Higher Labor Costs Spark Benefits Creativity

Amid the increased competition for talent, businesses are focused on growing and maintaining their staff by offering the right blend of innovative benefits, according to a new survey from Principal.

Principal Financial Group has published updated results from its Principal Financial Well-Being Index, showing that many small and midsize businesses enjoyed notable financial improvements over the last 12 months.

However, the employers in the index survey say they have a growing list of serious concerns about the future. They cite shifting geopolitical issues, interest rate hikes and continued recruitment challenges as some of their biggest worries.

According to Principal’s data, 68% of businesses report financial improvement compared to this time last year. In March of 2021, large businesses outpaced small businesses in experiencing financial improvement by a wide margin of 37 points—or 72% compared to 35%. By March of 2022, Principal reports, that gap narrowed to 20 points—or 81% compared to 61%.

The picture ahead is less positive as business and cost-of-living expenses continue to rise. Indeed, both employers and employees rated inflation as their number one concern. Businesses are feeling pressured to increase wages and benefits, while employees widely cite concerns about mental health and well-being—and finding a new job with better pay and benefits.

Amy Friedrich, president of U.S. insurance solutions at Principal, says increasing labor costs have clearly prompted businesses to get more creative in how they attract new talent. Amid the increased competition for talent, she explains, businesses are focused on growing and maintaining their staff.

Compared to this time last year, more businesses are increasing their number of employees, with 53% increasing compared to 32% in March 2021. Notably, more than a third (36%) of open positions at the average company in the survey are brand new positions. The data shows some 28% of employers with less than 500 employees report higher job vacancy levels, while 43% of employers with more than 500 employees report the same.

According to Principal, the significant role employee benefits play in talent attraction and retention is more apparent than ever, with 37% of employers noting that they are increasing the quality of benefits they offer to help with employee recruitment. In addition, employers are prioritizing specific benefits like caregiving support, vacation time and pet insurance, which all rose to the top of the list of benefits employers are offering to attract new employees.

Among the employees surveyed, those who were less likely to have benefits such as retirement, vacation time and dental and vision insurance in their current role were more interested in leaving their job.

“As businesses evaluate ways to attract and retain talent, offering competitive benefits that meet employee needs is critical,” Friedrich concludes. “Communicating with employees and adapting benefits to their needs creates a supportive workplace. Today, employees want to feel connected to the work they are doing. They are selective regarding where they want to work and what they want from an employer. Adding benefits such as training opportunities and retirement plans contributes to a valuable employee experience.”