Increasing inflation: Aon’s key considerations for employers looking to provide better support

As rising inflation starts to affect most locations around the world, there is a heightened requirement for employers to provide proactive support to employees who are facing increased living costs and a suddenly reduced buying power.

There are also wider ramifications; financial stress can negatively impact mental health. Employers whose workers are concerned about inflation and other volatile economic conditions could lead to increased physical and mental illness¹, reduced productivity, increased burnout², and higher turnover rates³. For many companies, increasing salaries in line with inflation is not a sustainable or achievable strategy. So how can employers provide support to employees who face increased living costs, whilst balancing parallel rising business costs?

¹ The link between money and mental health, Mind
² Mental Health and Substance Use, WHO
³ Rising Resilient Report, Aon

Build a Sustainable Working Life

In times of volatility, it is important that companies support employees in building strong foundations to help them cope with difficult situations. A business strategy which focuses on creating a sustainable working life will help employees navigate difficult times, whilst supporting wider company goals such as talent retention and attraction. A sustainable working life model consists of three parts:

• Agility: the ability to navigate change
• Belonging: a feeling of connection and support from a community in the working environment
• Resilience: the ability to weather change. Resilient employees report better concentration, motivation, enthusiasm, and job satisfaction

Building a sustainable working life starts with a strategy that focuses on building workforce resilience. It needs to be driven by real-world data; employers should know what employee needs are and how they vary across different demographics and geographies. It also needs to have a defined, quantifiable goal so that progress can be measured, addressed, and communicated. Companies need to be able to say where they are, where they want to be, and how (and when) they intend to get there.

Gather Better Data Insights

When faced with a vast amount of employee data, it can be difficult to know where to start. Competitor or industry benchmarking can help provide fuller insights; companies can overlay this with existing data around their own benefits offering, employee health risks, and benefits uptake. This can provide directional insight and a baseline for improvement.

Companies need to focus on getting the right data, in a separable format. It’s important for companies to know and be able to segment by employee demographics; there are currently five generations in the workforce – each have different benefit needs and different preference for delivery and communication. Inclusive communication becomes even more important for a global workforce, when there are different cultural expectations around communication channel and style; understanding benefits uptake and opportunities for improvement will help you refine your approach.

Meet Employees Where They Are

It may be the case that you are already offering benefits that can help employees control costs. One of the biggest drivers of increased benefit costs are higher employer medical costs; although historically they have typically outpaced inflation, we are currently seeing even higher costs due to worsening health and a stretched post-pandemic healthcare environment. In volatile economic times, it may not be possible or desirable to pass these increasing costs along to employees. This is where a resilience-led strategy can start to intervene; initiatives such as wellbeing programs and preventative health screenings can help employees stay healthier, leading to fewer claims. Similarly, many people postponed care during the pandemic – whether intentionally or due to reduced healthcare resource – leading to poorer health outcomes that require additional treatment later.

A company’s data on program utilization can be used to determine which programs need to be communicated better; are your employees engaging with wellbeing initiatives? Does uptake align to the key areas highlighted by employee research?

Focusing on Personal Finance

Although we are starting to see some companies provide increased remuneration to their employees, this isn’t always a practical option. Employers should audit the benefits made available to employees, and ensure that the intended demographic groups are aware and engaging with them. Voluntary benefits such as emergency childcare services, combined insurance products, and retail discount portals can all have an immediate positive impact on an employee’s personal finance. Companies need to proactively communicate these services to their employees, remove barriers to uptake, and reinforce their availability at key engagement times – for example, retail discounts ahead of celebratory holidays or childcare during school breaks.

Companies should also consider the financial literacy of their workforce, and provide support to improve their personal finance management. Are employees aware of financial best practices? Are they saving enough for retirement? Are they managing their everyday expenditure in an efficient way? Financial education sessions can help support employees with their short-term and long-term financial goals, and catalyze positive financial behavior change, and yet Aon’s research shows that only 37 percent of companies do not provide financial for long-term goals (excluding retirement).

Creating a Globally Inclusive Strategy

Employers need to ensure that they review their benefits strategy through an inclusive lens; how can you address key issues highlighted elsewhere? For example, are female employees taking higher amounts of unpaid leave due to ad hoc caring commitments? If so – could an emergency care benefits program help address this inequality?

Additionally, inclusionary benefits like providing tools to help employees access culturally relevant care can help establish trust with employees that the company is offering benefits that truly meet their needs.

Different cultures, systems, and laws mean that benefits are never truly the same from location to location. To ensure equity, companies should establish minimum standards that align to the company’s values. Again, benchmarking can be useful here – as well as a deep understanding of local legislations and convention. A globally consistent approach may not always be achievable, but there will be providers who can provide support to bridge the gaps in legislated offerings.