COVID-19 and the economic downturn have forced U.S. employers to examine cuts that were considered unthinkable at the beginning of the year, according to Gallagher’s 2020 Benefits Strategy & Benchmarking Survey. The study gathered data from 3,921 employers from December 2019 to May 2020, as well as a series of employer pulse surveys conducted between April and July 2020. Together, the data from these reports captures an in-depth overview of the effect the pandemic is having on hiring as well as employee benefits and compensation.

“Over the last decade, a tightening labor market led employers to offer a robust holistic rewards strategy to win the war for talent, but the pandemic has forced decision-makers to closely examine their benefits and compensation strategies,” said William F. Ziebell, CEO, Gallagher’s Benefits & HR Consulting Division. “Employers are reviewing their benefit offerings to make sure they address employees’ evolving needs and, at the same time, fit within their organizations’ budgets.”

Gallagher’s research found a significant number of employers plan salary freezes for management and executives (43 percent) and non-management personnel (42 percent) to preserve jobs in 2021. In addition, following the viral outbreak, more than 8 in 10 employers (83 percent) have more strongly emphasized the role of specific benefits within total wellbeing, including emotional wellbeing (65 percent), leave policies (47 percent), medical benefits (39 percent) and physical wellbeing (36 percent). The Gallagher report is a tool designed to help employers identify and prioritize a new approach to total wellbeing, as well as effectively communicate significant changes to 2021 benefit programs during this fall’s upcoming open-enrollment period.

Opportunities Exist for More Effective and Efficient Benefits Strategy
Given the level of economic uncertainty, it’s crucial for employers to evaluate their framework for decision-making to support recovery and strengthen resiliency. This includes examining their benefits and compensation strategies to ensure the total wellbeing of the workforce — employees’ physical, emotional, career and financial wellbeing — is supported at cost structures the organization can sustain. This could mean eliminating underutilized benefits, identifying new offerings and cutting unnecessary expenses to optimize the organization’s investment in its people.

COVID-19 did not force employers to make mid-year adjustments on their coverage. In June 2020, nearly 9 of 10 employers (86 percent) had not reduced health plan benefits and didn’t intend to during the pandemic. Additionally, almost 8 of 10 organizations (79 percent) expected to continue the same health coverage in 2021. By July, 63 percent of employers anticipated their healthcare expenses for 2020 would either align with projections (40 percent) or be lower (23 percent), in large part due to avoidance of elective procedures. However, in many parts of the U.S, the pandemic is spreading and it’s not yet clear whether health insurers will reduce, maintain or even increase premiums heading into 2021.

Gallagher’s 2020 Benefits Strategy & Benchmarking Survey learned the high cost of medical services (67 percent) and specialty drugs (41 percent) continued to be the top healthcare cost-management challenge for employers. These challenges, along with COVID-19 related concerns about increased operating costs and lower revenues, may force many organizations to adjust their 2021 benefits and compensation offerings. Employee cost sharing for medical benefits — which has remained relatively flat in recent years — may include unavoidable increases for many employers in 2021. Likely these would be in the form of increased premiums or greater implementation of high deductible health plans.

Employers also may reevaluate less commonly used healthcare tactics in an effort to reduce unnecessary costs, including audits of plan eligibility (18 percent) and claims (15 percent), and those that deliver greater value, such as narrow provider networks (14 percent), designated centers of excellence (10 percent) and integrated health and disability management programs (9 percent). In 2020, the overall use of at least one value-based option is 31 percent, but for large employers the rate was far higher at 58 percent.

Evolving Talent Management and Total Rewards will be Recognizable, but Retooled
As employers prepare for next year’s open enrollment, many will review the number and type of health plan offerings and even look to new HR technology to support changing workforce needs.  More than two-thirds (69 percent) of employers had planned to invest in HR technology platforms by 2022, before the viral outbreak in the U.S. Many of these capabilities have even more value now, with large portions of the workforce working remotely.

Adjusting leave policies, adding voluntary or life insurance options, and emphasizing wellbeing benefits will continue to give employers latitude to more easily update their compensation and benefits strategy for a custom fit with shifting workforce preferences. In July, 26 percent of employers had modified their paid time off (PTO) policy and 16 percent were contemplating that move, as a result of COVID-19. And although currently offered by just 3 percent, unlimited PTO can be a creative way to support organizational wellbeing by cutting costs and motivating employees, particularly those who work from home and may be struggling to strike the right work-life balance. Unlimited PTO also eliminates employer’s need to cash out any balance remaining within the PTO period or upon retirement.

Additional flexibility and choice are powerful attraction and retention tools that don’t require notable employer expense. Voluntary benefit offerings have increased in recent years, with 45 percent of employers enhancing these offerings in 2020. Insurance options like critical illness (58 percent) and hospital indemnity (42 percent) help guard against the financial strain of medical bills, at a time when protecting health has become more complicated.

COVID-19 Trends Expected to Continue, More Virtual Work and Care
Many states and regions implemented stay-at-home orders to combat the pandemic; as a result, nearly 8 of 10 organizations (77 percent) implemented extensive work-from-home arrangements. Furthermore, 42 percent rolled out flex-scheduling options. Findings suggests these offerings are here to stay, with nearly 86 percent of organizations indicating work from home will continue after the pandemic, and 59 percent saying flex scheduling will remain an option as well.

This wave of remote working began as a forced experiment, and the majority employers found the practice works. In the near-term, work-from-home options provide immediate risk-management benefits to employee health. In the future, the practice may also help organizations reduce real estate expenses. However, it’s important to note managers need to pay close attention to employee engagement and workplace culture to ensure employees’ career wellbeing is still being supported and teams remain connected, efficient and productive. This may require virtual development, training and mentoring. Over 6 in 10 employers offered development training for management or leadership (64 percent) as well as employees (62 percent), while a third (33 percent) provided mentoring programs.

Even before the onset of the pandemic, telemedicine was rated the top healthcare cost-control tactic in 2020, with 59 percent of employers providing employees with the ability to connect with healthcare providers virtually. COVID-19 has accelerated telemedicine adoption rates, providing employees with a socially distanced care option that is on-demand and less costly than standard office visits or trips to emergency rooms and urgent care facilities.

Opportunity Exists to Revitalize Communication Strategies
Many organizations found that the COVID-19 crisis provided them with an opportunity to connect strongly with employees. Prior to the pandemic, just 1 in 3 said their communications created tangible results or employee behavior change. In March, leaders in many industries were uncertain their organization could weather the impact of COVID-19, and employers had to take a fresh look at communication approaches and technologies. Going beyond the technology itself, decision-makers are assessing message timing and tone, which should carry a voice of empathy, unity and trust.

It will be crucial for employers to address any communication gaps ahead of the 2021 open-enrollment season given the fact most, if not all, in-person educational opportunities will transition to virtual experiences. While nearly two-thirds (63 percent) of employers use employee-initiated feedback and almost half (45 percent) utilize satisfaction and engagement survey results to measure communication success, these methods don’t always show what is and what isn’t working. Rather, employers are encouraged to take a close look at the data they have at their disposal, such as website analytics or portal visits, to help assess and revise their communication strategies.

“Whether working from home or in the workplace, employees continue to bring their whole selves to work. That’s especially true in today’s climate where workers can easily become overwhelmed by personal and professional challenges,” Ziebell said. “More than anything, employees want stability and a work culture that prioritizes respect, equity and workforce wellbeing, and provides a foundation for trust, commitment and attachment to their organization. Employers of choice that partner with their employees to overcome today’s challenges will make the organization stronger and stand out better when compared to other organizations when the labor market heats back up.”

The report can be found at