Five Big Human Resources Trends to Watch in 2024

Five Big Human Resources Trends to Watch in 2024
Workforce

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This insight is part 02 of 12 in this Collection.

January 12, 2024 24 mins

Five Big Human Resources Trends to Watch in 2024

Five Big HR Trends to Watch in 2024 Hero Banner

It's never been more important for HR leaders to help shape and support the execution of business strategies. However, to be successful in today’s volatile world, HR teams must stand ready to understand and harness five fast moving trends.

Key Takeaways
  1. Effectively managing programs and budgets is no longer enough ― HR professionals must use data, analytics and technology to optimize workforce impact.
  2. New compliance regimes like pay transparency require urgent attention, but they also create exciting opportunities for transformational change.
  3. Links between wellbeing and employee performance are no longer theoretical. New ways of measuring and building human sustainability are emerging.

Heading into 2024, there is little doubt about the critical role human resources (HR) leaders and professionals play in driving the success or failure of business strategies. According to Aon’s most recent Global Risk Management Survey, the inability to attract and retain talent now ranks as the fourth biggest global risk for organizations. This is the highest ranking for any HR focused risk in the nearly 20 years since Aon launched the survey. As a result, organizations are reevaluating their workforce plans, including the introduction of new operating models, updated location strategies, redesigned total rewards programs, and explorations of how artificial intelligence (AI) will influence future workforce requirements.

Of course, following the transformational events of the COVID-19 pandemic, employees have a say as well. Workers continue to advocate for change in several important areas:

  • Mental health and burnout are top concerns for employees and employers alike. To respond, HR professionals should strive to make agile and targeted health and wellbeing programs integral to their company’s DNA.
  • Employees continue to express a strong desire for improved work-life balance and mission-driven work. This means employee value propositions (EVP) must be modernized to better reflect the expectations of a post-pandemic workforce.
  • People are living longer, meaning both their careers and retirement years are lasting longer. Retaining tenured employees presents opportunities to keep crucial wisdom and skills inside an organization, but it places new pressures on workforce costs and planning.
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Our employees are looking at us as a company to care about them, their wellbeing and make their lives easier. We need to respond in a flexible manner to meet these needs.

Senior Vice President
Total Rewards at a Global Sports Media Entertainment Company

To help HR leaders and professionals make sense of the volatile forces impacting workforces today, we connected with clients and human capital leaders across Aon to identify the five biggest HR trends to watch this year.

Trend No. 1 – Find New Ways to Improve Affordability While Maximizing Impact

Inflation may be slowing in many markets, but it isn’t going away. Neither is economic uncertainty. As costs continue to rise, especially for healthcare and benefit programs, affordability will remain a critical challenge for HR leaders and professionals.

According to recent Aon research, the global average medical trend rate for 2024 is forecasted to be 10.1 percent, up from 9.2 percent in 2023 and the highest rate since 2015. This rate represents the expected change in medical plan costs ― insured and self-insured ― as a result of price inflation, technological advances in the medical field, plan utilization patterns and cost shifting from social programs.

While the medical trend rate in the United States is expected to hold steady at 6.5 percent, providing some relief to organizations, employer-sponsored plans in Europe are expected to see record cost increases.

There are several ways companies can combat this trend, including wider use of flexible or voluntary benefit plans, targeted wellbeing interventions and providing higher-quality options for preventative care. As Farheen Dam, head of Aon’s North America health practice notes, making it simple to choose high quality and cost-effective care is an important way to lower costs and improve affordability.

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One of the most important things you can do to lower costs and improve affordability and quality of healthcare for employees and their families is to make it really simple to choose high quality and cost-effective care.

Farheen Dam
Head of Health, North America, Aon

In Europe and other regions of the world, voluntary benefit plans offer exciting opportunities for employers to strike the right balance between cost and impact. Lisa Patel, head of Talent in Europe, the Middle East and Africa, advises clients to prioritize closing gaps and giving employees more control by supporting initiatives around personalization and customization.

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Think about what your company can afford, on an overall basis, to support initiatives focused on personalization, customized benefits and voluntary benefits. Then focus on tools that can help you close gaps and give your employees more control.

