2023 Employee Benefits Market Outlook
February 16, 2023
In 2022, many employers were
poised to regain their footing as the effects of the COVID-19 pandemic began to
wane. Unfortunately, the year presented employers with many new and difficult
challenges, including record-high inflation, unprecedented numbers of job
openings and employee quits, an economic downturn and wide-ranging regulatory
changes. These challenges and more will likely have a considerable impact on
organizations in 2023. Preparing for and building an organization that can
weather a potential recession is critical for a successful 2023. Employers will
need to ensure their organizations are adequately prepared for an economic
downturn; this includes taking proactive steps to limit recession-related
ramifications and maintain financial stability. Although employers can’t
prevent a recession from impacting their organizations, the strategies they
implement can greatly impact their short- and longterm futures.
Employers also face the difficult task of addressing rising healthcare costs while trying to keep employee benefits coverage affordable. Organizational budgets are expected to be limited, so organizations will need to find ways to balance their spending. Successfully striking this balance will be essential to managing costs in 2023. Bolstering voluntary benefits will be an effective way for employers to expand their benefits offerings without raising costs. Benefits such as accident and critical illness insurance allow employers to meet their workers’ unique needs and help employees maximize their benefits dollars. Employers will also need to contend with inflation and anticipated regulatory changes, such as a new overtime rule and pay transparency laws, as part of a complete cost management strategy.
Talent shortages and retention issues that plagued organizations in 2022 are expected to continue in 2023. Last year, employees had greater leverage and higher expectations in terms of job satisfaction, compensation, employee benefits and workplace flexibility; due to the projected economic downturn, employers are expected to regain some of their diminished leverage in 2023. For example, employers are expected to reclaim the edge in the return-to-work battle, with an increasing number of employers compelling employees to return to the office in 2023. Nevertheless, employers will need to remain competitive for talent acquisition and retention. This will include finding creative solutions to balance employee desires with organizational priorities.
Many employers are shifting to a holistic approach to employee well-being to address workers’ physical and mental health concerns. This will become increasingly important in retaining employees in 2023 as employees confront financial difficulties, exacerbating existing physical and mental health issues in the workplace. Trending holistic strategies include focusing on work-life balance, preventing burnout and utilizing financial benefits to reduce inflation’s impact. The renewed focus on reproductive health benefits that occurred last year is also likely to continue in 2023. There remains a lot of uncertainty in this area since the U.S. Supreme Court’s ruling ended the federal constitutional right to abortion, leading to a patchwork of state laws regulating access to abortion. Employers will need to continue to assess options for providing reproductive health benefits and how such options may impact employee attraction and retention.
The impacts of the pandemic may have started to wane in 2022, but challenges stemming from the pandemic continue to impact the workplace. Understanding and responding to these challenges will be essential for employers’ success in 2023 and beyond. Employers will need to find creative solutions to control healthcare costs, balance attraction and retention efforts, and ensure employee health and well-being while responding to an economic downturn. As you consider the information presented in the Market Outlook, evaluate which trends you may be susceptible to this year. Then reach out to us to discuss the next steps and request valuable resources to help evaluate potential solutions and meet 2023’s challenges.
Read our 2023 Employee Benefits Market Outlook for more insights!
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