Economic trends like high inflation and uncertain job markets impact how employers prioritize spending and employee benefits. Fortunately, PEOs can help brokers and small and medium-sized businesses navigate these challenges successfully.
The state of the economy impacts nearly everything. People limit their spending during high inflation periods. Companies may have to lay off workers if consumer preferences change and no longer favor their products. Employers must carefully assess the costs of hiring new positions or investing in fresh technologies.
It’s no secret: when inflation is high, budget cuts are more likely.
It doesn’t come as a surprise, then, that negative economic trends can limit the employee benefits employers, especially small and mid-sized businesses (SMBs), offer. SMBs will try to control costs while balancing the need to offer the competitive benefits that top employees want.
This post discusses the economic trends that are impacting employee benefits in 2024 and how professional employer organizations (PEOs) can help SMBs and brokers come out on top.
The average annual premiums for employer-sponsored health insurance rose by about 7% in 2023.
Inflation and rising healthcare costs
It is no secret that inflation has been one of the most impactful economic trends in recent years. In June 2022, the inflation rate hit its peak at 9.1%. Compare that to May 2020, when the rate was 0.1%. Inflation has been falling, but it’s still relatively high. When inflation is high, everything from food to gas to clothing to medical care can see price increases.
A study from KFF found the average annual premiums for employer-sponsored health insurance rose by about 7% in 2023, with a similar spike expected in 2024.
The Impact of Economic Trends on Employee Benefits in 2024
Inflation, while not as high as its peak two years ago, continues to impact spending and healthcare costs.
51% of employers report that inflation has impacted the benefits they can offer in 2024.
The job market continues to be uncertain.
PEOs help businesses deal with these challenges through education, competitive benefits and operational efficiencies.
McKinsey estimates that by 2027, healthcare costs will be $370 billion higher than projections before the pandemic.
Health insurance is the top benefit employees seek. Pair this fact with rising healthcare costs, and you see that benefits are often more important to them than salaries.
In addition to rising inflation and healthcare costs, the job market has seen large shifts impact SMBs and employees alike.
A fluctuating job market
The last few years have seen monumental shifts in the job market, from record layoffs to business closures to skyrocketing unemployment rates. While job growth and unemployment have leveled off for now, the future of the market is still uncertain.
Other economic trends are also impacting the job landscape – for instance, the Federal Reserve’s plans to cut interest rates and companies needing to provide more competitive wages to attract top talent.
Employers need to pay attention to trends like monthly jobless claims and new jobs added to assess growth and whether it’s a job-seekers market or an employers’ market.
Understanding where the market is helps businesses pinpoint critical moments to step up their benefits packages versus cutting costs.
How PEOs help brokers and SMBs navigate economic challenges
This information may sound daunting, especially because a variety of factors go into determining economic health and assessing job market trends. The future may be harder to predict when the economy is still in recovery mode after a global pandemic and its severe after-effects. How do SMBs balance everything effectively as employers in this climate?
The good news is that PEOs can help with the balance. Here are just a few of the ways brokers and SMBs can benefit from PEO partnerships:
Education
Staying on top of economic and employment trends requires continuous learning and research. PEOs keep up with the greater market to keep employers abreast of best practices to meet the moment.
PEOs are experts in matters related to human resources, which includes tracking economic and employment trends.
Competitive employee benefits
It sounds pretty straightforward to simply offer competitive benefits to attract employees. It’s harder in practice, however, especially when the economy is impacting budgets and employee support trends.
PEOs helps organizations balance costs and benefits effectively - accessing affordable coverages and focusing on the benefits employees care about most.
PEOs can help SMBs access options that are usually only reserved for larger companies, which provides them a competitive edge.
Operational efficiencies
Human Resources encompasses many moving parts aside from benefits. Each process, from payroll to compliance to training, needs a dedicated system that runs efficiently and connects to all other company systems. A company’s ability to do this effectively can make or break the bottom line.
PEOs incorporate the latest trends that help businesses stay more agile, whether that’s by utilizing more efficient technology or speeding up a once-cumbersome process. For example, PEOs can:
- Help businesses implement a benefits administration platform where employees have more control.
- Educate employees on how to manage their benefits, make leave claims and more.
- Provide transparent, easy-to-understand employer contribution cost comparisons.
- Take the burden off management when it comes to administering benefits.
PEOs incorporate the latest trends that help businesses stay more agile, whether by utilizing more efficient technology or speeding up a once-cumbersome process.
Successfully balance economic trends with better benefits with PrestigePEO
One of the best decisions you can make for your business and employees is partnering with a PEO. A PEO will help you deal with uncertainties in the economy and job market, whether they are related to inflation and rising healthcare costs or increasing wages and benefits expectations.
PrestigePEO provides one place to meet all of your Human Resources needs. We offer comprehensive solutions to help you ensure ongoing compliance, payroll efficiencies and top-tier employee benefits so you stay competitive and in line with market trends.
Contact PrestigePEO today to learn more about our PEO services for brokers and SMBs.
