Five New Priorities for 2022 HR budgets

One of the most difficult budgets to prepare for any company is the human resources budget. HR leaders and their executive teams need to anticipate the needs for next year for both the HR department and for leading the workforces. Today’s endemic conscious and young workers have dramatically changing work demands. The intelligent HR departments will begin their 2022 budget planning now to meet the challenge of increasing workforce salary demands, stress, medical costs, hybrid work expectations, upskilling, turnover, and one-click digital technology.

If we have learned anything in 2021, it is that the workforce is full of surprises. As 2021 began, many business leaders were hoping to see COVID19 abate and a return to something resembling normal. While the abatement occurred, the return to normal has been evasive.

Instead, employers have seen a national workforce that does not want to return to open office bays like before, and they want better pay and benefits, more digital technology at work that is as easy as making purchases on Amazon, and more career development.

Depending on the survey, 54 to 65 percent of remote workers do not want to face the daily commutes, the annoying disruptions in open office bays, and the continuing dangers of COVID19, which has a wicked way of mutating and continuing into what is now becoming endemic. Remote workers have learned they are more productive and safer at home. They would rather find a new employer than return to the office full time as they did before the pandemic.

Stress in the workforce is at an all-time high, according to Gallup, at 57 percent of the workforce. Stress manifests in higher absenteeism, presentism (which is being at work but not at the employee’s fullest capability), and poor health.  Some experts have calculated the hidden costs of poor wellbeing can cost a business nearly $10,000 per year per affected employee. Thankfully, the least expensive and easiest way to reduce stress is by providing flexibility in the work day. Hybrid and remote work models enable workers to balance their private and work lives and alleviate that stress—and these models allow employers to improve employee productivity by 20 percent and save employers thousands of dollars per remote worker in real estate costs.

Employee turnover and salary increases have reached levels not seen in the United States for 20 years. Turnover hit a seasonally adjusted high for all separations at nearly 11 percent. Total private-sector US wages are now up 7.9 percent from February 2020, and the wages for low-wage earners in leisure and hospitality are up 10.4 percent, according to the US Labor Department. At the close of 2020, many employers planned an annual salary increase of about three percent. They were wrong. For 2022, salary planning needs to be more aligned with employee expectations.

Medical costs are expected to have a healthy rise in 2022, but slightly less than in 2021. PwC’s Health Research Institute (HRI) is projecting a 6.5 percent medical cost trend in 2022, marginally lower than the 7 percent medical cost trend in 2021 and slightly higher than it was between 2016 and 2020.

The higher healthcare spending in 2021 has been due to employees having procedures and surgeries delayed in 2020 due to COVID19. PwC reports that 15 percent of employees deferred some care between March and September of 2020. Mental health and substance abuse costs are continuing in 2021 and are expected to in 2022. Making matters worse, the overall health of Americans worsened during the pandemic as people exercised less and increased substance abuse and smoking.

Glassdoor expects that employers will offer more mental health resources and financial wellness resources next year to address the stress and desires of many employees. Employers are also offering more benefits for working parents, from improved fertility coverage to child care. In addition, more employers will offer high-cost, low-premium health insurance options. As a part of this transition, Health Spending Accounts (HSAs) offerings will also expand. HSAs allow employees to pay medical expenses the health insurance doesn’t cover from pre-tax or post-tax deductions.

Workforce expectations are changing in another area. Millennial and Generation Z employees (24 and younger) expect business systems to work as wonderfully as buying a product on Amazon. One click. They expect one click job application processes and one click answers to their questions about onboarding, benefits, and other HR, IT, and operations policies. They will not read your policies on share sites. Employers who have cumbersome job application processes that take 10 minutes or more to complete will see 40 percent or more of their job applicants refuse to complete the process. Employers who have cumbersome onboarding processes will see high numbers of their employees quit in hours, not months.

The landscape of digital technology in HR has changed dramatically in the past 18 months. The pandemic and remote work have accelerated the use of technologies that were once considered extravagant, such as video interviewing, video conferencing, and chatbots. Previously, the HR digital landscape discussion was about expensive human capital management systems and their integration with either time charging systems, applicant tracking systems, or learning systems (depending on the vendor’s strength) or online health systems. That landscape is expanding to include HR chatbots. Employers now urgently need to communicate instantly with employees and provide information to employees whether they work in the office, the factory floor, at home, or across the globe–one click.

New research released in February 2021 by The Hackett Group confirms the accelerated transition to new business models and HR digital technology. The Hackett Group predicts that five new categories of HR digital technology are expected to move from “Gaining Traction” to “Majority” us. Moving into majority use are these technologies: predictive modeling, job candidate assessment tools, and chatbots to handle employee inquiries.

Here are five priorities for the 2022 HR Budgets!

  1. Pay. History teaches us that if you do not get pay right, you will not keep your high performers for long and won’t be able to replace them. The years of two-to-three percent pay increases are over. Depending on the industry and region of the country you are on in, you may have to plan for five to seven percent pay increases or higher in department budgets.
  2. Hybrid working. It is no longer a benefit from chill companies. It is an expectation in most office occupations. Smart companies will have a strategy for which job families can be productive with remote work or hybrid work and they will redesign their office environments to support it. These companies will promote their hybrid working environments on their career sites and have employees post 30-second videos talking about its benefits. The companies who do not proactively  transition to hybrid work environments now will feel the pressure to offer remote working privileges to critical talent as if it is a signing bonuses, creating inequities in the workforce. If you do not have the money for anything else on this list, invest in hybrid work environments. It will raise your workforce’s productivity and loyalty and cut costs.
  3. One-click digital technology. HR is often the last discipline for digital transformation. Now Gen Z and Millennial employees expect easy job application processes, ongoing communications, and effortless onboarding. Companies that do not offer these technologies will not attract the best young talent. If you have not, it is time to replace outdated applicant tracking process, human resources management systems, and invest in HR chatbots. HR chatbots actually save HR and IT operating costs and improve employee productivity.
  4. Health care for a stressed-out workforce and families. The cost of stress is enormous, and most employers do not understand these costs. Evaluate offering more mental health resources and financial wellness resources benefits (including paid leaves) for working parents, including improved fertility coverage to paid baby-bonding leaves to child care. However, the No. 1 change you can make to reduce employee stress is from hybrid work plans and more flexible work schedules. Plan for health increases in health care costs around seven percent.
  5. Upskilling your workforce. The US has been in a labor shortage for several years. COVID19 masked it for 18 months. In most industries, you will not be able to hire all the talent you need or automate the work. Besides, upskilling is less expensive than recruiting. Upskilling your current workforce will be necessary to retain and develop your current talent for the challenges of today’s digital world. The good news is that there are more online resources to provide the upskilling training your workforce needs. Smart HR organizations will work with their executive teams to prepare a talent plan prioritizing the skill development required of each discipline and for the organization overall, and excellent resources to provide the training.

There is no returning to normal. HR leaders need to prepare their budget proposals now to lead their organizations through the talent demands of the 2020s.

Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting, managing partner of InnovationOne, and Sales Advisor to MeBeBot. He works with companies to transform HR, implement remote work, recruit executives, and develop extraordinary leaders, teams, and innovation cultures. He is the author of the highly acclaimed book, Hack Recruiting: the Best of Empirical Research, Method and Process, and Digitization. Subscribe to his weekly blogs at 

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