Employee retention has become the No. 1 priority for both business operations (51%) and HR (66%) this year, according to a new report examining how employers are adjusting compensation and benefits to keep their employees from moving on.
According to Gallagher’s 2023 U.S. Organizational Wellbeing Report, more than half of employers (51%) experienced a turnover rate of at least 15% in 2022, up three points from 48% in 2021. The report draws on the insights from more than 4,000 businesses across the U.S.
“An organization’s ability to retain employees ultimately impacts its bottom line because hiring and training a new employee usually costs much more than retaining someone who is already on the payroll,” said William F. Ziebell, CEO of Gallagher’s Benefits & HR Consulting Division.
The workforce makeup and employee needs are evolving at a rapid rate. As a result, employers have to consider more comprehensive benefits and compensation offerings that can enhance the overall employee experience,” Ziebell said.
In 2023, the employee experience is in the spotlight, with employers betting big on total rewards. To do so, more than three in four employers (78%) enhanced existing employees’ base salaries and another 40% enhanced variable compensation. Even further, 39% of employers invested in expanded medical benefits and 38% upgraded their wellbeing initiatives — both up six points from 2022.
Despite the overwhelming focus on improving retention efforts, most employers anticipate growth in both revenue and headcount by 2024. Nearly two in three employers (63%) project a revenue increase and more than half (57%) predict a rise in headcount.
While many employers expanded medical benefits in 2023, more than half (53%) also increased cost sharing. This is likely because nearly four in five employers anticipate a moderate (68%) or significant (10%) rise in healthcare costs. These factors, which have rippled through the carrier base, are starting to affect employer-sponsored healthcare, showing up as increased health plan premiums. The median at the most recent renewal was 5%–5.9%, up from 4%–4.9% last year.
Employers are looking to telemedicine, healthcare decision support and cost-transparency tools to help offset these growing expenses for their people. For example, telemedicine saw significant growth among cost-management options, up five points to 63% when compared to 2022. There was also an increase in the number of employers that supply their employees with cost-transparency tools (30%, up six points) and provide healthcare decision support (29%, up two points).
While most DEI initiatives are managed by HR, leaders sometimes share the responsibility since they set the tone and vision for policies and practices in the organization. In fact, more than two in five employers (41%) include DEI oversight as a leadership accountability measure. When leaders’ behaviors and communication styles show that diversity, empathy and resilience are top priorities, they invite organizational transformation and advance goals for attraction and retention.
Demonstrating integrity through genuine, consistent and sustained communications around DEI initiatives can positively impact culture change and create the environment for an optimal employee experience. Employee communications more often include content about DEI (54%) than talent analytics and engagement (37%). Key elements of talent management and total rewards also incorporate DEI, including succession planning (30%), benefits (29%), compensation (28%) and performance management (22%).
“Now more than ever, it’s important for organizations to ensure their benefits and overall vision are well matched with the interests of employees,” said Ziebell. “While diverse benefits may come with more complexity, providing a people-first framework helps to address differing employee needs and interests.”
