Learn what it takes to build up your total rewards program to attract and retain top talent in a tumultuous labor market.

Authors: Seth Friedman Tom Rylko


Circumstances created by dramatic market changes are compelling employers to refresh their benefits approach. Top priorities include steadily increasing attraction and reducing the pace of attrition. As they consider the future, interests also center on what it would take to be just a step ahead of competitors in the talent race.

Recognizing that it's far more expensive to chase best-in-class wages than it is to establish best-in-class benefits, employers are shifting their focus to enhancing the employee value proposition while optimizing spend. When confronting high turnover and job vacancy rates, lowering the frequency of occurrences takes precedence. This is an important first step that decreases premium pay and slows the loss of intellectual capital.

Benchmarking provides a current view into what the organization offers compared to the market. Where healthcare is concerned, many employers are expanding their analysis beyond just deductibles and copays. They're including forward-thinking metrics such as ranking highly on the Disability Equality Index and evaluating how they support inclusive policies and practices.

Besides external comparisons, sourcing internal information directly from employees is necessary to identify the benefits they value most, and why. Methods may include focus groups, surveys and other listening formats — with content designed to avoid the assumption that HR understands population preferences.

Benefits need to meet individuals where they are by allowing enough flexibility to appeal to employees — of any generation — at all life stages. Reevaluating standard practices can reveal opportunities to add flexibility, customization or shorter-term solutions. Because younger generations often want more rapid reinforcement for their financial and career mobility interests, they're less likely to be satisfied with annual assessments and change cycles.

Benefits need to meet individuals where they are by allowing enough flexibility to appeal to employees — of any generation — at all life stages.

High rankings for paid time off (PTO), retirement, and medical and pharmacy benefits

Benefits preference surveys are important tools for determining what employees value most, identifying current strengths and key opportunities, and prioritizing related decisions and investments. Yet collective bargaining sensitivities, concerns about unmet participant expectations and the risk of professional exposure have limited their use.

While there are other reasons, the growing need to optimize the power of total rewards to attract and retain talent is overcoming these fears. Conducting surveys every other year builds a quantitative foundation for sharper qualitative insights from formats such as focus groups.

A recent evaluation of three dissimilar organizations compared commonalities and differences in benefit preferences, and focus groups allowed each one to closely examine why. Paid time off (PTO) was the most important benefit for all, followed by retirement and medical and pharmacy benefits.1

Use benefits preference surveys to determine the benefits employees want most, identify the strengths of those benefits, and prioritize decisions and investments.

Making flexibility and choice the defining element of PTO benefits

Employees have become more vocal about needing more flexibility, including time away from work. A PTO study can help employers determine the factors that are most likely to effectively address this high priority. Findings are also used to assess whether the entire spectrum of absence benefits is market competitive, based on factors such as overall desirability, optimal paycheck protection and financial sustainability.

Specific PTO indicators include thresholds for years-of-service tiers, maximum balances, the availability of a cash-out program and separate holidays. Allowances such as carryover and front-loading may also be evaluated. Shortening timelines for retirement vesting or PTO accrual tiers, from a span of five years to two or three, rewards employee loyalty.

For the employer as well as the employee, a choice of PTO options adds flexibility, especially when time-off requests can't be approved or the requester wants to defer preapproved vacation days. Policies that allow employees to choose other forms of compensation instead of time away from work introduce customization. Some alternatives are converting PTO to cash or a payment toward health premiums, and funding a non-highly compensated employee's retirement account. Another option is donating time to fellow employees who are confronting a medical emergency or recovering from a major disaster.

The importance of competitive retirement plan design and educational opportunities

A retirement study can help determine if plan contribution matching practices and vesting schedule parameters are market competitive. Some employers match employee contributions annually. Others invest an amount every payday along with the employee's 401(k) contribution, allowing participants to benefit from the time value of money as they buy into the markets. Considerations for shorter vesting periods include immediate rather than gradual schedules and matching throughout the plan year instead of at year end.

Many employees are looking for investment and retirement guidance. Offering educational sessions by topic, covering a wide range of interests across career stages, can provide broad support for building deeper knowledge and confidence. An annual calendar with reminders strengthens this value by helping to drive use.

Offering and actively managing medical and pharmacy benefits without increasing costs

Reluctance to take away or change employee programs and services continues in the current labor market, especially high-priority benefits such as medical and pharmacy. Instead, employers are considering ways to shrink costs without requiring employees to share them.

Strategies and interventions in the pharmacy category generally present the most opportunity, including regular contract negotiations and market checks, and the use of a specialized pharmacy consultant. Better terms, discounts and rebates can shift costs out of the health plan without transferring them to employees.

Plan vendors typically cover medication at the end of a presentation, and it's important to stay tuned. As these costs trend upward on the medical services side, employers need ample time to become familiar with management tools available to them and the future impact of the pipeline on gene therapy and other medications. Pipelines for gene and cell therapies are expected to expand to larger populations as oncology innovation increases. Projected growth for the specialty pharmacy market is 8% per year through 2025.2

The increasing role of innovation and technology in decreasing costs and improving health outcomes

Precision medicine, which considers a person's genetics, environment and lifestyle, also brightens the horizon for cost control and population health. This approach is designed to identify the right medication when the initial diagnosis is made, averting trial and error or needlessly maximizing the dose duration of specific therapies. Alternative funding programs are another option when the goal is to remove plan costs without shifting or compromising care. Organizations can use these programs to access patient or manufacturer assistance dollars, which help to absorb medication costs.

Rising adoption of biosimilars is projected to save approximately $100 billion in US drug costs between 2020 and 2024. Compared to branded reference products, these drugs are estimated to be as much as 35% less expensive.2 Health plans that steer members toward the therapy with the lowest net cost can maximize the potential gain for employers.

On a related front, health plans and pharmacy benefit managers (PBMs) are starting to integrate programs into member engagement engines. A key purpose is to alert patients to potentially less expensive sources of medication. Wellbeing and point solution integration also shows promise for helping patients achieve better health outcomes, such as behavior-based reversal of type 2 diabetes.

This tech-enabled approach supports adherence and helps identify opportunities to reduce or eliminate medication when the patient's needs change. Unnecessary expenses that remain in plans can be removed, while an enhanced employee experience can be reached with little or no added cost.

Keeping the workforce aware of the extent of their total rewards is a pivotal requirement. Employees need to understand all the dimensions of their benefits for modernization and customization efforts to succeed. When these options are clearly cataloged and easily accessed, employees can readily see how to use them most effectively, either alone or in combination. Regular communications are also instrumental. For employers, it's a matter of closing the distance — through connections that instill a sense of appreciation for both personal and organizational value.

Author Information


1Gallagher internal data, Oct 2022.

2Carter, Harold. "Three Specialty Drug Trends to Prepare for: Biosimilars, Gene and Cell Therapies, Cancer Drugs," Evernorth Health Services, 20 Apr 2022.


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