Mercer: employee benefit strategies under economic pressure
Current economic circumstances mean that many organisations that are now structuring their 2023 benefits strategies now face an unprecedented challenge and are having to address the impact of rising levels of inflation, according to an analysis by Mercer.
This will require them to do additional advance planning, to place a greater emphasis on medical insurance, and to focus more on vulnerable populations, such as low-paid employees.
According to Mercer uncertainty has been the name of the game for benefit specialists over the past few years. However, very few benefit managers have had to cope with the high levels of inflation the world experienced in 2022, nor with the imminent threat of a potential inflationary recession.
The Mercer analysis said that: “As a result of these economic challenges, employees are facing multiple new hardships. In response, employers are trying to get ahead of what meaningful inflation means for the design and financing of their employee benefit and well-being plans.
“Industry concern is high — as shown by the fact that governance and financial risks featured prominently in our People Risk research. Three such risks were in the top ten of the 25 risks reviewed. (These were: administration/fiduciary; increasing cost of health, risk protection and well-being benefits; and benefits, policy and reward decision making and accountability).”
Mercer concluded that even before current inflationary pressures hit, employers were in the process of resetting benefits to make them more relevant and to better manage people risk. As businesses have grappled with the ongoing effects of the pandemic, a number of other positive developments have come to the fore. These include advancements in digital access to health benefits, a desire to solve health and benefit inequities, and the acceptance of a broader business case for investment in employee support.
According to Mercer: "Now businesses must also factor in the impact of possible longer term inflation. We recommend that employers start to think immediately about how they can support their most vulnerable people, while continuing to engage with all of their employees to support their well-being. Employers must also consider reasonable cost containment measures for their benefit plans. This will be vital to manage long-term cost volatility. Ideally, such measures should steer people towards high-quality care, helping to create sustainable benefit solutions for all."
The Mercer analysis can be accessed here.
