The past several years have brought about a fundamental reconsideration of how and where employees work to a new set of workplace norms and expectations. As companies attempt to navigate these shifts, they will also need to confront difficult economic circumstances. While the labor market cooled throughout 2023, it’s still running hot.
With the rapid development of AI, automation and other disruptive technologies, companies will face significant skills shortages over the next several years. Talent competition is intense, employee engagement is perilously low (which increases turnover risk) and skills gaps are growing. All of this requires effective talent acquisition and retention programs with robust benefits that will attract qualified candidates and make them more likely to accept an offer.
Economic Uncertainty Will Affect Recruiting in 2024
Employees quit their jobs at an unprecedented rate throughout 2021 and 2022, thanks to shifting needs and demands created by the pandemic and surging inflation. These factors contributed to an extremely tight talent market, forcing companies to raise wages more quickly than they have in decades.
Although the Great Resignation has ended, inflation remains high, and there are still more jobs than employees available to fill them. This year could also bring new obstacles for recruiters. For example, the OECD Economic Outlook projects that GDP growth in the US could fall from 2.4% in 2023 to 1.5% in 2024, but salaries are still expected to keep rising more quickly than average. This could put pressure on HR budgets, which have already fallen after an influx in spending following the pandemic.
Companies may attempt to stretch their budgets by decreasing spending on hiring and retention initiatives and offering more voluntary benefits (which impose more significant costs on employees). But there are other ways for recruiters to navigate this difficult economic terrain in 2024, such as benefits that provide greater ROI.
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Companies Will Rethink Their Approach to Benefits Next Year
A benefit won’t help you recruit and retain top talent if it does nothing to distinguish your company from competitors or (even worse) isn’t embraced by employees. PTO is one of the most ubiquitous benefits, but is widely underused. According to a recent Pew survey, less than half of employees take all their time off. This should be a red flag for recruiters, as companies can’t attract candidates with benefits they don’t want.
One way to address this problem is to provide benefits that employees want. For example, over three-quarters of employees say they’re “ready to learn new skills or completely re-train.” It’s no wonder that employees focus on professional development – 69% of HR professionals and managers say their companies are contending with skills gaps. In comparison, 82% of company leaders report that employees need new skills in the AI era.
Companies will start to prioritize direct financial support as more employees are asking their employers for assistance For example, the SECURE Act 2.0 was signed into law at the end of 2022, which helps employees save for retirement with measures like employer matching for Roth accounts and automatic enrollment. HR teams must inform employees about these changes and help them pursue long-term financial planning.
A Major Trend Driving New Benefits Strategies
Covid-19 and its aftermath fundamentally changed the relationship between employees and employers. This is most evident in the demand for greater flexibility: remote and hybrid work, on-demand pay and other benefits that address employees’ unique needs.
While many companies are trying to get employees back into the office, physical attendance is still 30% lower than before the pandemic, and most employees embrace remote work. A 2023 survey found that employees value workplace flexibility more than incentive pay, generous PTO and retirement plans. Beyond remote and hybrid work, employees also want on-demand pay and other flexible benefits — like using their accrued PTO for other financial goals, such as paying off student loans and saving for retirement.
Although 2024 will be a challenging year for recruiters, it will also present many opportunities for those willing to think creatively about how they support their workforces. When companies demonstrate that they’re committed to flexibility and fully supportive of employees’ financial and professional aspirations, they will have a critical advantage in the talent competition.