By We normally talk about inflation in the context of how it impacts the average person on the street. We look at inflation through the consumer’s eyes. But there are other viewpoints. Take the average employer with a benefits package. Inflation not only interferes with that company’s ability to do business at a profit, but it also affects the benefits the company offers.
Benefits have been a given in this country for decades. With the exception of minimum-wage jobs, most jobs come with at least basic health insurance. More generous benefits can include life insurance, dental and vision programs, and a whole host of additional voluntary options. They all cost more during inflationary periods.
So how are companies coping? According to a recent Goldman Sachs report, they are managing. But benefit managers and brokers alike need to pull out every creative trick to do so.
Looking out for Employees
Though there is a tendency to assume that employers are only in it for themselves and care little for their workers, the Goldman Sachs report reveals that some 40% of America’s largest companies are now absorbing health insurance premiums entirely rather than passing a portion onto workers. Why? Because they understand their employees are already feeling the strain of inflation. They do not want employee finances to take a bigger hit.
This can play out in one of two ways. Either a company accepts a lower margin as a result of paying more for benefits or it raises its prices and passes the entire cost along to consumers. In all likelihood, the latter option is more common. Either way, employees do not have to take the hit like they used to.
A More Holistic Approach to Benefits
The Goldman Sachs report also says that employers are starting to shift away from the emphasis mostly on health insurance to provide a more holistic benefit package. Holistic benefits, according to benefitmall.com, tend to be a mix of traditional benefits and creative voluntary options. An employer might offer a traditional health plan along with life insurance, dental and vision, and any of the following:
- Long-term illness insurance
- Catastrophic illness insurance
- Disability insurance
- Pet insurance
- Commuter benefits
- Childcare assistance benefits
- Student loan repayment benefits.
Designing a holistic benefits package requires that employers really know the people who work for them. They need to know what their employees want, need, and are likely to use. There is no point in putting together a basket of voluntary benefits that no one is going to use. On the other hand, a good basket that has something for everyone is a basket that makes employees feel better about the benefits they get.
It Remains a Balancing Act
For employers, continuing to offer competitive benefits without breaking the bank is a balancing act. It can be done, but it is getting harder and harder. More than ever before, employers are leaning heavily on their benefits brokers to come up with the most creative packages they can. Brokers are leaning more heavily on general agencies and carriers to give them products they can work with.
When inflation runs high, so does the cost of offering employee benefits. The question for employers is always one of how much cost to absorb and how much to pass on to employees. Absorbing higher costs can protect employee finances when things are tight. But ultimately, someone must pay.
It will be interesting to see how benefits fare in the next year or two. Inflation continues to be higher than we would like. As the old saying goes, something has to give.
