Amid Economic Uncertainty, Is Investing in Benefits the Smartest Strategy?

When Heidi, an AI health company based in Melbourne, Australia, was rolling out its benefits overhaul in June — which included boosting paid parental leave to 26 weeks for primary caregivers and 18 weeks for secondary caregivers, globally, at full salary — the company saw an opportunity to differentiate itself at a time when some employers are pulling back on benefits.

“We actually said, ‘U.S. companies are cutting this, but we are doubling down,’ ” said Nell Hardie, head of people at Heidi.

“It’s obviously a cost to the business,” Hardie said of the firm’s benefits investments. “But we want to create a culture and environment where there is this level of care.”

In addition to increased paid parental leave for all its global employees, including its U.S.-based employees, the company’s recent benefits additions include a monthly health budget for employees, paid fertility support, and the ability for employees to work anywhere they want for four weeks during the year.

Heidi is one example of a company that is bucking the trend of benefits cutbacks and cost containment. Even as many companies have cut or reduced benefits recently as economic winds turn and cost pressures increase, some HR experts say it’s important to keep investing in people, especially when times are hard.

“Employees are more stressed and overwhelmed than I’ve seen at any point in my HR career,” said Brad Whiteside, director of employee experience at Salt Lake City-based software company O.C. Tanner. “To me, that’s a sign to lean in, not pull back.”

Bucking the Trend  

Recent events have forced many employers to take a hard look at their benefits offerings. Data from insurance broker and HR consulting firm Gallagher from late last year found that 40% of employers have considered reevaluating their benefits strategy or philosophy as a result of changing economic and business conditions. Additionally, a SHRM pulse survey of 1,219 U.S.-based workers in March found that while 42% of workers indicated that their organization maintained all their benefits at the same level over the past year, 15% reported reductions in some of their benefits, and 15% noted both reductions and enhancements. 

Companies including Zoom and Deloitte recently announced plans to trim paid parental leave programs. Others, like Starbucks, are dropping GLP-1 coverage prescribed for weight loss. Many others are increasing employees’ cost share for healthcare costs.

Related Article: 1 in 10 Employers Likely Will Stop GLP-1 Coverage in 2027

But some experts said that investing in benefits as others are cutting them is the ultimate strategy for building a resilient workforce and strengthening retention. Without that investment — or at least keeping the benefits they already have in place — employees are being put into survival mode just when they need help the most.

Caring for Employees

As employees struggle, investing in benefits that may offset costs or provide additional support can show care for workers. 

“Part of that recognition is by simply acknowledging ‘we know it’s hard, and here’s what we’re doing to help,’” Whiteside said. “Those benefits are arguably most important during times of economic downturn.”

According to Whiteside, O.C. Tanner isn’t pulling back on financial assistance and education programs and instead is “amping up how much we promote [its financial wellness benefit] so we ensure our workforce knows it’s available to them.”

Related Article: Employers Lean on Financial Wellness Benefits as Worker Stress Climbs

When budgets are tight or the trajectory of the organization looks unknown, a lot of organizations tend to “cut the fat,” Whiteside explained, and reduce spending on things that don’t create immediate or quantifiable value on paper. That’s especially true in the AI age as everyone chases ROI. 

“An executive might see that as a smart business move, but that doesn’t create a culture of care, it creates a culture of convenience,” he said. “Employees only hear that their leaders don’t see how they're struggling and won’t help.”

A Retention Tool

In addition to providing support for employees, investing in benefits now — or at least not cutting them — is a smart retention strategy.

Inevitably when the market swings and the labor market becomes employee-driven again, employees may remember if their organization continued to invest in them during a difficult period — or if they stopped.

Nader Salah, executive director of total rewards at Detroit-based financial services firm Ally Financial, sees the company’s purpose-driven culture as a key differentiator for attracting and retaining talent. Continually investing in its total rewards package is a way that Ally Financial leans into that.

“That’s really what positions us as an employer of choice. In order to maintain that, you need to invest in your people,” he said. “Our culture’s been ranked in the top 10 globally for engagement for several years in a row. You don’t stay there without continuing to invest.”

Ally Financial has spent the past several years expanding benefits across the employee life cycle, with recent additions ranging from fertility and adoption support to increased paid parental leave, child care resources, student debt assistance and, most recently, menopause support.

“It’s a very conscious decision that this is how we want to continue to engage our workforce,” Salah said. “We’re seeing that those investments are paying off.”

Hardie agreed, saying that in addition to providing a level of care and support to employees, the other upside for Heidi’s benefits investments is “that it lands well with employees, and it creates a fierce loyalty and a high-performing team.”

Even when there’s significant cost involved in the robust benefits investments, the advantages of “sustained high-performance that we are seeing outweighs that,” she said. “It allows us to retain our best people.”

Below are two tips for HR leaders on how to approach investing in benefits. 

Tip 1: Spend Dollars Wisely to Address Your Unique Workforce Needs

“We need to invest in benefits but in the right benefits,” said Maria Trapenasso, SHRM-SCP, who leads talent solutions at insurance brokerage and benefits consultant firm NFP in New York City. “The best way to approach investing in benefits is making sure that you’re spending dollars wisely. Every employer is unique.”

While benefits investments can be a big boon, not every employer should be investing in every benefit, she said.

“If you have a plumbing company that is 99% made up of men, you probably don’t need a menopause benefit,” she said. 

The point, Trapenasso said, is not to chase every new benefit that enters the market. Instead, employers should focus on whether a benefit addresses a meaningful need among their particular workforce.

For employers currently making decisions on total rewards packages, experts say it’s important to understand what kind of support employees need and want.

“Survey employees to understand what is most important for them, and then invest dollars in those benefits,” Trapenasso suggested. “Then, communicate. Once you’ve invested in benefits, make sure you are communicating regularly to employees that they now have these new benefits to use.” 

Tip 2: Consider the ROI of Investing in People

Hardie said other employers should think about the ROI when it comes to benefits. Organizations that simply cut or reduce benefits when times get tough don’t necessarily signal that they are investing in their people, she said.

“The ROI comes from building a culture of sustained high performance and reflection and building a diverse, inclusive environment where people from all walks of life can show up and do their best work,” Hardie said.

Ensuring that benefits are continually being added or thought about creates “loyalty, care, and the retention of your best people. There’s a real business case for it.”

Whiteside agreed. “This is a moment where the people-first organizations will really shine, while those who prioritize efficiency at all costs will start to see the consequences,” he said.