How inflation is impacting employee benefits

It’s important to keep in mind that inflationary pressures—and their impact on employees—are likely to persist. Recent data from the Producer Price Index (PPI) indicates prices may continue to rise as underlying producer price increases are pushed through to consumers. Currently, the reported 10.8% increase since May 2021² means prices will likely remain high for a while.

Ways employers can help

Corporate partners of Goldman Sachs Ayco are beginning to implement benefit solutions to help employees gain increased clarity and confidence in their financial lives. Through these optimized benefits, employers can demonstrate they understand the pressure employees are facing in the current climate.

Over 600 HR managers said they’re considering additional benefits or salary increases this year as a response to inflation in a recent Mercer compensation survey.³ Some of these additional compensation measures include:

• One-time bonuses given as a "market adjustment" in recognition of consumer inflation, or an employee appreciation bonus
• Minimum wage increases to a minimum or average hourly rate of $15 or more
• Short-term pay increase to aid hourly workers. One company recently increased their hourly wages for a 6-month period
• Restructuring merit pay raises by holding more frequent assessments, shifting from performance-based raises to flat percentage increases and increasing average raises by as much as 100% at some companies

Many companies also are expanding benefit offerings to help employees stretch their dollars and better realize the value of their work, in recognition for all they do. Expanded offerings include:

• Financial wellness. 80% of employers have begun addressing the financial well-being of their employees and 63% of employers expect to increase their financial wellness budget in the next one to two years.⁴ Goldman Sachs Ayco’s financial wellness benefits help employees maximize the value of their benefits and compensation through personalized guidance delivered one-on-one by experienced financial professionals.
• Voluntary benefits. The majority of our corporate partners now offer voluntary group-priced benefits, including insurance coverage, child- and elder-care support, and student loan repayment assistance. Increasingly, employees expect these as part of a competitive benefit package.
• Employee discount programs. These provide discounts on one-time and ongoing expenses and services—like retailers, restaurants, and tax, legal and financial services. They can also be an excellent recruiting and retention tool at a low cost to employers.

Innovative ideas

Leading companies also are offering new financial assistance opportunities, aiming to meet the needs of all employees, at no cost to them. Here are just a few innovative ideas to attract and retain top talent:

• Lifestyle spending accounts. Also known as lifestyle benefit programs or wellness spending accounts, these after-tax accounts are funded exclusively by the employer. Employees can allocate the funds for benefits and expenses of their choice. Some examples from our corporate partners include:
  • An $800 reimbursement account that can be used for over 50 expenses—including gym membership, student loan repayment, ID theft protection, tax prep and care for loved ones or pets
  • $2,000 annually directed toward certain voluntary benefit plans like premiums for group life, supplemental health or property & casualty insurance, and group legal coverage
  • $2,000 annually that can be used for wellness-specific items—like gym membership, nutrition and weight management programs, and mental and behavioral health support
• Emergency savings accounts. Employers are supporting their employees through these accounts in a variety of ways:
  • Banks and credit unions sometimes offer convenient payroll deduction programs with favorable savings rates. Some companies make after-tax contributions to these accounts to incentivize savings. These contributions can be structured as either a match or fixed amount once the employee’s balance reaches a certain threshold.
  • By matching after-tax 401(k) contributions, companies can help employees build emergency funds accessible through in-service withdrawals. There are currently several proposals in Congress to potentially allow for more tax-advantaged employer assistance in this area.
• PTO conversion. During the COVID-19 pandemic, many employers began to revise their PTO policies to provide more flexibility for employees. We expect the number of companies that offer some form of PTO conversion to continue increasing. Commonly, our corporate partners are allowing up to 1 week of vacation to be converted per year. Although many companies only permit a conversion to cash—also referred to as a buy-back program—we have also seen the option to direct these funds toward student loan payments, 401(k) plan contributions or 529 savings plans.
• Special equity grants. We have seen a small but growing number of corporate partners expand compensation by making one-time or off-cycle equity award grants. Some companies have made grants available to employees who normally wouldn’t receive these awards. A larger number of companies are expanding their long-term incentive plans (LTIP) to provide all employees with equity awards. This trend varies widely by industry. While close to 30% of our corporate partners in the technology industry offer LTIP awards to all employees, it’s only 10% in the industrial sector.

These solutions may help meet the needs of your complex and diverse workforce as they face the impacts of inflation. As your employees navigate the current environment, Goldman Sachs Ayco can help them maximize the value of their benefits and compensation, save time, and increase confidence over their financial life—while helping your company increase retention. We can also support your HR team by becoming a pulse on your employee population and delivering insights to help guide benefit decisions moving forward.