The impact of rising inflation on employee benefits

The impact of rising inflation on employee benefits

As the global economy faces significant challenges in terms of the increased cost of food, commodities, and energy; financial well-being has been top of mind for everyone – not least of all, the organisations operating in this high-inflationary environment, facing a massive increase in costs and a potential global recession.

In addition to general inflation, organisations are facing the rapidly rising cost of healthcare and the additional impact of medical inflation which can be as high as six or seven percentage points above general inflation, leaving many employers weighing up health and well-being benefit packages.

“Organisations need to be careful because if they were to cut down or take something away, naturally they would lose their workforce and be left mitigating the negative employee feedback,” said Sukhikh. “Not providing the support that employees expect is something we want to avoid.”

So how can employers look at tightening their belts to manage the rising costs and continue to support employees living with the cost-of-living pressures?

“Don’t do anything rash,” said Marina Sukhikh, director of analytics, health solutions in the APAC region at human capital solutions company Aon. The worst thing you can do is act on the existing pressures immediately without thinking about the long-term impact.”

There is a plethora of data outlining the increased importance of benefits to employees, in fact, some experts argue that benefits are more important than compensation when it comes to managing health. Mental health and financial well-being are inextricably linked so ensuring the mental health of your employees as they face the pressures of the high cost of living is of utmost importance.

The best thing you can do is understand the way your program is currently performing, where your risks lie and figure out how to mitigate those risks,” Sukhikh continued. “Understanding your employee populations utilisation data is the most important measure you can take to stay ahead of current risks.”

Reviewing your medical utilisation data

Understanding medical utilisation starts with conducting a deep dive into your organisation’s claims data. Analyse what your employee population is doing, where they are going, what they value, and what choices they are making in terms of providers and treatments.

From that data, you can then identify opportunities for intervention and evaluate those opportunities on a scale of, what are the immediate gains or changes you can make to tighten the program while minimising the impact on employees and then apply them to the mid and long-term.

Why is offering health and well-being benefits so important in APAC?

If we look at America, going to a counsellor or seeking help when you’re stressed has become a societal norm that is openly accepted but in APAC, that is not really the case. There is still a stigma attached to having poor mental health or asking for help with mental health issues, so employees are more likely to hide that they’re struggling.

“Relying on an individual to recognise they have a problem and get the help that they need is not going to get you very far,” said Sukhikh. “But the endpoint of having good well-being in your workforce is productivity, engagement, and employee satisfaction.

Aon has just released two new reports: The Impact of Inflation on Employee Benefits, and The Global Medical Trends Report which together aims to give employers insight on how to mitigate the effects of inflation on their workforce.