Lisa Patel
Head of Talent, EMEA, Aon

Beyond healthcare and benefit costs, inflationary pressures on cash compensation, including salaries and bonuses, continue to mount. Benchmarking compensation annually against competitors, differentiating pay for higher performers and using targeted equity grants are all ways to ensure your compensation spend is sustainable and has a high return on investment. Unsurprisingly, companies that do a good job differentiating variable pay and salary increase budgets based on performance do a better job of retaining key talent.

Another interesting way to attack costs while delivering more effective outcomes for employees is through the use of collective retirement plans. Collective plans, known as Master Trusts in the UK and Ireland and Pooled Employer Plans (PEPs) in the U.S., allow companies to gain scale in the market, reduce administrative costs and lower fees for employees. Nearly one in five retirement plan members in Europe are already in a collective plan, and the number of companies moving away from operating their own 401(k) plan to a PEP is rising rapidly in the U.S.1

As defined contribution plans continue to be the predominant source of retirement income for employees, governing bodies have come to realize that asking each employer to sponsor their own retirement program is an inefficient model,” says Byron Beebe, global chief commercial officer for Aon's human capital capabilities.

Master Trusts and PEPs started with smaller employers, but they have proven to be effective in the UK, Ireland and the U.S., explains Beebe. That’s because they reduce costs and administrative burdens while providing access to better tools for employees. “We expect these programs to expand exponentially in 2024."

Trend No. 2 – Harness Data and Analytics to Make Better Workforce Decisions

It seems intuitive that human capital data and analytics can help employers design and deliver more effective programs, but for many HR leaders and professionals, the ability to do so remains elusive.

A great place to start is by using evidence-based studies to evaluate the effectiveness of programs based on measurable outcomes, such as employee engagement, productivity, retention and wellbeing. This type of research can help employers identify best practices, establish benchmarks and develop controlled tests to explore new strategies and interventions.

Doug Melton, Aon’s global head of health analytics, notes that advanced analytics can be a valuable guide, not only for keeping the workforce happy, but also as something that impacts direct expenses for healthcare, productivity and absence rates.

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We’re actively doing a lot of multi-variable regression analysis that can help employers determine what is and isn’t working as it relates to the mix of insured benefits, non-insured benefits and clinical vendor partners.

Doug Melton
Head of Global Health Analytics, Aon

For example, we partnered with a leading pharmaceutical company to measure the return on investment of its wellbeing programs as business leaders grew concerned with rising healthcare costs. Using data and analytics, we found that moderate gains in individual wellbeing resulted in an average productivity gain of 5 percent. This translated to an added value of $3,500 per person —more than offsetting the $500 average per person cost of wellbeing initiatives.

Organizations can also use data and analytics to support personalized programs and interventions — targeting employees with benefits they are more likely to use. Segmenting employee populations based on factors like location, life stage, health risks, personal preferences and behaviors, can reveal significant opportunities to both reduce costs and meaningfully improve health outcomes.

Finally, HR professionals can develop adaptive models to monitor and track the performance of their programs over time, as well as adjust and optimize them as needed. This allows employers to use data and analytics to anticipate and respond to emerging trends and challenges, such as new regulations, health trends and technologies.

For example, an explosion in gene and cell therapies (GCT) is raising new questions for employers — from how to cover GCTs in health plans to helping employees and their families determine the eligibility for, and efficacy of, cutting-edge therapies to working with (re)insurers and governments to pay for expensive treatments.

“While data is being collected, GCTs are so new, it is still uncertain how effective they will be during the course of a person's lifespan,” says Aon’s Melton. “But as more long-term clinical data becomes available, the efficacy and durability of treatments will become clearer. It’s important for companies to stay alert and have tools in place to be ready to act.”

Trend No. 3 – Ensure Fair and Transparent Pay

As new regulatory regimes come into force around globe, including the EU Pay Transparency Directive and multiple state and municipal laws across the U.S., paying people fairly and transparently is no longer optional. Adding to the pressure companies face is the fact that many younger workers are quite comfortable sharing their personal compensation information with each other ― they understand that traditional taboos against talking about pay only contribute to pay inequities.2

Brooke Green, head of Aon’s North America talent practice, advises that the momentum around pay transparency regulations will continue to spread. But beyond that, it’s the expectations of the workforce that will drive change.

