Benefits and Compensation in 2022: A Look Back



​Soaring inflation was the common factor behind many of the biggest headlines in the world of compensation and benefits in 2022, but other developments were on employers' minds as well, including abortion benefits in the wake of a landmark U.S. Supreme Court reversal; transparency around job salaries and wages; and employee mental health in a time of extreme global insecurity.

Here's a look at some of the year's biggest topics in compensation and benefits.

Inflation and Pay Raises

The cost of living soared this year, hitting a 40-year-high in June, with U.S. consumer prices jumping by 9.1 percent year over year. Unsurprisingly, the rise affected virtually every aspect of employees' lives, from increased mental angst and financial stress to shelling out more on everything from housing to gas and groceries. As a result of inflation—coupled with a hot job market throughout the year—employers handed out bigger pay increases than they have in years. Salary.com's Cost of Living Adjustment Survey Report, released in the spring, found that most U.S. organizations (73 percent) targeted a payroll budget increase of 4 percent or more this year and a plurality of organizations (43 percent) are growing their salary merit-increase budgets by 5 percent or more. In addition, consultancy WTW's July Salary Budget Planning Report found that companies are budgeting an overall average increase of 4.1 percent for 2023, compared with the average actual 4 percent increase in 2022.

Despite the increases, pay raises ultimately trailed inflation and the majority of employees felt the toll that the rising cost of living took on their financial situations, resulting in their feeling unsatisfied with their pay. A recent survey from Remote.co, for instance, found that the vast majority of employees (80 percent) say their current salary is not keeping up with inflation. And HR consultancy Mercer found that concerns over inflation have made financial health employees' greatest unmet need and that insufficient pay is causing employees to look elsewhere for higher-paying jobs.

Health Care Costs

As the price of most things rose, so did health care costs. A confluence of factors—including widespread inflation, economic instability and increased health care utilization as a result of the pandemic—have driven larger-than-usual increases for 2022 and predicted increases for 2023.

Employers in the U.S. expect medical plan costs per employee to rise 5.6 percent on average in 2023, Mercer reported earlier this year, a significant jump over the premium increase of 4.4 percent expected for 2022. The projected increase might be even higher—around 7 percent—if employers did not make changes, Mercer found.

That's why it's no surprise that employers said they are moving to reduce costs: Results released in April from WTW's 2022 Emerging Trends in Health Care Survey showed that nearly two-thirds (64 percent) of more than 600 U.S. employers intend to take steps to address employee health care affordability over the next two years. Those include improving quality and outcomes to lower overall costs, as well as adding or enhancing low- or no-cost coverage for certain benefits.

Another important health care cost trend of the year? Employers largely did not pass on the increased costs to their employees. That's "because of the tight labor market and the desire to keep health care affordable for employees," said Jeff Levin-Scherz, population health leader at WTW.

Abortion Benefits

In June, the U.S. Supreme Court overturned Roe v. Wade, the landmark 1973 decision that protected women's right to have an abortion—a move that spurred several large employers to announce they were adjusting benefits policies to help their employees continue to access abortion services. Even before the Supreme Court's ruling, Amazon, one of the biggest private-sector employers in the U.S., said it would pay up to $4,000 in travel expenses annually for employees to undergo abortions in states where the procedure is legal, and Microsoft announced it would expand benefits to cover costs for employees seeking abortions and other procedures in different states.

In an early June survey by SHRM Research of more than 1,000 HR professionals, only 5 percent of respondents said their organizations planned to provide travel expense benefits (gasoline, airfare, hotels) outside of a health savings account for employees to access abortion and reproductive services that are not accessible in their state of residence. A late June survey from the International Foundation of Employee Benefit Plans found higher interest in abortion benefits: It found that more than 1 in 4 employers (26 percent) say they are exploring the expansion of covered abortion services—including nonelective/medically necessary services, elective/nonmedically necessary services, medication, telehealth and travel benefits to locations where services are performed.

The abortion benefits issue did raise some compliance issues for employers, though: Employers that are considering offering abortion-related benefits, such as out-of-state travel to a jurisdiction where abortion laws are more accommodating, need to keep in mind compliance and liability considerations, benefits advisors and experts told SHRM Online.

Pay Transparency

Pay transparency became one of the hottest compensation issues of the year: Calls for pay transparency reached a fever pitch, with large amounts of workers calling for employers to be open about salaries.

A solid majority of employees (79 percent) said they want some form of pay transparency, according to Visier, a Vancouver, British Columbia, Canada-based maker of workplace software. And one-third of job seekers said they would not attend a job interview before knowing the salary range, according to a survey from job search engine Adzuna.

On Nov. 1, New York City implemented a pay transparency law requiring employers to include a good-faith salary range in job postings. New York City joined other cities such as Toledo, Ohio, and states such as Colorado and California in passing pay transparency laws. Employers are adjusting to the rules, however, as some employers have responded to the new laws by posting very broad salary ranges. Doing so may open employers up to penalties or employee backlash.

Employee Mental Health

A plurality of events took its toll on employees' well-being over the past year: the ongoing pandemic, record-high inflation and more. Those factors have increased employee rates of stress, anxiety, burnout, depression and more.

Other events like the crisis in Ukraine increased stress and anxiety as workers worldwide were concerned about what a European war would mean for the rest of the world.

Events like these reiterated the importance of employer assistance in the form of comprehensive mental health benefits, counseling options, empathy and understanding. Experts also said that regular communication about mental health offerings and other benefits, as well as regular check-ins and surveys to monitor how workers are feeling, is important. Employee mental health issues—and how employers address them—will continue to be a hot issue in the coming year.