How is the economic uncertainty affecting employers and their workers?
Since it’s open enrollment time, let’s talk about workers first.
One big way economic uncertainty is affecting your employees is they’re hesitant to contribute as much as they did this year – or more – to their consumer-driven health (CDH) accounts, like health savings accounts (HSAs) and flexible spending accounts (FSAs).
In fact, a recent survey of 1,175 U.S. adult consumers found that of the 25% who have CDH accounts, nearly half (47%) said the economic downturn and uncertainty will impact how much they contribute to their account, according to Alegeus. That’s a lot considering 74% said they didn’t alter their investment choices during the pandemic.
This is where HR comes in to help counsel employees on how using CDH accounts and paying for things with pre-tax dollars can save them money.
Many employees still don’t understand how they can use CDH accounts to save money. In 2021, U.S. consumers spent $491 on out-of-pocket healthcare costs, according to Kalorama Information. And even though tax-advantaged healthcare accounts are widely offered, only $95 billion of the $491 billion were paid for using pre-tax dollars!
That’s billions in tax savings being left on the table.
Focused on short-term expenses
So, HR needs to show in black and white how their employees can use these pre-tax dollars to save them money. Because right now employees aren’t thinking about CDH accounts and investing in them. They’re focused on short-term expenses, such as buying groceries and gas, and how they can cut back on these expenses, rather than long-term investments like CDH accounts!
If budgets allow, consider supporting employees with healthy food options and travel funds. Then you can use this time during open enrollment to increase employees’ knowledge of CDH accounts and how they can save money in ways they currently don’t understand.
How economic uncertainty is affecting employers
Employers are still having a hard time finding and retaining talent in this tight labor market and economic uncertainty. So, what’s the answer?
Unfortunately, increasing overall salaries is what most employers are planning to do to compensate for inflationary pressures (77%) and tight labor market concerns (68%), according to the latest Salary Budget Planning Report by WTW, a global advisory, broking and solutions company.
In 2022, the salary increases rose about 4.2%, and the forecast for 2023 is an increase of 4.6%.
With the economic challenges ahead in 2023, 21% of organizations that are changing salary budgets said they’ll fund increased spending through compensation plans and benefits programs their employees value. Seventeen percent said they’ll raise funds by increasing prices, and 12% will restructure the company and reduce head counts.
But the tight labor market has been the major factor in 68% of companies increasing salary budgets.
“As inflation continues to rise and the threat of an economic downturn looms, companies are using a range of measures to support their staff during this time,” said Hatti Johansson, research director, Reward Data Intelligence, WTW. “Organizations should prioritize their actions based on the needs of both employers and employees, and pay close attention to market data to inform any changes.”
Considering alternatives due to economic uncertainty
As for the organizations that are considering salary increases, plan to do it through two adjustments per year.
In addition to making salary adjustments, 61% of organizations are putting more emphasis on diversity, equity and inclusion (DEI). And 46% are trying to improve the employee experience to drive retention.
“With attraction and retention issues persisting, employers should consider the overall employee experience and not just salary increases,” said Lesli Jennings, North America leader, Work Rewards and Careers, WTW. “By focusing on health and wellness benefits, workplace flexibility, careers and DEI, organizations can position themselves as the employer of choice for their current and prospective employees.”