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The pay transparency movement will continue to spread through regulation, but also through changing workforce expectations. We’re in an environment where employees are rightly demanding fairness, clarity and transparency in how they are paid.

Brooke Green
Head of Talent, North America, Aon

However, moving from basic regulatory compliance to sustainable pay equity and pay transparency solutions is a challenge for many organizations. Complicating matters is pay compression, an artifact of the hypercompetitive talent market that followed more than a decade of wage stagnation preceding the COVID-19 pandemic. When the labor market was at its tightest, companies were hiring at the top of, or above, established salary bands. This was clearly not sustainable. Costs ballooned, and, in many cases, inequities also grew.

To begin addressing pay equity and pay transparency requirements in a more sustainable manner, companies need to return to the fundamentals. They need to develop stronger job architecture frameworks and reexamine their pay and performance management practices.

Job architecture frameworks provide a clear and consistent way of defining, evaluating and leveling jobs across an organization based on skills, responsibilities and impact. They enable career paths, mobility and learning opportunities for employees. And when it comes to pay equity, job architecture also helps align internal pay bands to external market benchmarks.

Pay practices govern the processes through which employees are compensated, including manager training on base pay, variable pay, benefits and recognition programs. These practices should be fair, competitive and transparent, reflecting the value and contribution of every employee.

Finally, performance management practices include the methods and tools used to measure and manage employee performance, feedback and development. They should be objective, timely and relevant, linking performance outcomes to rewards and recognition, and fostering a culture of ongoing growth.

Once job architecture frameworks and pay and performance management practices are revisited and renewed, companies have the foundation they need to drive transformational change. They can achieve their broader diversity, equity, inclusion and belonging goals, while improving long-term financial wellbeing.

20%+

Pay transparency laws have been shown to reduce the gender pay gap by 20-40 percent.

Source: U.S. National Bureau of Economic Research, 2021

Learn More

Trend No. 4 – Invest in Wellbeing to Achieve Human Sustainability

Companies are more interested in wellbeing than ever, and they should be. Unfortunately, part of that interest stems from the fact that access to healthcare remains a challenge and costs are at an all-time high. For employees to be engaged, productive and successful, they need to be well.

Yet, despite evidence from Aon’s 2022-2023 Global Wellbeing Survey that improving employee wellbeing increases company performance by between 11 and 55 percent, the pathway to achieving this potential remains unclear.

Aon has developed a data-driven approach to wellbeing that integrates our health, wealth and talent capabilities in a simple way that focuses on creating connected value for our clients. This includes a spectrum of solutions that meets clients where they are:

Healthcare

Most companies are heavily focused on this area. They endeavor to provide world class support to colleagues in times of need, and rightfully so. Of course, there are always opportunities for improvement, with a growing emphasis on managing healthcare costs while improving long-term outcomes. In particular, by identifying specific population risks, organizations can get better at offering targeted and inclusive ill-care benefits to the right people at the right time.

Wellbeing

Increasingly, companies are pouring their energy and investment into wellbeing, with the goal of educating colleagues, managers and leaders on how to empower themselves and their teams to stay healthy and thrive in today’s world. This preventative approach often includes offering people digital assessments, more time off, and new self-service benefits, stipends and training. While well-intentioned, companies often fall into the trap of offering too many poorly connected wellbeing programs. This creates an information gap around what is truly making a difference for employees.

Human Sustainability

Over the long-run, companies have an exciting opportunity to redesign their organizations with a human-centered lens by integrating their ill-care and wellbeing data and insights into core talent strategies. This enables business and HR leaders to rethink traditional approaches to performance, total rewards, engagement and ESG by measuring and reporting on the multi-faceted nature of talent. These solutions are leading-edge and enable organizations to identify optimal factors that drive sustainable performance, such as understanding if flexible working arrangements versus more compensation are more or less effective as retention tools.

11%+

Improving employee wellbeing increases company performance between 11 and 55 percent, depending on the areas of wellbeing that are strengthened.

