8 Key Trends: Benefits and Compensation in 2024
As we enter 2024, benefits and compensation are changing significantly, shaping the way businesses and employees operate. In this blog, we look at eight important trends in benefits and compensation, showing how they are changing employee compensation packages.
From being open about salaries to prioritizing mental health support, both employers and employees are facing new challenges. With the rising cost of living and the shift to remove work, companies are rethinking how they compensate their employees to better meet their needs. These trends cover a wide range of topics, including expanded benefit offerings, pay increases, and the adoption of flexible work arrangements.
As business strive to attract and retain talent in today's competitive environment, it's crucial to understand and adapt to these trends. By staying informed and proactive, businesses can create a workplace culture that promotes employee well-being, work life balance, and productivity.
1. Beyond Paychecks: Investing in Employee Financial Health Offerings
The financial well-being of employees has emerged as a critical concern for businesses nationwide. It’s evident that the landscape is shifting, demanding greater attention and investment from employers.
In recent years there is a decline in the financial wellness of employees across various industries. Many individuals find themselves grappling with financial insecurity with a large number of employees living paycheck to paycheck. This financial unrest has left its mark, emphasizing the need for solutions to build financial resiliency.
Employers are becoming more aware of the importance of investing in the financial health of their workforce. Financial well-being is no longer viewed as a peripheral concern but has ascended to the forefront of employee needs.
Financial benefits, it turns out, offer exceptional value for investment, delivering a substantial return on investment. As employers explore avenues to enhance employee financial health, they discover a variety of options at their disposal. From budgeting assistance to debt repayment tools, emergency savings plans, and student loan debt assistance, the array of financial benefits is as diverse as it is impactful.
2. Pay Increases to Match Inflationary Pressures
Inflation significantly impacts employee compensation, affecting salary increases and company budgets. In 2023, US companies raised employee salary budgets by an average of 4.4%. However, in 2024, companies expect a slight decrease to an average growth of 4.1%.
With rising costs and economic uncertainty, it's crucial for employers to adjust salaries to retain talent. In a competitive labor market, attracting and keeping skilled professionals is vital. Failing to keep up with salary adjustments risks turnover and lowers employee morale.
Inflationary pressures are driving increased salaries in 2024. As consumer prices rise, employees have less disposable income. Therefore, recalibrating compensation structures to maintain competitiveness is essential.
3. Redefining Compensation Through Expanding Employee Benefits
As employee needs evolve, compensation is evolving too. Employers now understand the importance of supporting employee well-being beyond just salaries.
Mental health is becoming a central focus for employee health. Employers are investing more in mental health initiatives to address workplace stress and societal pressures. These initiatives include counseling services and stress management resources, aiming to help employees navigate modern challenges while growing resilience.
Besides mental health support, employers are broadening their benefit offerings to meet diverse employee needs. From child and elder care assistance to pet insurance, hospital indemnity, and parental leave, companies are taking a holistic approach to employee health insurance.
Benefits also set employers apart as they seek to attract and retain top talent. Offering comprehensive and innovative benefits packages shows that businesses are responsive to the varied needs and aspirations of their workforce.
4. Employers Response to Rising Healthcare Costs
Managing healthcare costs poses a significant challenge for businesses, demanding proactive strategies.
In anticipation of higher costs in 2024, companies are preparing how to manage it. In 2023, the U.S. average health benefit cost per employee rose by 8.2%. Predications suggest a further increase to approximately 8.9% in 2024. Factors driving these cost include medical inflation and increased demand for specific medications.
To address rising healthcare expenses, employers are exploring diverse cost management approaches. These include implementing wellness programs, promoting preventive care, renegotiating provider contracts, and exploring alternative delivery models. Importantly, there's no one-size-fits-all solution; employers must tailor strategies to align with long term goals and employee needs.
5. Embracing Pay Transparency
Pay transparency is a significant trend reshaping employee compensation. This trend is gaining momentum, driven largely by state and local legislation. In 2023, several states, including Hawaii and Illinois, pioneered pay transparency laws.
In 2024, this momentum continues. New legislation is expected to require regular communication from employers to employees about pay ranges and where they fall within those ranges.
At its core, pay transparency promotes trust and fairness in the workplace. It ensures employees understand compensation structures and base salary ranges, empowering them and recognizing their contributions. Additionally, it helps prevent biases and inequalities, fostering inclusivity.
6. Employers Rethink Pension Plans for 2024
2024 marks a pivotal moment as employers reassess their approach to retirement benefits in response to shifting industry dynamics. Notably, examples like IBM unfreezing their pension yet halting their 401(k) match have prompted companies across sectors to rethink their retirement benefit strategies.
The decision by IBM has rippled across the corporate landscape, creating a wave of evaluation among employers. Employers are recognizing the need to adapt and evolve their retirement benefits to better prepare employees for their post-work life. With longer life expectancies and evolving economic landscape, the traditional model of retirement planning is undergoing a significant shift.
7. Upskilling and Reskilling Programs in Professional Development
As technology, including automation and AI, becomes more prevalent, it contributes to a growing skills gap in the workforce. Businesses are grappling with the challenges posed by technological advancements, prompting the rise of upskilling and reskilling programs as vital tools for professional development and growth.
The integration of AI in the workplace has transformed industries across sectors, leading to shifts in job requirements and skill sets. As a result, businesses are faced with a widening skills gap, where the demand for specific skills outpaces the existing talent pool
These programs help fill skill gaps and give employees the skills they need to succeed in the digital age. Companies offering continuous learning and development opportunities empower their workforce to adapt to evolving job roles and technological advancements.
8. Work Environments Role in Enhancing Compensation Value
Where employees work impacts not just talent acquisition but also their well-being.
Offering flexible work schedules and creating supportive workspaces are crucial for enhancing employee satisfaction and productivity. Whether it's full-time remote, hybrid work models, or flexible schedules, these options greatly benefit employees. Flexible work arrangements like job sharing or shortened work hours also contribute to employee satisfaction and well-being.
Employers must consider the needs and preferences of their workforce when implementing work models. For those requiring a return to the office, improving the in-office environment is essential. This involves creating comfortable workspaces that prioritize employee engagement, performance, and happiness. Creating spaces for teamwork and concentration can keep employees focused and productive when they come back.
CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about our ability to create a strategic HR function in your business that drives business growth potential, contact us today.