Small and Midsized Businesses Concerned About Inflation, Pressure to Increase Wages and Benefits

Rhea-AI Summary

Principal Financial Group reveals an encouraging trend in the latest Principal Financial Well-Being Index, showing that 68% of U.S. businesses report financial improvement compared to last year. Notably, 53% of businesses are increasing hiring, significantly up from 32% last year. Employers are also enhancing wages and benefits to attract talent. However, challenges such as inflation and recruitment difficulties persist. Moreover, 27% of employees left their jobs due to retirement, indicating potential staffing impacts from an aging workforce.

Positive

• 68% of businesses report financial improvement year-over-year.
• 53% of companies are increasing hiring compared to 32% last year.
• 40% have increased wages for most or all employees.

Negative

• Inflation remains the top concern for employers and employees.
• 27% of employees reported leaving jobs due to retirement, affecting manpower.
• 43% of larger employers experience higher job vacancy levels compared to 28% of smaller businesses.

Principal^® survey finds more U.S. businesses are increasing hiring compared to last year, retirement contributing to staffing impacts

DES MOINES, Iowa--(BUSINESS WIRE)-- Principal Financial Group^® reports that while many small and midsized businesses show financial improvement from this time in 2021, shifting geopolitical issues, interest rate hikes, and continued recruitment challenges raise concerns about ongoing impacts.

Our first wave of business insights for 2022 (Photo: Business Wire)

According to the latest Principal Financial Well-Being Index^SM (WBI), 68% of businesses report financial improvement compared to this time last year. In March of 2021, large businesses¹ outpaced small businesses² in financial improvement by 37 points (72% compared to 35%). Today, that gap narrowed to 20 points (81% compared to 61%). However, as business and cost of living expenses continue to rise, both employers and employees rated inflation as their number one concern. Businesses are feeling pressured to increase wages and benefits while employees are concerned about mental health and well-being and finding a new job with better pay.

“Employers are keeping a close eye on inflation, weighing the impact of rising costs of doing business with how much they can invest in talent – for both recruitment and retention. They’re looking at expenses and prioritizing salaries and benefits, when able,” says Amy Friedrich, president of U.S. Insurance Solutions at Principal. “Increasing costs have prompted businesses to get more creative in how they attract new talent and improve the employee experience as they boost hiring efforts.”

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1	Businesses with 500 to 10,000 employees.
2	Businesses with two to 499 employees.

Businesses ramp up hiring, increase wages

Amid the increased competition for talent, businesses are focused heavily on growing their number of employees. Compared to this time last year, significantly more businesses are increasing employees, with 53% increasing compared to 32% in March 2021. And on average, 36% of open positions at a company are brand new positions.

Looking closer at job vacancy levels, small businesses are faring better than their larger counterparts, which are experiencing greater job vacancy levels today. Just 28% of employers with less than 500 employees report higher job vacancy levels vs. 43% of employers with more than 500 employees.

This focus on employee attraction has generated definitive actions from employers. Nearly half of businesses are offering flexible work schedules (49%) while 40% have increased wages for the majority or all of their employees. Over half of the employees surveyed reported receiving a wage increase during the past year, the most common amount was a 3% increase.

Friedrich explains that “businesses are feeling confident about their current cashflow and are ramping up operations. Employers are focused on adding staff as they expand their business.”

Employee benefits remain key for attraction and satisfaction

The significant role employee benefits play is more apparent than ever, with 37% of employers noting that they’re increasing the quality of benefits they already offer to help with employee recruitment. In addition, employers are prioritizing specific benefits like caregiving support, vacation time, and pet insurance, which all rose to the top of the list of benefits employers are offering to attract new employees. Among the employees surveyed, those who were less likely to have benefits such as retirement, vacation time, and dental and vision insurance in their current role were more interested in leaving their job.

As businesses contend with the shifting labor force, improving the employee experience is key for retention. When asked about benefits businesses are increasing to improve employee satisfaction and wellbeing, employers identified disability insurance (short or long term), vacation time, and mental health and well-being programs as the top three. Employees with greater job satisfaction are more likely to have access to financial wellness, training and educational opportunities, as well as caregiving benefits.

