The US economy has been growing for just over a decade, and it remains strong.
There are more jobs, and workforce participation has increased for some groups. However, growth has slowed somewhat, and with a trade war with China and weakened economies elsewhere in the world, concerns about a possible recession continue to mount.
It’s impossible to predict how the job market will be impacted if and when a cyclical recession hits. However, there are some important demographic differences between 2006 and today that you’ll need to consider when thinking about the potential impact of a recession on your business.
First, workforce participation overall is decreasing. Part of this is fueled by an aging population in which around 10,000 people turn 65 each day, a trend that will continue until 2032. Additionally, more young people are deferring entering the workforce to gain post-secondary education. In the past, immigration has helped mitigate some workforce challenges, but that has slowed significantly.
So, just what might these continuing pressures on the US workforce mean to your benefits program in the face of a recession?
While jobs growth is associated with the currently strong economy, it’s also the result of demographics. (You don’t need advanced math skills to accurately predict that people born in 2019 will be 10 years old in 2029.) We can’t manufacture additional workers, which means we are facing continued competition for talent, especially without the influx of resources through immigration. According to Korn Ferry, “by 2030, the United States could experience unrealized revenue of $1.78 trillion due to labor shortages, equivalent to 6% of its entire economy.”
Benefits are a powerful recruitment and retention tool, and with a continued projected talent shortage, cutting back is likely not going to be as viable a cost-saving option as it was in the Great Recession. This is especially true if you are faced with freezing wages or scaling back the workforce. This is exactly when you need to retain your most productive star performers. However, these people will continue to be in high demand, and they may be happy to jump ship for better benefits, especially if pay is stagnant or there are reductions in things like bonuses or office perks.
And, benefits aren’t going to get less complex. Employees will continue to expect—and potentially demand—robust programs that can be personalized for their unique needs, enabling them to create an appropriate suite of coverage that provides a strong safety net, especially when so many employees face financial challenges. This includes not only traditional benefits like healthcare, but also financial programs and voluntary benefits.
In an economic downturn, you need to drive efficiency. It’s likely you’ll be tasked with continuing to field complex benefits while also thinking and acting strategically to address the resource shortage. This might also include sourcing different kinds of talent, including people skilled in leveraging AI-based solutions to drive business results. And, you might be asked to accomplish all this with reduced headcount in your department or on your team.
Benefits administration solutions that leverage state-of-the-art technology to manage your programs while providing a modern, high-touch employee experience will be instrumental to helping you balance the demands HR and benefits teams face during a recession.
SaaS-based solutions are cost-effective and scalable, and they transfer a significant portion of the effort associated with managing programs and servicing employees to a third party, a necessity when your headcount is reduced, either within your team or the organization.
(It may seem premature, but if yours is an organization that uses layoffs, make sure to look for a partner with deep COBRA administration experience. And, remember, rehires are more productive much faster than new hires. So, how you manage your offboarding and COBRA experience is vital if you want those valuable resources back. Keeping people engaged with your organization through a curated suite of post-employment benefits can give you a competitive edge.)
While the platform needs to be intuitive and easy-to-use, both for you and your employees, you want to make sure you drive any noise out of the process with a positive end-to-end employee experience. Mobile access is key, as is real-time, online assistance. Businessolver’s virtual benefits assistant, Sofia, is an example. This AI-enabled application is available 24/7 with no wait time. She speaks multiple languages and can be accessed via chat or voice recognition. Sofia is already solving almost 60% of our chat volume, which prevents calls to our service center reps as well as client’s HR and benefits teams, driving down cost and driving up employee satisfaction.
For many organizations, the prospect of a recession means contracting, cutting costs and potentially downsizing. However, given the demographic realities of the US workforce, if a recession hits, trimming benefits may not be feasible—or wise. Instead, administering them more efficiently and effectively will enable smart HR teams to use their own talent more strategically while safeguarding their organizations from the potential flight of key, high-performing employees.
When facing a potential economic downturn, you need to think critically about your benefits administration to ensure you are able to continue to function successfully no matter what direction the economy turns. A tech-forward approach will help future-proof your organization for years to come.