Dec 07, 2022
Results of Newport’s 2022-2023 Compensation, Retirement and Benefits Trends Survey
In today’s highly competitive labor market coupled with high inflation and global issues, employers continue to find it more challenging to compete for talent. Successful organizations have evaluated the competitiveness of their compensation programs, retirement plans, and employee benefits portfolio to effectively compete for and retain the talent that drives success
Understanding what employees value most is key, especially as employers plan and budget for the year ahead.
Newport’s 2022-2023 Compensation, Retirement and Benefits Trends survey yielded a number of findings of interest to Plan Sponsors and Advisors:
- Higher pay increases are a top compensation strategy
- Increases to retirement plan matching contributions provide a meaningful benefit to compete for talent
- The level and quality of service ranks as the most important factor in evaluating retirement plan offerings
- Nonqualified plans continue to be critical for recruiting and retaining executives
- Enhanced health & welfare benefits including remote work are top benefits strategies
Newport’s 2022-23 Compensation, Retirement and Benefits Trends Report includes responses from over 560 organizations coast-to-coast and across over fifteen diverse industries, including manufacturing, healthcare, finance & banking, and professional services. Below is a summary of our main findings.
In 2022, organizations have implemented a number of compensation strategies to attract and retain talent in the competitive labor market, including higher-than-normal pay increases for hourly and salaried employees as well as increased use of incentives and bonuses.
Average 2022 base salary increase budgets range between 4.0% and 4.2% across hourly, salaried and executive employee groups. The highest average base salary increases have been reported for hourly staff in the Manufacturing, Distribution and Transportation industries and Construction, Real Estate & Energy Utility sectors. For the next performance review period, organizations report pay increases of at 5.0% and above for high performers.
In 2023, salary increase budgets range between 3.6% and 3.7%. This may indicate that organizations expect competitive labor market conditions to begin to ease in the year ahead.
Annual incentive plans continue to be leveraged this year to drive results. Seventy-five percent 75% of organizations reported providing short-term incentives to employees and across all job levels from hourly to executives.
Long-term incentive plans include cash-based and equity-based programs designed to motivate performance to achieve specific organizational goals over several years. From an industry perspective, Finance, Banking and Insurance and Manufacturing, Distribution and Transportation sectors are more likely to utilize long-term incentive plans for their organizations.
Ninety-five percent (95%) of organizations reported offering a qualified retirement plan to employees. Matched defined contribution plans remain the most common plan type, followed by Defined Benefit plans, ESOP, DB-Hybrid, SIMPLE, PEP and MEP plans.
An interesting trend this year focuses on maximum company matches, which seem to be where employers are enhancing their retirement plans. In 2022, more than one-third of organizations report offering maximum company matches above 5% of compensation.
Automatic enrollment and automatic escalation are offered more frequently by larger plan types. It’s also more common for larger plans to default to auto escalation at time of enrollment.
Advisor relationships continue to be highly valued by plan sponsors, where three-quarters report working with an independent advisor and more than half report collaborating with the same advisor for more than five years.
More than one-third of plan sponsors indicated they use a 3(16) administrative fiduciary to manage retirement plan administration, fiduciary, and reporting responsibilities.
And while the retirement plan costs are rated by employers as an important criterion when choosing a retirement plan provider, the level and quality of service continues to rank above the cost of investments and cost of service when evaluating retirement plan providers.
For employers, nonqualified deferred compensation (NQDC) plans remain a critical benefit program for executive recruitment and retention. The primary goals employers have for their NQDC plans are creating a valuable financial planning tool for participants and offering a competitive plan when compared to peer companies.
Job level is the most common criteria used by companies to determine NQDC plan eligibility. Of the organizations offering these plans, the majority of eligible participants include the President and Chief Executive Officer, Vice Presidents, Director Levels and other levels of management and Board of Directors members.
Highlights from the Newport/PLANSPONSOR Executive Benefits Survey 2022 Edition can be summarized in five trends to watch, including discretionary company contributions, custom communication campaigns, enhanced focus on investment menu, combination of COLI & mutual funds, and dedicated NQ TPA/recordkeeper.
Health and Welfare Benefits
We see the cost of employer health insurance continue to rise each year as organizations offer employee group health coverage to their workforce and eligible dependents. Nearly 80 percent of employers saw an increase in health plan costs in 2022.
To manage health plan costs, employers continue to pass on a greater portion of those costs to employees through higher premium payments and deductibles, by offering tax-advantaged savings and spending accounts, and leveraging employee wellness initiatives and managing specialty pharmacy costs.
Strategies implemented by employers in 2022 to attract and retain talent include continued remote work opportunities, increased communication around benefits offerings, and enhanced health & welfare benefits.
In addition to medical, dental, vision, life insurance and disability benefits, many organizations offer employee assistance programs (EAP,) telehealth, flexible work hours & remote work options, wellness & financial wellness programs, employee discounts, perks, and education programs.
Click here to watch an on-demand webinar of Newport’s Compensation, Retirement and Benefits Trends Report.
The Executive Summary is available for download here.
Newport Group, Inc., an Ascensus Company, and its affiliates provide recordkeeping, plan administration, trust and custody, consulting, fiduciary consulting, insurance and brokerage services. 20221206-2619408