The American workforce has faced a tremendous number of obstacles over the past three years. From layoffs and furloughs to ever-changing perspectives on hybrid work, it’s no wonder that employers struggle to maintain an engaged and motivated employee base. Employers have had their own share of challenges, as they must balance employee attraction and retention efforts against economic uncertainty and tightening budgets.
As the lines between work and life have grown increasingly blurred, so have the opportunities for employers to make a positive impact through lifestyle benefits and lifestyle spending accounts (LSAs).
2023: The year of benefits transformation
During the pandemic, lifestyle benefits took the form of funds for home office setup, expanded dependent care support, online fitness programs, grocery delivery and healthy food deliveries. More recently, with the Dobbs v. Jackson decision, lifestyle benefits have evolved into reproductive health and travel assistance programs. According to Alegeus platform data, the use of lifestyle benefits increased 40% since 2020.
A primary advantage of lifestyle spending accounts is their flexibility: They offer flexibility to meet the growing and shifting needs of employees, all while giving the employer deep insights and control over how funds are used. But in order to think about what we can look forward to in the coming year for lifestyle benefits, we have to take a look back at how they got where they are today.
Lifestyle benefits for the modern workforce
The war on talent has had a tremendous impact on lifestyle benefits in 2023, requiring employers to get creative and adjust their offerings to meet the needs of their diverse workforce and talent pool.
A recent study by Alegeus found that only 29% of employees say their employer perks are fully aligned with their lifestyle. The same survey found that the top employee retention perks were family care, such as elder care, daycare, pet care and adoption assistance, food and work-from-home support.
However, these preferences vary drastically by generation, with older generations such as Baby Boomers and Gen X agreeing work-from-home and food support are high priorities, while many millennials favor family care and healthy living perks. As employers have learned that there’s no “one-size-fits-all” benefit, the new challenge has become finding lifestyle benefits that meet everyone’s needs without breaking the bank.
Although inflation rates are cooling, they are still at record highs. With that, money is a huge stressor for everyone, and being financially responsible and cost-conscious has become critical.
According to Alegeus’ data, grocery and gas/transportation are the areas where people continue to cut back this year due to inflation and other looming economic pressures. With the growing importance of financial responsibility and the impact of stress on employee productivity, many employers are re-evaluating and revamping their lifestyle benefits packages to offer financial planning tools and resources – or targeted lifestyle funds to address these budget shortfalls.
Employers have more leverage than ever as the economic downturn has employees hesitating to “shop around” for another job. This has presented a huge opportunity for employers to align their benefit offerings with the needs of their current employees.
2024: A year of flexibility
Employers are starting to look for ways to revamp their entire benefits package, and lifestyle benefits will be a substantial piece of that puzzle.
Employers are looking at healthcare costs and trying to contain them through wellness incentive plans like gym reimbursements, weight loss programs and healthy food stipends. In the long run, this helps employers contain healthcare costs because it leads to a healthier workforce who ultimately won’t need to spend as much money on medical treatments and prescription drugs. A healthier workforce also leads to happier and more productive employees.
Different generations with different needs
We have five different generations in the workforce right now who have varying needs, especially when it comes to health. For example, Generation Z may have more interest in gym reimbursements as they are looking to try new workout classes, while baby boomers are interested in a stipend for their weight loss program, and Generation X is most interested in money for healthy grocery shopping.
Employers are going to be looking at how they can help each of their unique employees in whatever stage of their lifetime – or lifestyle – they are currently in.
As more employers are requiring employees to return to the office, the lifestyle benefit budget for at-home offices provided by employers may begin to dwindle.
But with that, the budget for commuter benefits is set to take off. During the pandemic, employees noticed huge savings when they switched to remote work, eliminating the cost of gas, parking and work clothes, and are now accustomed to having that extra money. In addition, employees now understand they can work from anywhere and, many times, they’re more productive when working from home.
To combat this, employers are now brainstorming ways to incentivize the return to the office and offset these re-added costs. By offering commuter benefits, like pre-tax debit cards for parking or public transportation, child- and pet-care stipends and in-office perks like free meals, gift cards or team-building events, employers hope to encourage in-office collaboration.
Although it’s very unlikely that we will return to being fully in-office again, it’s clear the shift from fully remote to hybrid is underway. 2023 was set to be a year of relief, reflecting on the pandemic’s transformative impact on work and life. Although this has held true, the world is still in a place of financial stress. The lifestyle benefits space, and the employers offering these unique benefits, will continue to find creative ways to put employee well-being first.