SHRM: 7 Benefits and Compensation Trends to Watch in 2024
Amid record salary hikes, the explosion of GLP-1 drugs and the end of pandemic emergencies, 2023 was a big year in total rewards. But don’t expect things to slow down in the benefits and compensation world in 2024, industry experts said.
“It will absolutely be a big year,” said Kim Buckey, vice president of client services at Optavise, a Carmel, Ind.-based benefits administration firm. She added that it will be best practice for organizations to follow a detailed strategy to address total rewards this year.
“Having a formal benefits strategy in place can help keep employers focused on addressing employee needs and company-specific areas of cost increases, while reducing the temptation to explore the ‘solution du jour’ or the latest buzzy benefits offerings,” Buckey said.
Here are some of the top benefits and compensation trends to watch in the coming year.
GLP-1 Drug Coverage Decisions
GLP-1 drugs such as Ozempic and Wegovy, which are used to treat type 2 diabetes, drew attention as a weight loss tool in 2023 and quickly became in demand among employees. As a result, employers began considering whether to cover them for that purpose. That conversation will only intensify in 2024, experts said.
“The GLP-1 drugs as weight loss tools are very top of mind and very trendy,” said Jeri Hawthorne, CHRO at benefits firm Aflac. “I think that will continue to be a massive topic because most self-insured health insurance plans do not cover those. And companies are evaluating, ‘Do we offer this because we want healthy employees? But they’re extremely expensive and we don’t know the long-term side effects.’ Employers are deciding, ‘Is this the right thing to do? What’s the impact of that to our workforce and our population?’ ”
Some evidence points to more employers covering the medications: An October survey of 500 employers by health care firm Accolade found that 43 percent of employers plan to cover GLP-1 drugs in 2024—nearly double the share of employers that covered them last fall.
The anticipated spike is likely the result of high interest among employees, as well as potential boons to employers in terms of healthier workers. Providing access to the medications could also be a recruitment and retention tool, said Dr. James Wantuck, associate chief medical officer at Accolade.
“With the recent spike in demand surrounding these medications, HR decision-makers feel it will create a better health insurance package overall for employees, as well as boost their mental and physical health long-term,” he said, noting that more than two-thirds of companies that added GLP-1 coverage to their health care offerings experienced an increase in enrollment.
“For companies who are already offering this medication as part of their benefits, they’ve also seen higher employee satisfaction as a result,” Wantuck added.
More Financial Health Offerings
Although inflation cooled over the past year, employees are not feeling much reprieve. In fact, employee financial well-being suffered several blows in 2023: A significant number of workers said they were living paycheck to paycheck; credit card debt hit an all-time high; employees said inflation was hindering their overall savings, as well as their retirement savings; and employee financial wellness hit an all-time low.
“We’re seeing signs of worker financial stress as pandemic savings are depleted, debt loads increase and student loan payments restart,” said Timothy Flacke, co-founder and executive director of the Boston-based national nonprofit Commonwealth.
That means financial health will become a bigger priority for employers in 2024, experts predict.
Flacke said he expects employers will broaden their interest in financial benefits, from financial budgeting help and debt repayment tools to emergency savings and student loan debt help. “Employers are increasingly understanding the broad need among workers for greater near-term financial security. Meanwhile, more SECURE [Act] 2.0 provisions are kicking in, with ongoing progress in clarifying the legislation itself and providers who are building features to take advantage of the new policy,” he said.
And while some employers may look carefully at adjusting their benefits priorities if budgets are tight, “financial benefits offer very strong bang for the buck,” Flacke noted.
Pay Increases Will Meet or Exceed Inflation
Salary raises were some of the highest in years in 2023. But that didn’t make much of a dent for employees as continued high costs of living proved problematic.
This year, though, wage growth is expected to meet or surpass inflation for the first time since 2020. The International Monetary Fund projects lower inflation for the U.S. at around 2.8 percent, and employers are budgeting for pay increases of between 3.8 percent and 4 percent, according to various projections.
Those increases “will start to close the gap with nominal wages—if only by a little,” said Ruth Thomas, pay equity strategist at Payscale.
However, real wages will continue to lag.
