The lasting influence of the economic recession on employee benefits
The economic recession over the past six years had a significant impact on nearly every employer, regardless of industry, size and market. The convergence of the housing market crash, the banking crisis and the government sequestration started a chain of events that forced many companies to dramatically alter their business practices. A slow recovery leaves many reluctant to make sizable investments in infrastructure, hiring and benefits.
To explore this issue and other trends that impact selection and preference around employee benefits, Regence recently developed an in-depth white paper. It is based on a qualitative analysis of the perspectives of C-suite executives from a variety of sectors.
Most of these leaders view these hardships as both a challenge and an opportunity to take a strategic look at their operations and structure. As a result, most believe the recession was transformational and things will not necessarily go back to business as usual.
Employees shared financial burden
Some employers reporting trimming compensation to help make ends meet. Many cited having little to no pay raises and cutting 401K matching programs. Others had to freeze hiring and figure out how to do more with fewer people. However, “refilling” these buckets is a top priority for the vast majority of the leaders surveyed in the study.
“We really had to evaluate who was continuing to add value to the organization. It was extremely hard to go through that, but also a really worthwhile exercise,” said one executive. “It has made us even more aware that we need to be adding value to our customers and to our business partners.”
Impact on health coverage
Before the recession, many companies took pride in their ability to pay nearly the entire premium cost for workers. But the combination of economic pressure and rising health care costs made many reevaluate this approach.
Most employers interviewed require at least some employee contribution to premiums, but still feel obliged to ensure the employee portion is affordable. To keep premiums affordable, however, many opted to cut in other areas like raises and 401K matching.
This theme of “preserving” health benefits and affordability was pervasive throughout the discussion with leaders:
Health care benefits are among the last budget items employers want to pull from. A few executives recall pivotal moments when they had to make significant changes to their program, such as changing providers or moving to a defined contribution model. They describe the transition as being challenging for them and the employees. Adding new benefits is challenging too because once they are added, executives don’t want to take them away. As one executive remarks, “We don’t ever like to go backward.”
To learn more about how economics, workforce trends and regulation are influencing the mix of employee benefits: Developing a strategic benefit approach that matches the dynamic needs of every employer.