A Look Back at the Biggest Trends in Benefits and Compensation in 2023

The aftermath of persistent high inflation, a new phase of the COVID-19 pandemic and buzz around GLP-1 drugs were just some of the issues that made their way into the workplace in 2023—and had a significant effect on employers’ total rewards strategy.

Employers and HR leaders were tasked with navigating new challenges, like employee backlash to return-to-office mandates, and monitoring continued problems, like COVID-19 infections and high costs of living. At the same time, organizations were busy looking at new benefits trends (think menopause benefits and pregnancy-loss leave) and handing out some of the biggest pay raises in years.

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

End of COVID-19 Emergencies

Although COVID-19 infections have been a recurring issue in the workplace, this year marked a significant phase in the COVID-19 era: The Biden administration ended the COVID-19 public health emergency (PHE) and the national emergency on May 11. Both had been in place since 2020.

The end of the emergencies signaled significant implications, and decisions, for employers—especially on their health and benefits strategies. Organizations had to make decisions regarding COVID-19 vaccine and testing coverage, as well as other issues.

The PHE, for instance, mandated that health insurance plans fully cover COVID-19 testing without employee cost-sharing, on both an in- and out-of-network basis. But that requirement changed as a result of the emergency ending, meaning that medical plans, including employer-sponsored plans, do not have to pay for testing. Employers now decide how to proceed.

As a result of the end of the COVID-19 emergencies, employers also took a hard look at their COVID-19 vaccine mandates for employees, with several organizations dropping the requirements. However, HR and benefits leaders continued to encourage workers to roll up their sleeves to keep themselves and other employees protected against more severe effects of the virus.

GLP-1 Drug Coverage

Due to buzzy results and popularity among celebrities, 2023 marked a big spike in demand for GLP-1 drugs, such as Ozempic and Wegovy, as a tool to help people shed pounds. That demand made its way into the workplace, as well, creating an important decision point for employers: whether their health insurance plans should cover the pricey drugs for weight loss.

“There’s a lot of discussion about it,” said Nancy Price, vice president of human resources strategic sourcing at HealthTrust, a Nashville, Tenn.-based group-purchasing organization focused on the health care space. She told SHRM Online in June that coverage for GLP-1 drugs is one of the top issues on employer clients’ minds. “This whole concept around covering weight-loss drugs is really coming to the forefront right now.”

By late in the year, data from the International Foundation of Employee Benefit Plans (IFEBP) found that 27 percent of employers provide their employees with GLP-1 drug coverage for weight loss purposes. In 2023, the average representation of GLP-1 drugs used for weight loss in employers’ total annual claims was 6.9 percent, employers told IFEBP.

Expect GLP-1 drug coverage for weight loss to be a continued trend in 2024, too: A survey of HR leaders from health care firm Accolade found that 43 percent of employers plan to cover the weight-loss drugs in 2024, nearly double the share of employers that cover them now (25 percent).

Remote Work and Back-to-Office Requirements

Thanks to COVID-19, remote work has been the trend for the past couple of years, with the majority of companies that were able to allow workers to work from home for health and safety reasons embracing it.

But 2023 marked a shift: Some organizations told workers to come back to offices to work in person. The Walt Disney Company, for instance, told employees at the beginning of the year they will have to be in offices four days a week. Amazon said in February that corporate workers would be required to spend at least three days a week in offices. And insurance company Farmers Group reversed its remote-work policy (it told most of its employees last year they could permanently work remotely), telling workers they would be required to be in the office at least three days a week.   

The announcements were significant, but they weren’t without backlash: Both Disney and Amazon employees signed a petition asking their respective CEOs to reconsider the policy, for instance, while Farmers Group workers also protested the move.

At the time, HR leaders told SHRM Online that although the back-to-office mandates weren’t surprising in light of more relaxed pandemic-related measures, such new policies could have the potential to backfire. That’s because remote work and flexibility have been overwhelmingly popular and desired by employees after nearly three years of the practice.