“Workers still feel the burden of higher prices, contributing to tensions on growing wealth inequality and potential unrest,” Thomas said. “Employers should ensure pay increases remain strong and consider salary adjustments to keep up with market changes to avoid turnover from employees seeking better pay.”
A recent WTW survey found that inflationary pressure is the primary reason behind increased salary budgets for 2024. Employers surveyed also cited concerns about a tight labor market as a reason for bumping up workers’ pay.
“We are seeing healthy salary increases forecasted for 2024,” said Hatti Johansson, research director of reward data intelligence at WTW. “Though economic uncertainty looms, employers are looking to remain competitive for talent, and pay is a key factor.”
Mental Health Focus
Mental health has been a big focus of organizations for the past few years, and that will likely continue in the coming year. In fact, it may be a bigger emphasis due to rising rates of employee burnout and the looming presidential election, which may lead to greater employee angst and stress.
“Mental and emotional wellness will be a massive topic, especially as we’re going into an election year,” Hawthorne said. “People tend to be much more polarized in their views. Maybe five or 10 years ago, people could just disagree on and have different perspectives on certain topics, but now it’s become much more polarized and sometimes even aggressive. Mental health—and areas around helping reduce stress and improve emotional wellness—will be a massive focus for the next year.”
Expect organizations to increasingly tout available resources for employees, as well as consider new benefit offerings such as mental health days and mental health apps.
Controlling Health Care Costs
Organizations are bracing for higher health care costs in 2024.
“Increasing health care costs have been an employer concern for years, if not decades, and this year will be no different,” Buckey said. “Medical inflation, increased demand for weight loss drugs and the availability of new medications and gene therapies continue to drive up costs. Because employers are reluctant to pass on to their employees most of the increases they experience, managing their costs will be even more of a priority.”
Employers may take different approaches to do so, from offering integrated wellness programs and telemedicine options to requiring prior authorization.
“Every employer is different, and there are almost as many approaches to controlling health care costs as there are employers,” Buckey said. “Some will investigate value-based care by rolling out centers of excellence or additional network tiers. Some will try reference-based pricing, while others will implement stricter controls on prescription drugs. There is no one right answer, and each year seems to bring a new potential solution.”
More Pay Transparency
In 2023, several state legislatures considered pay transparency legislation. While Hawaii (effective Jan. 1, 2024) and Illinois (effective Jan. 1, 2025) were the only states to pass this type of law, Lulu Seikaly, senior employment counsel at Payscale, said the transparency trend won’t slow down in 2024.
She predicted that not only will more pay transparency legislation be on the table, but that “new legislation will start to require employers to regularly communicate to their employees what the pay range is and where they fall in that range.” For example, in Rhode Island, employers must provide the salary range to an employee if they ask for it during their course of employment.
“If organizations have their compensation strategy in order, this will actually be a good thing,” Seikaly said. “Being transparent with employees will increase trust and retention.”
Hawthorne agreed, saying conversations about pay transparency among organizations—even those in localities without any legislation mandating it—will continue in 2024.
“What we found with our own data is that employees prefer to live [where]—or they’ll prefer to apply for jobs where—ranges that are posted are narrow,” she said. “When pay transparency first became common, some companies put salaries with big ranges. I think there were conversations about narrowing of ranges because that’s desired by employees.”
Pensions May Make a Comeback
IBM announced late last year that it was unfreezing its pension plan and ending its 401(k) match—a significant shift, given the company’s large footprint and status.
Other employers might consider a similar move and bring back a pension plan, experts said.
“We are confident that other employers have taken notice of what IBM is doing. Even before that [announcement], many organizations were already having conversations about whether this type of shift is right for them,” said Jonathan Price, national retirement practice leader at benefits consulting firm Segal. “Therefore, we are confident that other employers will make a similar shift. How many and in what year—whether it’s 2024 or 2025—we will have to see, but we are fully confident that other employers will follow suit.”
Even if companies don’t flock to a pension plan, many will likely start to think about how to better prepare employees for retirement and how to give them a steadier supply of income in their post-work years. That’s been a major problem in recent years, Price said. “We know there’s a retirement problem,” he said. “There’s an opportunity for employers to think about this differently and think about other solutions.”
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