Amid budgets cuts and inflation, HR teams should think long-term about their benefits

In the past two years, millions of people, especially women and parents, have left their jobs, seeking better pay, benefits, or work-life balance. Whether you call it the Great Resignation, the Great Reshuffle, or the Great Regret, there’s no disputing that something drove people into new jobs or out of the workforce entirely. As a result, many HR teams have added new and innovative benefits to attract and retain talent, especially among millennials and Gen-Z. But with a recession looming large and layoffs already starting, employees and HR teams alike fear the impacts of cutting back on all that progress.

In the year ahead, HR leaders are going to have to make some tough decisions about their benefits offerings, despite all the progress previously made towards improving health, wellness, and equity through benefits. To protect and maintain company culture, HR teams need to approach this moment with the future in mind—and find vendors that can do the same.

Walking the tightrope between benefits and costs

As belts tighten, costs are only rising—and so are employee expectations. A recent Mercer poll found that over two-thirds of employers are looking to improve their health and wellness offerings to attract and retain talent, citing rising healthcare costs and poor access. Likewise, nearly 65% of companies are planning to increase budgets for salary increases to stay competitive in 2023. And although the Great Resignation seems to have slowed, the attitudes are seemingly here to stay. A recent report found that 60% of employees have left or considered leaving a job because of inadequate family benefits. Similarly, a recent study found that the majority of employees aged 18 to 35 are willing to quit a job if it impacts their quality of life. 

So how can HR teams walk this tightrope? Linda Shaffer, CPOO at Checkr, says it’s a matter of balance. “We're looking into ways to cut costs without reducing benefits, such as negotiating better rates with our vendor partners or implementing a benefit utilization review,” says Shaffer. “We’re also adding or increasing voluntary benefits offerings, like pet insurance or legal services, which can be attractive to employees but don't come with a high price tag for the company.”

Cut smarter, not harder

Since some cuts will be inevitable, it’s better to start by reducing costs within your existing benefits framework first. Working with your vendors to find ways to pare down or improve utilization can help your team justify and validate spend—or find valuable areas to trim.  “Recessions are temporary, so it doesn’t make sense to make permanent changes to our benefits as a response to temporary shocks,” says Marina Vaamonde, founder of HouseCashin. “We need to listen to our employees and prioritize our benefits based on their stated needs.”

But it’s crucial not to cut things that people actually want to use. Monika Dmochowska, Talent Acquisition Lead at Tidio, believes that “mindful decisions regarding benefits that prioritize employee well-being should help you save cash and keep the organization happy.” What does mindfulness entail? Making informed decisions based on benefits engagement and utilization. “Don’t rush budget cuts and take benefits away from people who use them daily,” says Dmochowska. “If you offer a gym pass for the city your headquarters is located in, but your employees are hybrid or remote, that’s worthwhile to cut. But if they’re using that gym pass daily, you’re going to cost yourself more in unhappiness and attrition than you’d save in cash upfront.”