Geoff Webb, vice president of solution strategy at Charlotte, N.C.-based software firm isolved, said that since many employees have become accustomed to remote and hybrid work, a sudden shift back into offices will likely “cause some portion of employees to evaluate their priorities and expectations from an employer.” Indeed, a survey from Clarify Capital, a financial consultancy in New York City that surveyed more than 1,000 remote workers, found that nearly 7 in 10 employees (68 percent) said they would rather look for a new job than return to the office.

But many employers and company leaders have argued that returning to offices would help foster productivity, engagement and collaboration. Other research this year from the Integrated Benefits Institute found that remote workers might experience higher rates of depression than in-office workers.

As a result of the back-and-forth over the issue, many organizations have worked on compromising with employees about returning to in-person work.

Inflation Effects and High Pay Raises

The consumer price index from the U.S. Bureau of Labor Statistics was a highly watched metric in 2023 after soaring inflation—which continued to take a toll on workers over the past year—hit a 40-year high in June 2022. Inflation generally cooled throughout 2023—falling to 3.1 percent in November—although core inflation, which excludes volatile food and energy components, rose 0.3 percent in November, and 4 percent from a year earlier.

However, continued months of high costs of living continued to negatively impact workers’ financial health and even pushed some statistics to their worst in years: LendingClub found that nearly two-thirds of consumers (64 percent) said they were living paycheck to paycheck; the number of workers who see inflation as an obstacle to saving for a comfortable retirement shot up from 2022 to 2023; and Bank of America’s annual Workplace Benefits Report found that employee financial wellness hit an all-time low. And overall financial concerns and high costs of living had a negative effect on employees’ mental health.

“While inflation has moderated, many individuals are still experiencing strain from elevated prices,” Nate Black, vice president of health solutions product development at Voya, told SHRM Online.

Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America, agreed, saying “workers continue to feel stressed about their finances and are concerned about keeping up with the cost of living.”

As a result, pay raises in 2023 were a prominent strategy, with data from WorldatWork in September finding that U.S. employers, on average, increased salary budgets by 4.4 percent in 2023, higher than projections of 4.1 percent. Consulting firm Mercer similarly found earlier this year that U.S. employers reported 2023 annual merit increases have averaged 3.8 percent, while total compensation—which includes merit awards as well as all other types of compensation increases impacting base pay, such as promotional, cost-of-living and minimum wage—increased by 4.1 percent. Those are the highest increases since 2008, Mercer reported.

Emphasis on Family Benefits

The year also marked several moves on family and other personal benefits, from a rise in parental leave to benefits that aim to help employees going through life transitions or trying times.

The 2023 SHRM Employee Benefits Survey found that paid maternity and paternity leave each saw 5 percentage-point jumps from last year and are now offered by 40 percent and 32 percent of employers, respectively. Simultaneously, paid parental leave is now offered by roughly 4 in 10 employers (39 percent), a 6-point jump from last year, according to this year's survey. Paid adoption leave also jumped by 6 percentage points, with about a third of employers (34 percent) now offering it, and paid foster child leave is now offered by 25 percent of employers, representing a 3 percentage-point increase.

“Prior to the pandemic, a lot of benefits had been about focusing on individuals,” SHRM researcher Cal Engstrom said in June. “But when COVID-19 hit, a lot of employers started to think about benefits that help not just their employees, but their loved ones as well.”

Other new benefit trends made their way into the workplace as well in 2023, including menopause benefits and pregnancy-loss leave.

Increased Pay Communications and Transparency

Calls for pay transparency and more robust communication about pay continued to grow in 2023.

A July survey from consulting firm WTW found that more than half of employers are communicating with employees about pay policies—even organizations that aren’t legally required to do so. Of the 448 U.S. employers surveyed by consulting firm WTW, 6 in 10 disclose job levels to their employees, and roughly half (48 percent) communicate about how individual base pay is determined and progresses. More than one-third of companies (36 percent) disclose individual pay ranges to employees, while an even larger number (46 percent) are planning to or considering doing so in the future.

“Many U.S. organizations are providing more visibility into their pay programs and practices,” said Mariann Madden, North America Fair Pay co-lead at WTW. “Boards of directors are taking ownership for pay equity and pay transparency and are looking for organizations to define, monitor and report on their commitments and priorities. Pay equity and transparency are closely linked. It will be very difficult to have confidence in one without the other in place.”