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February 6, 2023

As labor shortage drags on, companies continue to ramp-up employee benefits

PHOTO | CONTRIBUTED The Lee Company President and CEO Bill Lee in his Westbrook office.
By Skyler Frazer
U.S. workers’ most pressing concerns
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Employers for the last few years have offered higher pay, incentives and other new benefits to attract workers amid a tight labor market.

But with workforce shortages still plaguing countless industries — Connecticut employers reported 102,000 job openings in November — some companies are continuing to ratchet up employee perks, including offering benefits that remain far out of reach of most workers.

For example, The Lee Company — a Westbrook-based, family-owned manufacturer of miniature precision fluid control products — announced in January it was eliminating employees’ monthly medical insurance premiums without scaling back coverage benefits.

That runs counter to the national trend of workers shouldering more of their health insurance costs.

Phillip Montgomery

“In the past 10 years or so, finding a company that did that sort of thing became a rarity,” said Phillip Montgomery, the director of compensation services and safety at the Connecticut Business & Industry Association.

Companies are finding other ways to incentivize employees, Montgomery said.

Some are helping workers pay off student loan debt, or increasing funding for educational certification or degree programs.

Employers are also increasingly offering insurance options that help pay for elderly care.

Glenn Dowd

“That was a benefit that was rarely seen 20 years ago that’s now offered by employers with increasing frequency and not surprisingly, as we see our average age at death increasing and length of life increasing,” said Glenn Dowd, an employment lawyer and partner at law firm Day Pitney. “There’s a need to provide for people as they’re older and maybe need care but are not able to stay at home.”

Retirement benefits and planning are also a major focus as financial security has become an increasingly important priority for employees, said Teresa Bucello, a partner and Connecticut health practice leader at benefits consulting firm Mercer.

Teresa Bucello

Bucello said Mercer’s recent employee study found that covering monthly expenses was the No. 1 concern for workers in 2022. Supporting an employee’s financial goals could be key to retaining talent, she said.

“Right now employees are asking ‘how can you help me now?’ — and employers that are making very short-term decisions in terms of passing costs on are creating a longer-term issue because people are going to leave,” Bucello said.

Bucello said some companies are exploring the idea of offering workers lifestyle spending accounts that can be used to pay for health and wellness expenses such as gym memberships, but the concept hasn’t yet been widely adopted.

Child-care support is also trending up, she said.

Rising healthcare costs

Bill Lee, president and CEO of The Lee Co., said he’s been pitching the idea of fully covering employee health insurance premiums for about a decade.

The pandemic’s influence, particularly on employees, weighed heavily on the decision to move forward with the added benefit, he said.

“So many people talked to us about how valuable our healthcare system was to them, not just in terms of the physical side of getting health care, but the mental side of knowing that they were a member of a really good plan that had their back, and that they were going to be able to get care when they needed it,” Lee said. “It just sort of pushed us over the edge to go ahead and do it.”

The Lee Co.’s roughly 1,100 employees — spread across three sites in Westbrook and Essex — along with their spouses and families are covered by the new policy.

Their benefits remain the same, but they are still responsible for deductibles and copays.

Lee declined to disclose how much the expanded benefit will cost his business, but he hopes it can serve as a recruitment tool. Lee Co. — which also offers a profit-sharing plan, scholarship fund, tuition reimbursement and advanced manufacturing training, among other perks — plans to hire 30 to 40 additional staffers in the next eight to 10 months, he said.

In recent years, as health insurance costs have steadily increased, companies have been more likely to shift those higher expenses onto employees than do the opposite, said CBIA’s Montgomery.

CBIA, in an annual survey, used to ask board members whether or not they fully pay employee insurance premiums. Two or three decades ago, Montgomery said, about 15% of employers said they did, but that number gradually dropped into the single digits to around 5% or less.

Dowd, the employment lawyer, said spiraling health insurance costs are one of the major issues facing employers.

“And the reaction thus far for most employers has been to tell employees ‘we’re going to share more of these costs with you so that you are a partner with us in having these health insurance benefits provided to you,’” he said.

And costs are generally higher for a small business compared to a larger company that has more bargaining and purchasing power when shopping for health insurance plans.

“One big problem with a small company,” Dowd said, “is that you could have one person who has an expensive illness and that can really drive up your rates from year to year, as opposed to a larger company, where one person doesn’t have that kind of impact.”

Given the rising costs and overall economic uncertainty, Montgomery said he’s not sure eliminating medical insurance premiums will be a trend. Companies making the decision have to be committed to it, he emphasized.

“If I say I’m going to cover an entire premium, that’s something you probably want to commit to for some time — you don’t want to be in a situation where you’re giving it one year and taking it back,” Montgomery said. “To make that sort of commitment, you have to be really comfortable as far as your economic outlook, and probably not many companies are comfortable enough with their status at this juncture.”

Instead of passing on more direct costs to employees, Bucello said, many companies are offering lower-cost health insurance plans, but they often neglect certain coverages and have high deductibles.

“It’s definitely a balancing act and with the war for talent, employees are looking to their employers to help them manage this,” Bucello said. “When employees are talking about why they leave or are considering leaving an employer, right behind pay and workload is insufficient healthcare benefits.”

Here are U.S. workers’ most pressing concerns:

  • Covering monthly expenses
  • Being able to retire
  • Work load/life balance
  • Physical health and fitness
  • Mental/emotional health
  • Personal fulfillment and purpose
  • Job security
  • Personal debt

Source: Mercer’s Inside Employees’ Minds 2022 survey

 

 

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