By Maggie Mancini
As organizations brace for open enrollment season, employers are once again anticipating a rise in benefit costs. With HR leaders grappling with how to improve employee engagement and productivity while managing costs amid a period of market uncertainty, many organizations are looking for ways to optimize their benefits strategy and avoid “benefits sprawl,” explains Michael Rogers, chief human resources officer at Alight.
“Benefits sprawl is when an organization keeps adding benefits but doesn’t have a cohesive strategy,” Rogers says. “This is often the result of trying to meet everyone’s needs. They end up with a ‘benefits Frankenstein’ made up of siloed offerings and dozens of providers. This leaves employees confused and overwhelmed. They may not even understand what benefits are available to them.”
According to Alight’s Winning with Well-being report, just 10% of workers know about all their benefits, and 35% only know about the benefits that they use. When employees do take advantage of benefits, Rogers says, they often end up making regrettable healthcare decisions.
“This is incredibly frustrating for employers who have invested in tools and resources to help employees make more informed decisions,” Rogers says. “Workers feel unsupported, and the organization struggles to contain costs and achieve ROI.”
MVB: Most Valuable BenefitsAlight’s report finds that employees consider medical, dental, retirement, vision, and overtime pay benefits to be the most valuable to them. Employees view these benefits as particularly important because they demonstrate that their employer cares about them as a person—not just as a worker. Employers should take the time to survey workers about what benefits they value most. Since everyone’s needs are different, Rogers says, a personalized benefits strategy is paramount.
“Today’s workforce is in distress,” Rogers says. Alight’s upcoming 2024 International Workforce and Wellbeing Mindset Study finds that 44% of employees view their overall well-being positively, down 7% since last year. This trend has been observed across all measures of well-being: financial well-being has fallen by 7%; mental and emotional well-being has decreased by 6%; and physical well-being has dropped by 4%.
Rogers explains that over two-thirds (68%) of employees describe their stress as moderate to severe. “That’s not surprising when you think of all they’ve been through in the last several years,” Rogers says. “Pandemic, inflation, soaring healthcare costs, high interest rates. Today’s workforce is stressed out and they’re looking to their employers for help.”
Securing Employee Participation “Today’s workers have choices,” Rogers says. “If an employer doesn’t meet their needs, they can easily take their talents somewhere else. The decision about where to work used to be primarily about pay. That’s still important, but these days, people are focusing more on benefits.”
Many employees expect comprehensive support that includes health, wealth, and well-being, Rogers says. Employers find themselves overwhelmed by the costs associated with managing benefits and providers, leading to a gap in what’s offered and what’s impactful.
“Employers can close that gap by making it easier for employees to understand and use their benefits,” he says. “Breaking down the silos between benefits offerings and integrating benefits across the employee lifecycle reduces complexity and enhances employee engagement.”
Research from McKinsey finds that healthcare costs for employers could rise by nearly 10% through 2026.
Determining Benefits ROI Alight’s report finds that when fewer employees take advantage of their benefits, the ROI for the company suffers because of low adoption rates. Companies are under tremendous pressure to eliminate benefits programs that aren’t delivering ROI, he explains. Research from McKinsey finds that healthcare costs for employers could rise by nearly 10% through 2026. This makes it an obvious target for expense reduction, he says.
“When few employees take advantage of benefits offerings, employers cannot reap the desired results,” Rogers says. “Employees feel unappreciated, they struggle to improve their well-being, and the company loses money, not just in the form of the investment they’ve made in benefits offerings, but in lost productivity, higher absenteeism, and the extraordinary cost of replacing an employee.”
Organizations are turning to artificial intelligence (AI) to make sure employees get the most out of their benefits, Rogers says. AI-driven platforms provide a tailored benefits experience, delivering tools and personalized guidance to employees. The result? More employees use their benefits, achieve better outcomes, and feel a deeper appreciation for their employer’s investment.
“AI and machine learning enables companies to personalize benefits, streamline administration, and drive the desired business outcomes,” Rogers says. “This empowers them to transform benefits from a necessary expense into a game-changing differentiator.”
Wellness-Focused Benefits ManagementWhen companies prioritize well-being, employees feel more positive about their employee experience, which drives retention, Rogers says. Among workers who feel their well-being is strong, 75% say they are likely to be with their employer in 12 months—more than double the percentage of those with poor well-being, according to Alight’s research.
“Employers can measure the impact of their benefits offerings by tracking things like participation, engagement, health outcomes, cost savings, and attrition,” Rogers says. “This data can also be leveraged to make improvements to the benefits portfolio.”
Organizations that offer comprehensive benefits—and steer clear of benefits sprawl—are better positioned to attract and retain top talent, Rogers says. Their workforce, in turn, will be healthier, happier, and more productive.
