Mercer’s 2022 Global Talent Trends (GTT) report reveals how targeted benefit spending decisions can mitigate and even find opportunity in today’s challenging environment.
High inflation. Recession fears. Supply chain issues. The “Great Reassessment.” This quartet of rising costs, slow economic growth, and talent attraction and retention issues has HR – still exhausted from the pandemic – back in the spotlight. Our recent Global Talent Trends study found that almost all executives (96%) feel that they are in an employee-centric labor market, and 66% are facing labor shortages. 70% of HR predicts higher than average worker attrition this year, and CEO’s top two asks of HR in 2022 revolve around talent and skill acquisition.
With “people” costs rising and “people” well-being top of mind, benefits become an even more powerful tool – if wielded for maximum impact. Throwing higher compensation at these challenges will only get an organization so far. Employees choose, and stay with, organizations that care about their entire well-being, and benefits can become a great differentiator in attracting and keeping the right talent and, no surprise, a third of the executives are ready to invest: 33% of executives place total well-being strategies second only to upskilling on their workforce wish list for 2022.
Workers don’t intend to retire
Recent findings suggest just 16% of employees intend to stop working completely at retirement age. The drivers of this intent are to stay mentally sharp (43%), fill time (39%) and out of financial necessity (a top response for 30%). This highlights the fundamental role work plays in people’s lives. Coming out of this period, however the focus is on benefits that deliver today. In fact, the retirement provision was the 11th most crucial factor in driving employee's decision to join an organization this year (down from 7th place in 2020) and the 10th most crucial factor in a decision to stay (down from 5th place in 2020). Today employees are placing more emphasis on short-term physical and mental wellbeing than long-term financial wellbeing, signalling a focus on benefits that benefit in the ‘now’ coming out of this pandemic period.
Such findings taken together reveal an important reality: today’s retirement benefit offerings are in danger of failing to meet the current and future needs of workers and the organization. In fact, this could best be described as a “30%” problem. According to GTT, only:
of HR leaders plan to offer phased retirement options in 2022
of HR say they proactively offer different employment options to older employees (e.g., project-based roles, freelance)
offer post-retirement flexible working/part-time roles
are building their own retiree freelancer talent pool
And though only 30% of employees say they can’t afford to retire (most acute in Japan, at 64% and South Africa and United States at 39%), around half of employees (49%) feel financially secure for the future – a figure we fear is set to decline as we feel the full force of rising inflation and pandemic fall out on real wealth. The concern is that even when people are aware of looming pension gaps, it's not spurring people into action. It's evident that a sizeable proportion of the workforce is underestimating how much capital is required to achieve an adequate retirement income, and how health may impact an employees’ ability to keep working after retirement age. Consider that, only 24% of baby boomers say they will exit the workforce completely after retirement age yet, according to the US Bureau of Labor Statistics, people between the ages of 65-74 made up only 27% of the workforce in 2020. This is a staggering difference and begs the question: what are we doing to effectively manage our workforce’s aspirations and realities to better set them up for a health and financially secure future?
With 20% of employees planning to work up to 5 years past their retirement age, and an additional 12% planning to work 6+ years past their designated retirement date, getting smart about longevity means adapting retirement plans to meet the variety of ways in which employees hope to continue working and the realities of their health prospects that might further impact these wishes.
Workers have digital fatigue
There is no doubt that automation and digitization of benefit processes is the way to go. However, technological “overcorrection” has created a loss in human interaction vital to the employee experience. Sixty-five percent of executives believe that the automation of HR has led to a loss of valuable contact between HR and the business. Further, employees are looking for all this technology to make their lives easier and support their hopes around balance — 51% of employees believe the future of work will be balanced. The reality is, however, that despite the embracing of new ‘features' associated with tech, we are lagging in realizing the ‘efficiencies’ as we are still holding on to old ways of working/not fully adapting which is adding a cognitive load onto employees
When evolving the HR function has both the employee experience and digitization goals in its sights, the function and the experience are likely to both become more agile. This is especially true for the benefits teams, at the core of the employee value proposition (EVP). This year will prove to be one of high impact for many benefits specialists when you consider that 43% of organizations plan moves to high-touch personalized interactions for key groups and 43% will restructure HR around talent populations, not technical disciplines. Two changes that will change the EVP landscape.
AI (Artificial Intelligence) is also playing a surprisingly prominent role, as 38% of HR respondents are using an AI-driven benefits enrolment platform (up from 32% in 2020), using nudges to help with wealth management (39%) and offering AI-driven financial investment insights for employees (37%). All helping to put wellness, health and wealth as a core part of how companies show they care about employees. Ensuring the associated communications speak to the various populations will be key to realizing the return on this investment. Additionally, utilizing data and global benefits management (where appropriate) to hone benefit spend will be key to sustainability. For example, benefits management is one way to shore up cash by using captives to redirect cash back to the company.
Workers will see a very different organizational response to a recession
Another enduring legacy of the pandemic is how it has shaped executives’ view on where to invest and where to retreat when faced with another economic downturn. Reducing operational costs stays at the top – no surprise. But only one in five executives would pull back on investments in health and wellbeing and learning and development. Benefits and the value propositions will remain in focus despite changing economic conditions, and potential pressure on core teams to be financially prudent will become an increasing challenge. As companies respond to economic headwinds, retaining this focus on benefits could prove vital to attract necessary talent to support responding changes to strategy and help in retaining top talent that may consider moving to companies that are perceived as fiscally or strategically healthier.
With HR exhausted (30% report being pulled in too many directions), finding opportunities to take non-essential work off their plates through AI and automation and outsourcing complex fiduciary work through OCIO (Outsourced Chief Investment Officer) becomes critical (something 78% of HR say made a difference during the pandemic and 20% of Executives already have on their agenda this year) A segment of progressive executives is also looking to increase AI and automation investment in the wake of a downturn.
As organizations that want to stand out from the crowd are seeking to offer retirement plans that reflect the enterprise’s values and culture. Today, 37% of HR leaders say their retirement plans offer a sustainability investment option (something 36% of EEs say they expect). And 36% plan to offer phased retirement this year. What will be the real game changer is helping employees to take a wealth perspective on their deal (viewing pay, benefits and retirement together) and appreciating nudges to make better health and wealth choices.
Casting off with confidence
One thing is clear for the benefits team: the time has never been better to tackle total well-being in a truly holistic fashion and ensure it is future-fit for purpose. Three quarters of business leaders agree that HR was the hero of the moment, successfully addressing exceptional workforce challenges last year. The question now is how those sitting in the benefit seat can translate that trust into a more balanced total reward proposition that helps deliver on the promise of a sustainable future for all.