Source: Aon’s 2022-2023 Global Wellbeing Survey

Read the Report
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Companies need to take wellbeing seriously, across all of its dimensions. For too long, the focus has been on reactive support rather than prevention. By shifting to a wellbeing mindset, we improve employee resilience while improving health outcomes.

Lisa Patel
Head of Talent, EMEA, Aon

Trend No. 5 – Proactively Manage the Adoption of AI

The COVID-19 pandemic initiated a revolution in how companies and HR functions leverage technology to get work done. The most significant of these changes was adopting various tools and practices to make remote working possible across huge swaths of the workforce.

Whether organizations are ready or not, the emergence of generative AI tools means a new revolution in working is upon us. HR leaders and professionals must be ready to tackle this challenge and opportunity head-on, as employees will not wait to explore what AI can do for them.

While AI technologies promise exciting benefits for organizations, including improved efficiency, reduced costs, enhanced employee and customer experiences and quicker delivery of data-driven insights, the use of AI also presents significant risks. These challenges include the ethical, legal and social implications of using AI, as well as the need to build AI-related skills and competencies. Therefore, HR leaders and professionals need to adopt a proactive and strategic approach to implementing and using AI in their organizations. Here are some ways they can start:

Protect and promote your organizational values

HR leaders and professionals should ensure the use of AI applications is aligned with the overall vision, mission and values of their company. For example, if an organization is committed to promoting inclusion and diversity, then AI recruiting tools should be carefully vetted to make sure they promote fair and unbiased hiring practices. Moreover, HR teams should help other leaders communicate the purpose and benefits of AI to stakeholders, including employees, managers, customers and regulators, and create safe and transparent spaces to seek feedback on how to improve AI outcomes.

Ensure accountability and quality

HR leaders and professionals have a big role to play in establishing how people use AI. This means HR teams should carefully monitor and evaluate the performance and impact of any AI applications they use, while also supporting best practices within their organizations to identify, report and mitigate any potential errors, biases or harms. Furthermore, HR leaders and professionals should partner with other functions to establish clear roles and responsibilities for the design, development, deployment and oversight of AI applications and related data.

Develop skills and competencies

HR leaders and professionals intuitively understand AI is not a substitute for human intelligence or emotions, but rather a complement and an enabler. Therefore, HR leaders and professionals should invest in developing and enhancing employee skills and competencies to work with AI tools. This includes building data literacy, analytics and programming skills, as well as supporting soft skills like critical thinking, creativity, collaboration and emotional intelligence. Additionally, HR leaders and professionals should foster a culture of learning and innovation where employees are encouraged to experiment with and learn from approved AI applications.

Importantly, while there is great fanfare about the risks AI poses to jobs ― indeed, our own research suggests about a quarter of jobs may face AI-related disruption risks ― how companies choose to implement AI, and then reskill and upskill employees, will be a huge part of how this story is ultimately written.

Making Better Workforce Decisions

Whether you’re looking to reimagine your location strategy, successfully introduce AI tools into your operations in a safe and responsible manner, establish fair and transparent pay practices, boost employee engagement, retention and performance through improvements in total rewards and wellbeing programs, or combat the rapidly rising cost of healthcare, understanding how to respond to and manage the five big trends outlined above will be key to your success in 2024 and beyond.

Additionally, as Lambros Lambrou, Aon’s chief executive officer for human capital, notes, “it is important to remember these trends are deeply interconnected. Boards and executive leaders are looking for HR leaders and their teams to deliver integrated solutions, informed by data and analytics, that address workforce needs holistically to support business goals.”

With this mandate in mind, one way to tackle the challenges and opportunities presented above in an integrated manner is to bring HR teams together around transformational projects. For example, reinventing your employee value proposition, modernizing your total rewards programs, or developing a skills-based workforce strategy, are all efforts that give HR teams a chance to break down internal silos and make better decisions.

1 https://www.eiopa.europa.eu/system/files/2023-03/EIOPA-BoS-23-071_CP-advice-IORP-II-review.pdf
2 https://www.nber.org/system/files/working_papers/w25834/w25834.pdf

General Disclaimer

The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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