It is clear that America is currently experiencing consistent inflation at a level not seen in decades. Driven mainly by higher energy prices and housing costs, inflation is now beginning to spread throughout the entire economy. What does it mean for employee benefits?
When high inflation becomes embedded in an economy, it touches everything. Everything costs more – from food to fuel and utilities. Employee benefits cost more as well. Higher benefit costs force both employers and employees to make adjustments. The scope and seriousness of those adjustments varies.
Higher Health Insurance Costs
The most visible impact of inflation on employee benefits is the cost of health insurance. Premiums go up along with everything else. Unfortunately, both employer and employee feel price hikes directly. Employers may try to absorb as much of the cost as possible, but some of it inevitably falls back on the employee.
When inflation is high and persistent enough, it can lead to employers seriously considering dropping their group coverage. There comes a point when they can no longer afford the premiums. They know that saddling their employees with the increase will only make it more difficult to retain the workforce.
Cutting Underutilized Benefits
One of the workarounds to higher health insurance premiums is cutting underutilized benefits. These are benefits that the company is paying for but not seeing much participation in. Any money saved from cutting such benefits can go back into covering higher health insurance premiums.
Eliminating the ‘Extras’
Inflation tends to cause employers to eliminate whatever it can to save money. Employee benefits offered as ‘extras’ are often on the table. For example, free lunch every day is an expense companies can do without. So it gets the axe. Likewise for the company box at the downtown baseball stadium and the free memberships to the wholesale store.
Employees Have to Cut Back, Too
Employers are not alone in having to cut back during periods of high inflation. Their workers need to do the same thing. Cutting back on the extras is the most painless way to save when money is tight. For many people, this means going out to eat less frequently and putting off purchases of new clothing, new vehicles, etc.
Cutting back gets more serious when employees need to start considering healthcare. One worker may decide to forgo his prescription medication because his out-of-pocket cost is too high. Another might decide to not see the doctor because she cannot afford the co-pay. Neither situation is good.
No Easy Solutions
Inflation’s impacts on employee benefits are very real. Employers and their workers need to face the fact that there are no easy solutions. From the employer’s perspective, Dallas-based BenefitMall encourages looking for new and innovative ways to provide employee benefits that enhance hiring and improve retention.
Still, every new benefit comes at a cost. When the money is not there, employers need to be more circumspect about what they offer. At the same time, employees must wrestle with the idea that their companies do not have the extra money to spend. There is always the temptation to go look for work elsewhere. But will other companies not be in the same boat?
The thing about inflation is that it does not discriminate. It affects everyone and everything. When it is excessive and persists for a prolonged period, inflation has the ability to completely wreck an economy.
Here’s hoping that our economy isn’t headed for an inflationary disaster. Here’s hoping inflation settles back down to manageable levels. In the meantime, it will continue impacting everything from the weekly grocery bill to our employee benefits.