase wages and benefits while employees are concerned about mental health and well-being, and finding a new job with better pay, Principal notes. Among the employees surveyed, those who were less likely to have benefits such as retirement, vacation time, and dental and vision insurance in their current role were more interested in leaving their job.
When asked about what benefits businesses are increasing to improve employee satisfaction and well-being, employers identified disability insurance (short or long term), vacation time, and mental health and well-being programs as the top three. Employees with greater job satisfaction are more likely to have access to financial wellness, training and educational opportunities, as well as caregiving benefits.
In addition, employers are prioritizing specific benefits like caregiving support, vacation time and pet insurance, which all rose to the top of the list of benefits employers are offering to attract new employees.
“As businesses evaluate ways to attract and retain talent, offering competitive benefits that meet employee needs is critical,” says Friedrich. “Communicating with employees and adapting benefits to their needs creates a supportive workplace.” Further noting that employees are selective regarding where they want to work and what they want from an employer, Friedrich further emphasizes that adding benefits such as training and education opportunities, as well as retirement plans, contributes to a valuable employee experience.
Vacancy Levels
Meanwhile, amid the increased competition for talent, businesses are focused heavily on growing their number of employees. Compared to this time last year, significantly more businesses are increasing employees, with 53% increasing compared to 32% in March 2021, Principal found. And on average, 36% of open positions at a company are brand new positions.
Looking closer at vacancy levels, small businesses apparently are faring better than their larger counterparts, which are experiencing greater job vacancy levels today. Just 28% of employers with less than 500 employees report higher job vacancy levels versus 43% of employers with more than 500 employees.
This focus on employee attraction has generated definitive actions from employers, Principal further observes. Nearly half of businesses are offering flexible work schedules (49%) while 40% have increased wages for the majority or all their employees. Over half of the employees surveyed reported receiving a wage increase during the past year; the most common amount was a 3% increase.
Leaving for Retirement
Retirement was the new top reason for employees leaving, according to the survey. Businesses reported a 16% decrease in staff in the past three months, led by 27% of employees leaving because of retirement. Staff losses from retirement may not last, however, as people face rising costs and potential losses in savings due to inflation and recent market volatility.
“As the final wave of Baby Boomers turn 60 it’s reasonable to expect a phased transition into retirement, including part-time careers and trying something different or new,” said Sri Reddy, Senior Vice President of Retirement & Income Solutions at Principal. “Employers would be well-served to rethink how they define roles, as well as benefit structures, to keep some of these highly-skilled, but potentially part-time, workers.”
Findings in the Principal Financial Well-Being Index are based on surveys of business owners, decision makers and business leaders aged 21 and over who work at companies with 2–10,000 employees. The latest wave was conducted from March 11-23, 2022, with a total of 500 business owners and decision maker participants and a total of 200 employee participants.
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