Trends in benefit offerings
Health care and wellness benefits
The recognition of how important health care benefits are to employees might be one important reason why most health care benefits have remained fairly steady since 2003, according to the SHRM 2007 Benefits Survey, which asked HR professionals which benefits their companies currently offer. Where there were noticeable differences between 2003 and 2007 in the health care benefits organizations offered, more often than not this represented an increase in the type of offerings rather than a decrease (see Table 3). In fact, the only health care benefit offering that decreased significantly between 2003 and 2007 was indemnity plans (dropping from 28% to 18%).
This seems counterintuitive-with health care costs increasing year after year, it seems only logical that the number of health care benefits on offer would decline. But there are a number of factors that might help explain this. First, declines in employer-provided health care coverage are more likely to emerge from the large number of small businesses that do not employ any HR staff. Since the respondent pool of the survey was made up of HR professionals, this kind of trend would not be reflected in the survey findings. Second, a growing number of different health care-related offerings may not necessarily represent a growing willingness among employers to spend more on health care. In fact, many of the health care benefits that have seen the most growth are those involving preventive care or new ways of paying for health care that shift more costs onto employees. SHRM polls on strategies to overcome rising health care costs over the past three years have shown preventive health care and wellness programs to be one of the most important strategies organizations are using to try to deal with rising costs. Rather than indicating more investment in health care spending overall, many of these health care benefits most likely reflect employers' attempts to find ways to bring down health costs, especially through preventive care.
This shift to preventive care and encouraging healthy behaviors is also indicated in the 2007 MetLife Study on Benefit Trends that showed strong growth in many health-related programs (see Figure 2). A better understanding of the kinds of factors that lead to the chronic health conditions that are most expensive to treat could be leading many employers to develop programs that encourage healthy behaviors and reduce disease risk factors.
Numerous studies have shown rising concern among employees about financial security and the ability to save for retirement. The 2006 Rewards of Work Study found a dramatic decline between 2003 and 2006 in employee satisfaction with retirement benefits. Whereas 56% of workers were satisfied with their retirement benefits in 2003, only 42% were satisfied in 2006, making it the strongest decline in satisfaction for any of the benefits studied, including health care. The Employee Benefit Research Institute's (EBRI) 2007 Retirement Confidence Survey findings show that workers have been slow to adapt to a changing U.S. retirement system. According to the survey, many workers are counting on benefits that, in all likelihood, will not be there when they retire, and most have only saved a modest amount for retirement (see Table 4).
Future demand for retirement benefits and expectations about the future availability of benefits could be affected by economic conditions that influence savings rates or access to key benefits among different demographics and age groups. For example, young people are the largest U.S. demographic without health insurance, and this could influence future demand for health care benefits, especially as younger generations begin to establish families. Retirement benefits may be the area where expectations could be most influenced by generational economic trends. The generations following the baby boomers seem to have lowered expectations that they will be able to access retirement benefits, especially pensions, through their employers. At the same time, they also may face financial obstacles that make them less likely to take advantage of the retirement benefits their employers do offer. Paying off college debt is one major obstacle that is increasingly delaying when workers begin saving for retirement. In addition, despite their greater financial investment in education, young people now entering the workforce earn less than their counterparts in previous generations. In 1974, the typical male high-school-only graduate in the 25-to-34 age group earned an inflation-adjusted $42,697. In 2004, earnings had declined to $30,400, and even young adult males with bachelor's degrees or higher are earning less than their 1974 counterparts. Compared to the median net worth of Americans between the ages of 55 and 59, which rose 97% over 15 years, the median household net worth of the 35-39 age group fell 28% and the median income fell 10%. These economic conditions seem to be influencing generational behaviors when it comes to saving for retirement. A 2007 survey from Charles Schwab & Co., Inc. found that younger investors are aware they should be saving for retirement, but they face significant challenges like competing spending priorities and a lack of information to make simple investment choices. The survey found that paying daily living expenses is a higher priority than saving for retirement for this age group, with paying off debt such as student loans a significant factor. This could mean that-paradoxically-retirement benefits could become less important to younger employees as they struggle to pay other expenses and eliminate debt even as their need for retirement savings grows.
Overall, however, fears of inadequate retirement savings are likely to keep the demand for retirement benefits strong, especially as the workforce ages. The findings from the SHRM 2007 Benefits Survey show a few notable trends such as the growth of defined contribution retirement plans and an increase in individual investment advice, which has been trending up over the years but was slightly down in 2007 from its 2006 high (see Table 5). Though its gains since 2003 were slight, many retirement experts believe that due to changes in liability regulations, automatic enrollment into defined contribution retirement plans is likely to increase rapidly in the years ahead. Many employers see automatic enrollment as a way to encourage the demographic groups most at risk of delaying saving for retirement, such as low earners and workers under 30, to get into the savings habit.
Work/life balance benefits
Future trends in work/life balance benefits could be largely influenced by demographic changes that tip the balance more toward women and Gen X and Y employees in the workforce, especially in industries where there are significant skills shortages. Based on the findings from the SHRM 2007 Job Satisfaction Survey, women and younger workers appear to be more concerned with work/life balance than other demographic groups.
A 2006 SHRM survey that found that HR professionals were most worried about retaining younger workers also showed that some industries, such as education, finance, professional services and health, were particularly concerned about holding on to highly educated women as employees. Attempts to create more flexible working practices are already happening in many professions, especially in fields where women have overtaken men in acquiring professional degrees and in areas where employers are most concerned about their ability to retain younger workers.
Though the SHRM 2007 Benefits Survey found that, for the most part, any increases in work/life balance benefits were relatively modest over the last five years (see Table 6), more efforts may be made to offer work/life benefits and flexible working options to employees, depending on the degree to which skills shortages intensify. In an environment where health care and retirement benefits costs continue to grow rapidly, more employers may see work/life balance as an area where they can offer employees a key benefit they value without necessarily paying higher costs. In fact, many organizations are finding that offering more flexibility in the way workers manage their time can actually save costs by boosting productivity.
Leave benefits are another aspect of work/life balance. A trend toward a time bank of vacation leave and paid time off plans seems to be occurring, and though the number of organizations that offer paid maternity and paternity leave remains small, the difference between maternity and paternity leave is shrinking. More organizations also appear to be offering paid adoption leave (see Table 7).