Companies Struggle to Address Persistent Insecurity Among Workers

Years of global economic strain have made workers more fearful for their bottom line. For businesses, this means that they’ll need more than an attractive paycheck to stay competitive in the job market.

A recent survey by risk analysis firm WTW shows an increased standardization in benefit packages by multinationals following the COVID-19 pandemic. Back in 2019, only 36% of multinationals had “minimum standards” for their benefit packages across global operations. By 2023, the number had jumped to 70%. 

Retirement plans and healthcare benefits are at the top of the list of what employees value most, according to WTW’s findings. The fact underscores workers’ concerns over their physical and financial security.

“Our research on peoples’ attitudes towards employee benefits confirms that protection and security matters,” WTW points out in its report. “Retirement and healthcare benefits consistently rank among the top five drivers of both attraction and retention worldwide.”

We’ve reported before on the increased relevance of benefit packages whenever employees hunt for jobs. Following the COVID-19 pandemic and the subsequent economic problems, it seems as if workers came to terms with the speed with which their physical and financial situation can take a turn for the worse. 

The macroeconomic landscape is still tight enough to make potential employees evaluate job offerings beyond paychecks. A recent survey by Metlife shows that 67% of employees are worried about the impact of inflation over their paychecks, with 63% stating they felt benefit packages helped in reducing overall financial stress.

A similar survey by Bank of America found that 52% of workers surveyed in 2021 felt “financially well”. By 2023, that number had fallen to 42%, the lowest since 2010. That very same survey put a competitive benefits package as the third most relevant factor in employee retention, with 38% of workers stating its importance. Workers put retirement savings as their top financial priority (31%), followed by paying off credit card debt (16%) and saving “for the unexpected” (13%).

“Medical insurance remains the number one benefit. This is the case regardless of where employees are based; whether in the US, UK, India, or Sri Lanka,” commented Avadhesh Dixit, Chief HR Officer at Acuity Knowledge Partners, a consultancy for financial firms. “It’s important to note that the appeal of certain benefits varies depending on an individual’s life stage. For example, younger employees may not necessarily value life insurance as much as older ones.”

Some nearshore territories seem to be particularly exposed to such a tight macro landscape. In Mexico, for example, inflation has made the federal government’s policy of yearly minimum wage increases less effective. This has made Mexican workers appreciate employment benefits which soften the blow on their pockets. Benefits such as grocery vouchers, insurance facilitation and financial planning were favored by Mexican employees in 2023.

In Argentina, where inflation has been the country’s economic boogieman for years, benefits such as performance bonuses, partial payments in US dollars and even stock options have grown popular among executives and middle management.

Matching Your Competitors

The pressures of a competitive job market and a tough macro landscape are changing business leaders’ approach to employee benefit packages. More than a plus, benefits can be what gives a company its edge over its competitors.

Of the more than 250 multinationals surveyed by WTW, 29% said they try to match other employers’ benefit packages in order to be competitive in the labor market. Also,13% said they use those packages to engage both potential and current employees. 

In a previous WTW survey, 76% of organizations pointed to competition for talent as the factor that most influenced their benefits strategy, followed by rising costs (51%) and flexible work arrangements (36%). 

A study published by fintech firm Enfuce indicates that 60% of employees accepted a job offer thanks to an attractive benefits package, while 35% turned down an offer or quit their job due to issues with company benefits. Although responses about what’s relevant in a benefits package varied among employees, most pointed to wellbeing (physical and mental), as well as personal values, as the most important factors in their decisions.

A lot’s been written about “employee experience” and alignment of a company’s values with that of its workers as strategies to foster loyalty, implement culture and retain workers for years, or even decades. Nevertheless, several of the surveys mentioned above point to a reality in which workers have a better understanding of their financial and personal situation and plan accordingly.

In this sense, companies should not convince themselves that an attractive benefits package will replace a good salary.

“I’m not convinced that benefits are ever going to totally supplant salaries as the decisive driver of attraction and retention. That said, well-rounded benefits packages designed with intention can definitely be a draw: employee-centric benefits is the future,” commented Carolyn Walker, Global HR Director at cloud talent solutions firm Tenth Revolution Group. ”

The increased relevance of employee benefits also speaks to another imprtant issue for nearshore investment: the role of multinationals in the communities they operate in. 

There’s an abundance of examples of global companies becoming cornerstones of economic development in cities all across Latin America and the Caribbean. Some of the more successful examples in the region have left their mark beyond the volume of jobs they’ve created, allowing communities to develop technical expertise, business acumen and even entrepreneurial spirit. 

Unaffordable Competitiveness?

Business leaders might be getting a clue on the relevance of benefit packages as part of their overall competitive strategy, but that does not make delivering those benefits any easier.

According to WTW’s survey, financing weighs heavy on the minds of multinationals when it comes to benefit packages. So heavy in fact that it is the top priority for benefits teams in HQ and throughout local operations. Such concordance isn’t seen in any other factor related to benefit strategies, at least within this specific survey. 

The macro landscape is as much a problem for employers too. As we’ve reported before, top brass kept a tight grip on all sorts of spend during 2022 and 2023. Hopes are high for this year, but certainty is far from achieved.

Such high levels of uncertainty have been the reason behind wave after wave of layoffs by too many digital service providers. Coupled with a more promising prospect for automation, one has to wonder about the near-future of benefit packages in that context.

Some companies already dedicate a considerable portion of employee compensation to benefit packages. At Acuity Knowledge Partners, for example, benefits represent, on average, about 20% of each individual employee’s overal compensation.

Trapped in a challenging macro landscape, companies are explorning non-financial benefits that might provide employees with a sense of work-life balance and general wellbeing. Such benefits include flexibility in working arrangements and upskilling programs.

“Not all benefits are financial. SMEs can sometimes be more open to innovative HR practices but large firms such as Acuity are also thinking creatively about the best way to structure benefit packages to maximise employees’ contributions to the business,” commented Avadhesh Dixit. “This means thinking intelligently rather than taking a reductive view that it’s just about how much money a firm invests in benefits.”