More than half of UK employers (57%) say that rising costs are influencing their employee benefits strategies, according to research by Willis Towers Watson.
Its 2023 Benefits trends survey, which surveyed 339 UK organisations across a range of industries about their benefit strategies, also found that concerns around rising costs have become the second most important issue influencing benefit strategies, despite this not making the top four in 2021.
Three-quarters (77%) of respondents cited competition for talent as the number one issue they face in 2023 in terms of their benefits strategy, while 43% felt that their current benefits plan is effective or highly effective in attracting and retaining key talent.
Employers are anticipating cost to be a top challenge for benefit budgets in next two years, as 46% are concerned about higher inflation, and 36% expect an impact from the economy and current business environment. Encouragingly, less than one in 10 (7%) have opted to reduce the generosity of their benefit programmes, although 16% have plans to do so.
In order to conserve costs, 56% are aiming to ensure that benefits plans meet the needs of all employees, 49% will focus on their wellbeing, 27% have secured additional funding for benefits programmes, and 54% are planning on doing so.
More than one-third (37%) have taken action to bundle different services into one package from a single vendor, while 47% plan to do so, and 56% have taken action to improve terms from vendor contracts, while 79% are planning to take this action.
Andy Leighton, senior strategic consultant at WTW, said: “The current state of both the economic and labour market is putting employers in a precarious position, when determining how to win the competition for talent and contend with the rising cost of services, while budgets remain tight. It’s a fine balance between streamlining benefit operations to become more cost-effective, while maintaining a focus on personalised benefit areas that are tailored to the individual needs of the workforce.
“This is especially challenging when employees are demanding increasingly comprehensive benefit provisions which support key areas of inclusive wellbeing, lifestyle and financial protection; as a result employers will not want to backpedal.”