Employers Should Consider Long-Term Effects Before Dropping Benefits
Workspan Daily
January 04, 2024
Key Takeaways
  • Some employers are dropping pandemic-era benefits. Inflation and other factors are causing companies to scale back pandemic-era benefits as well as some traditional benefits.
  • Benefit changes should include employee feedback. Companies should survey employees about the benefits they value most — and point to employee input when announcing benefit changes.
  • Consider long-term effects of benefit changes. Take into account employee retention, competitors' offerings and organizational structure when dropping benefits.


 

After employers scrambled to offer new benefits during the COVID-19 pandemic, the pendulum is swinging in the other direction for some businesses that are now dropping those same benefits. 

Some benefits that were boosted during the pandemic are likely here to stay, said Eric Miller, vice president and consulting actuary at Segal. The “2024 Segal Health Plan Cost Trend Survey” noted that mental health-related telehealth visits increased nearly fourfold from 2019 to 2022. 

“It will take some time to iron out which services work best in which settings, determining the optimal use of telehealth and virtual visits, but I don't see any efforts to put it back in the box,” Miller said. “Telehealth has a pretty strong foothold in the mental health space in particular, which historically has been a specialty area with access concerns in many parts of the country.” 

But other benefits that were added during the pandemic are being reduced or removed as businesses are looking for ways to save. 

Inflation and changing employee needs with continued return-to-office shifts are both contributing factors, but organizations should take a measured approach to dropping benefits. 

“Employers need to survey their workforce and not just assume they know what is hitting their employees,” said Bobbi Kloss, vice president of human capital management services at Benefit Advisors Network. “There are five, six generations in the workforce — you still have a couple of traditionalists in there — so you have to cover a lot. Develop a strategy that will be impactful for everyone.”

A Shift in Benefit Offerings

The pandemic was a driver for a variety of improved benefit offerings, including mental health solutions, virtual care expansions, inclusive benefits, musculoskeletal solutions (such as orthopedic health support, joint surgery and spinal surgery), caregiver support, additional time away and flexible work policies, said Kelly Conlin, U.S. health practice leader and chief health actuary at Gallagher. 

Several years later, those new benefits are some of the first on the chopping block. With inflation affecting companies' bottom line, traditional benefits may also be reduced moving forward. 

“I'm seeing employers evaluating their programs — newly added and well established — to optimize the investment they are making in their employees,” Conlin said. “They are solving for the best impact they can have within their benefits budget. During the pandemic, employers were under pressure to stand up new programs in record time to help their employees. Some of these programs will stick, while others will not, and some of the older programs will become obsolete.” 

She noted that some companies are expanding their voluntary, employee-paid benefits as a way to supplement their total rewards packages. 

Considerations for Employers

Conlin suggested creating a “scorecard” to measure the success of each benefit program, measuring employee participation and feedback, health outcomes, and financial or performance indicators — while taking the employee voice into account. 

She listed three ways to receive employee feedback: surveys, focus groups and benefits committees. “Through this process, employers will gain an understanding of which benefits are most valued and successful to make an informed decision on any programs to consider dropping,” Conlin said. 

Employers should openly communicate benefit changes. Point out the ways in which employee feedback was incorporated into the decision. Also, point workers toward remaining benefits and services. 

For instance, if wellness-focused benefits such as mental health days are cut, employers should emphasize robust employee assistance programs and anti-bias training that, when effectively implemented, can help reduce some difficulties employees may face in the workplace, Benefits Advisors’ Kloss said. 

In addition, employers can use newsletters and other year-round tools to increase employee awareness of benefits and services, rather than only distributing benefit information once a year during open enrollment, she said.  

Companies also should take succession planning into account when dropping benefits. If major total rewards changes lead to significant turnover, that may have an effect on organizational structure down the road. 

“They'll lose institutional memory and the opportunity for career development,” Kloss said. “Do you have the people in the right seats to move up into leadership? That's one thing employers need to think about.”

Kloss urged employers to consider the long-term outlook related to decisions they make now, including by examining what benefits their competitors continue to offer. 

“If you just keep taking back from the employees, then your employees will get unmotivated and less productive. Then, you get higher turnover,” she said. “Employers need to be really careful about what they're doing and what benefits they're touching because they have the potential to hurt their greatest asset.” 

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