“As businesses evaluate ways to attract and retain talent, offering competitive benefits that meet employee needs is critical,” says Friedrich. “Communicating with employees and adapting benefits to their needs creates a supportive workplace. Today, employees want to feel connected to the work they are doing. They are selective regarding where they want to work and what they want from an employer. Adding benefits such as training and education opportunities and retirement plans contribute to a valuable employee experience.”

Retirement the new top reason employees leave

Retirement was among the key drivers of staff leaving, business leaders said. Businesses reported a 16% decrease in staff in the past three months, led by 27% of employees leaving because of retirement. Staff losses from retirement may not last, however, as people face rising costs and potential losses in savings due to inflation and recent market volatility.

“As the final wave of Baby Boomers turn 60 it’s reasonable to expect a phased transition into retirement, including part-time careers and trying something different or new,” said Sri Reddy, senior vice president Retirement & Income Solutions at Principal. “Employers would be well-served to rethink how they define roles, as well as benefit structures, to keep some of these highly-skilled, but potentially part-time, workers.”

See all results and insights from the latest Principal Financial Well-Being Index^SM (PDF).

About the Principal Financial Well-Being Index^SM

The Principal Financial Well-Being Index^SM surveys business owners, decision makers and business leaders aged 21 and over who work at companies with 2 – 10,000 employees. The nation-wide survey, commissioned since 2012, examines the financial well-being of American workers and business employers. In response to COVID-19, the Well-Being Index was transformed from an annual survey to a quarterly pulse, offering three waves, revisiting questions and measuring sentiment regarding timely issues in the small and midsized business marketplace. In the first pulse of the Well-Being Index in 2022, the employee audience was added to the survey to compare and contrast key ideas and sentiment from employers. The survey was commissioned by Principal and conducted online by Dynata from March 11-23, 2022, with a total of 500 business owners, and decision maker participants and a total of 200 employee participants. The research report focuses on providing a holistic perspective on key trends and timely issues in the small and medium business market.

Principal developed a dedicated portal for employers designed to help business handle the effects of COVID-19 and a challenging economy in the months ahead. To learn more visit Navigating Business Now.

About Principal Financial Group^®

Principal Financial Group^® (Nasdaq: PFG) is a global financial company with 18,500 employees¹ passionate about improving the wealth and well-being of people and businesses. In business for more than 140 years, we’re helping more than 51 million customers¹ plan, protect, invest, and retire, while working to support the communities where we do business, and build a diverse, inclusive workforce. Principal^® is proud to be recognized as one of America’s 100 Most Sustainable Companies², a member of the Bloomberg Gender Equality Index, and a Top 10 “Best Places to Work in Money Management³.” Learn more about Principal and our commitment to building a better future at principal.com.

1	As of December 31, 2021
2	Barron’s, 2022
3	Pensions & Investments, 2021

Dynata is not an affiliate of any company of the Principal Financial Group®

Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Co. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., 800-247-1737, member SIPC and/or independent broker/-dealers. Referenced companies are members of the Principal Financial Group^®, Des Moines, IA 50392. Principal Global Investors leads global asset management and is a member of the Principal Financial Group^®.

© 2022 Principal Financial Services, Des Moines, IA 50392, USA.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220503005012/en/

Ashley Miller, miller.ashley@principal.com, 515-878-6295

Source: Principal Financial Group

FAQ

What percentage of U.S. businesses report financial improvement according to the Principal Financial Group?

68% of U.S. businesses report financial improvement compared to last year.

How has hiring changed for U.S. businesses in 2022?

53% of U.S. businesses are increasing hiring, up from 32% last year.

What are the main concerns for U.S. employers according to the latest report?

The main concerns are inflation and recruitment challenges.

What percentage of employees left their jobs due to retirement?

27% of employees reported leaving their jobs due to retirement.

What benefits are companies improving to attract talent?

Companies are enhancing wages, offering flexible schedules, and improving benefits like caregiving support and vacation time.