Pressure to contain skyrocketing employee benefits costs is prompting many organizations to reexamine their offerings. A handful of high-profile benefits pivots in recent weeks shed light on just how complex—and potentially controversial—such decision-making is.
Starting next year, consultancy Deloitte will scale back benefits offerings for a select group of employees, particularly around family-building resources and time off; the latter is also the focus of a benefits shift at tech giant Zoom.
Wes Cowen, national practice leader for employee benefits at OneDigital, says that, while the Deloitte and Zoom announcements have made headlines, the two organizations are not outliers, as companies grapple with balancing talent investment with rising costs.
“Employers across America are facing similar challenges,” Cowen says. “We are in an environment I haven’t seen in the 25-plus years I have been in this industry.”
The cost of employee benefits, particularly around healthcare and pharmaceuticals, is driving a complete reimagining of benefits strategy at many organizations, Cowen says. Many are considering a hard “reset” of benefits design.
“The trend has elevated long enough that many employers just can’t absorb it anymore,” Cowen says.
At Deloitte, that reality means that employees who are considered part of its “Center” model—largely internal support staff like IT and admin—will have their benefits offerings trimmed come January.
Specifically, these employees will have the amount of paid family leave available to them cut from 16 weeks to eight and PTO reduced by one to two weeks, to between 18-25 days, according to Business Insider. They also will no longer have access to a $50,000 stipend that can support family-building efforts like IVF, surrogacy and adoption.
Family-friendly benefits are often considered highly valuable to employees. A recent study from KinderCare found that 85% of employees view childcare benefits on par with healthcare and retirement benefits. Another recent report highlighted just how important employees considered paid family leave: Among employers that rolled out such a plan, three-quarters saw boosts to talent attraction and retention.
That offerings related to time off and family-building were trimmed for just one subsection of the workforce was heavily criticized in online reaction to the news.
“Deloitte sent a message that the contributions of the employees in certain jobs and groups are valued less than others in the company,” wrote HR leader and career coach Laurie LeBlanc on LinkedIn.
Grace Jaén, REBC®, CHRS, VP of Health & Welfare at GA& Partners, notes that the decision likely illustrates that Deloitte’s talent strategy is prioritizing roles outside of the Center model.
“Not all roles are equally scarce or valuable in the market,” she says. “If benefits are reduced—or enhanced—for one group, it reflects how the firm views that group’s bargaining power, replaceability or future importance.”
Paid family leave is also on the chopping block at Zoom. Currently, employees who give birth have access to 22-24 weeks of paid leave, which will be reduced to 18 weeks next year; non-birthing parents will have their leave offering slashed from 16 weeks to 10.
Jaén notes that parental leave typically has one of the highest costs per user, and isn’t applicable to most employees, making it a prime target for organizations focused on driving down costs. Yet, the offering, she says, “does illustrate an organization’s emphasis on employee culture and eliminating it sends a strong message.”
Axing family-related benefits raises the question of a disparate impact of benefits pullbacks on female workers, who are already facing unbalanced caregiving pressures—particularly post-COVID—that puts workplace equity further in the crosshairs.
According to recent research, women are five times more likely than men to say they’ve left the workforce because of caregiving.
Executive coach Susan Colantuono wrote on LinkedIn that both Deloitte and Zoom’s actions will have a “gender-adverse impact” on their current and future workforces—and they could prompt more employers to follow suit.
“What’s more alarming than Zoom and Deloitte? The precedent,” she writes. “When marquee employers move, others follow. We’ve seen it with DEI rollbacks. We’ve seen it with RTO mandates. Paid leave and PTO are next.”
Redesigning for value
Managing benefits costs in a way that doesn’t negatively impact talent strategy will require a close alignment with what employees really want—and an understanding of where the avoidable costs actually are.
Instead of straightforward cuts to offerings, employers should first recalculate, Cowen says—and HR is “best-equipped” to ensure the C-suite keeps employees needs at the forefront in such assessments.
OneDigital’s Employee Value Study highlights how current perception gaps can be exacerbating the challenge: Despite hefty employee benefits spend, the study finds, offerings often miss the mark—and drive up unnecessary costs—because they are one-size-fits-all, and don’t align with how employees shift the value they place on benefits as they progress in their career and personal life.
“HR leaders need to inform key decision-makers on what it is that employees value,” Cowen says. There will be tradeoffs, he emphasizes—employers can’t meet every single benefits need for the entire workforce population. However, a “comprehensive total rewards package” that checks the most boxes for the most employees can keep the organization competitive.
For instance, Cowen points to GLP-1s. His firm is increasingly connecting with employers looking to meet high employee demand for the weight-loss drugs without the investment being an impediment—which requires a long view of both financial cost and employee value.
“These drugs are driving pharmaceutical spend today, but what are the long-term effects?” Cowen questions. “Could it help offset medical costs down the road?”
Such questions need to be part of a total reassessment of benefits design and delivery to make the investment in offerings generate long-term ROI.
“The levershouldn’t just be cutting benefits—it’s looking to determine how do you redesign a plan focusing on how care is accessed, where it’s delivered and how providers and partners are held accountable,” Cowen says.
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