In 2025, leaders and employees alike are feeling the pressure of various external challenges affecting the workplace. Economic shifts, geopolitical tensions, environmental issues, and technological changes create a sense of uncertainty and increased risk. This is a critical time to reassess your strategies and make sure you’re investing wisely in your talent.
As the business adjusts its growth plans and strategies, it’s essential to realign your talent strategy to meet the evolving needs of your workforce. Even in stable times, your employees’ needs change as they go through different life stages and as your workforce evolves. Knowing your executive team is focused on cost containment, you may be wondering where to cut costs and where to invest. It’s a tough balancing act, but you can make the most of your people investments while protecting and retaining your valuable talent.
Recently, Rebecca Hall, a compensation practitioner for over two decades, sat down with Sean Connelly, an expert in employee listening and rewards optimization, to discuss the employee research work he leads at Mercer. Take a look at their conversation to understand why total rewards optimization is a priority for many companies this year.
Sean, I hear you’re seeing an uptick in companies reaching out to talk to you about assessing their total rewards investment. What, specifically, are they asking you to help solve?
We often hear companies wanting to make the most of their current rewards programs, but lately, more are asking how to save money without upsetting their employees. Sometimes they’re considering specific changes to compensation or rewards, while other times they want to optimize their overall spending without taking away valuable benefits.
With everything going on in the world—like inflation, tariffs, and global supply chain issues—it’s a good time for organizations to rethink how they adapt and move forward. Increasingly, our clients are saying they want to proactively understand how they can best save money without employee disruption before leadership compels them to make changes that may not achieve intended goals.
For example, we know that rising healthcare costs create financial strain on employees, and employers know the downside to passing those costs on to employees even as they are facing budget cuts or cost constraints as well.
We can help employers determine how to best manage those increased costs in a way that will create the least disruption to employees and the organization’s budget. Our approach uncovers which benefits and rewards employees value most, relative to each other, and then with actual costs, we can model various scenarios against the specific goals of the organization.
According to Mercer’s National Survey of Employer-Sponsored Health Plans, the average cost of employer-sponsored health insurance rose by 5% in 2024, and is projected to increase by 6-8% in 2025.
With all of the uncertainties and risks we’ve mentioned, total reward leaders may worry about how to best make decisions about where to invest and where to trim budgets. At the same time, they want to make sure employees feel valued and are getting what they need out of programs. How do you support clients with those decisions?
What is a conjoint survey?
A conjoint survey asks employees to make trade-offs across different total rewards programs to show us what is most meaningful in more precise ways than asking directly.
True, there are a limited number of resources to work with, and companies need to make sure employees understand that. Mercer’s methodology, the Mercer Rewards Optimizer®, allows us to get much more precise than a traditional survey does. We use conjoint survey methodology to find out not just what employees value, but what they’d be willing to give up in order to get more of what they want. It’s about the trade-offs they’d be willing to make.
Here’s an example:
In a particular company, when surveyed, nearly half (46%) of employees are willing to forego a pay increase in exchange for improved well-being benefits. Now, imagine that an increased investment in well-being benefits would cost the organization less than the salary increase. That makes the choice clearer, doesn’t it?
This is how we bring data-driven insight to help employers make smarter decisions. Their objective may be to save money or reduce waste, but the ability to reallocate their investments enables organizations to tailor their benefits and rewards for employees and to have a data-driven way of making informed decisions.
Many companies use external benchmarking to determine how their benefits and rewards compare to the market. Ideally, how does benchmarking fit into employers’ considerations of potential rewards and benefits changes?
Benchmarking is important and a really great starting place to understand the value of programs. But there can be a disconnect between external benchmarking and what your specific employee population thinks and feels.
For example, an employer might conclude from benchmarking that their 401(k) match is too low given what competitors offer. However, I worked with a client where this was the case but over 60% of employees said their 401(k) match was “better than average.” There can be many issues that impact the employee perception of a plan beyond the economic value of it, including communication, understanding, and administrative service.
Benchmarking alone may lead you to believe one type of change is needed, but employee perceptions and preferences can give you a different perspective and allow employers to make more informed decisions.
What should HR leaders be thinking about as they consider engaging with Mercer in this type of analysis?
Ideally, organizations should have some form of strategy for listening to employees across a wide range of topics and purposes. For rewards, it doesn't always have to be a conjoint survey. The conjoint survey and Mercer Rewards Optimizer® are powerful if your company is considering making changes to the rewards portfolio. But depending on the need and context, there is a whole range of employee listening alternatives to consider, and they all have different benefits that align to different goals and objectives.
For example, Mercer conducts Unmet Needs Analyses when organizations are seeking specific data about where they are perceived to fall short in terms of attractive compensation, benefits, and rewards. For some, that may be the first step, whereas others are ready to make changes, which is when rewards optimization is appropriate. Overall, the biggest consideration employers need to make is their readiness to use the results of this analysis to facilitate change and set strategy for the future.
Another big requirement is to be able to support the communications and change management strategies. I can’t stress this enough – communication and change management can’t be an afterthought!
Sometimes, employers worry that asking employees about their preferences and trade-offs will set them up to expect more; others worry that employees will immediately assume benefits are being taken away. However, the whole premise of a trade-off conjoint survey introduces and reinforces the idea that there is a limited pool of resources and in order to receive more of something they will likely have to accept less of something else.
The last thing I’ll say is that organizations should plan to engage in ongoing modeling. Mercer conducts the initial modeling of idealized portfolios of programs, but we then provide the organization with access to Mercer’s modeling tool and dashboard (Mercer Rewards Optimizer®) so that they can continue to model different alternatives and find innovative combinations. It’s not a “one and done” project.
Thank you so much for this discussion, Sean. The expert-led design of conjoint surveys, layering cost data with employee preferences data, and the optimization dashboard give companies unique and targeted insights designed to directly guide investment decisions. You shared some very compelling reasons to reach out to you.
Thank you, Rebecca. I’d be happy to engage in discussions with anyone who would like to know more.
Would you like to talk to Sean or another Mercer colleague to learn more about rewards optimization? Give us a call at 855-286-5302 or email surveys@mercer.com.
Meet the expert
Sean Connelly, Principal
Sean is Mercer’s US & Canada Total Rewards Preference Research leader and has worked with clients for over 30 years to help them understand employee needs and preferences for benefits and rewards.