To attract and retain talent in a tight labor market while helping employees address sky-rocketing costs, a new study finds that U.S. employers are pursuing innovative new ways to improve their employee benefit plans.
One such option, according to the Goldman Sachs Ayco 2023 Benefits & Compensation Trends in Corporate America Report, is paid-time-off (PTO) conversion programs, which allow employees to buy and sell their vacation days for compensation.
Indeed, some companies are now allowing employees to convert vacation time to cash, 401(k) or HSA contributions, student loan payments, and charitable contributions (including donating days to other employees).
The report points to a 2021 EBRI workplace wellness study that found that 25% of employees said a PTO conversion plan would be the most valuable improvement to their employer’s benefits program. This option is currently offered by 23% of Goldman Sachs’ corporate partners and the most common amount is up to five days (40 hours).
Following open enrollment last year, Goldman Sachs Ayco analyzed the benefits offered at 400 companies where it provides corporate-sponsored financial counseling. The most common themes that emerged for 2023 are inflation-driven cost control, and diverse and equitable benefits for retention and recruiting. These trends build on findings from the firm’s 2022 analysis, which showed a focus on expanding mental and financial health benefits; adding a diverse mix of voluntary benefit programs; and expanding family planning and caregiver benefits.
“The persistence of higher-than-expected inflation has created significant financial challenges for the U.S. workforce,” said Kathy Barber, Vice President and Head of Corporate Benefits & Compensation at Goldman Sachs Ayco. “Forward-thinking companies want to help their employees navigate these challenges, leading many to enhance the suite of benefits they offer. It is a powerful statement that shows companies understand and appreciate their employees,” she adds.
Competitive Differentiators
Additional findings show that among Goldman Sachs Ayco’s corporate partners reviewed, 74% offer a Non-Qualified Deferral Compensation (NQDC) plan as part of executive compensation. Of these, 64% limit eligibility to senior management. But companies are expanding eligibility requirements: 35% of companies base qualifications on compensation instead of title, up from 25% two years ago. The benefit’s prevalence also varies by industry; for example, only 63% of tech companies offer a plan, compared to 37% of pharmaceutical and general industrial companies.
The survey further showed that 87% are contributing more than $500 to employee health savings accounts (HSAs) to help ease inflationary burdens, and 22% are also switching to matching formulas and/or adding wellness incentives for these contributions, helping to encourage employees to save more and drive greater utilization of HSAs.
Lifestyle spending accounts (LSAs)—also known as lifestyle benefit programs or wellness spending accounts—are another emerging trend. These after-tax accounts allow employers to reimburse employees for defined types of expenses while giving employees flexibility to leverage support for the benefits and expenses most important to them.
Some examples of LSAs corporate partners now offer include:
- $800 reimbursement accounts for over 50 expenses (including gym memberships, student loan repayment, ID theft protection, tax preparation, and care for loved ones or pets);
- $2,000 annually for voluntary benefit plans (premiums for group life, supplemental health or property & casualty insurance, and group legal coverage); and
- $2,000 annually for wellness-specific items (gym memberships, nutrition and weight management programs, and mental and behavioral health support).
Meanwhile, child and elder care assistance benefits are the top growing programs at Goldman Sachs Ayco’s corporate partners, up 177% in the last three years, with 55% now offering them. Pet insurance has surged 120% over three years. Access to fertility, adoption, and surrogacy benefits is rising, with 60% of companies (40% in 2022) offering adoption and surrogacy reimbursements, most commonly up to $10,000.
The six most common voluntary and ancillary benefits reportedly offered are:
- Mental health – 95%
- Group legal plan – 73%
- Personal accident insurance – 69%
- Critical illness insurance – 68%
- Identity theft protection – 62%
- Pet insurance – 58%
Beyond Employee Assistance Programs, many companies also offer virtual and on-demand services, self-help apps, community forums to connect on mental health concerns, and manager training to open constructive dialogues with employees on their wellbeing.
“To support the needs and desires of the increasingly diverse U.S. workforce, one-size-fits-all approaches will no longer work, if they ever did,” says Lauren Uranker, Managing Director and Head of Corporate Relationship Management at Goldman Sachs Ayco. “Supporting the physical, mental and financial wellbeing of employees is leading more and more employers to offer holistic programs of personalized, voluntary and ancillary benefits that can meaningfully improve the lives of their employees and improve satisfaction and retention.”
The findings are based on a May 2023 analysis of compensation and benefit offerings at 400 U.S. companies where Goldman Sachs Ayco Personal Financial Management provides corporate-sponsored financial counseling.
