Amid a challenging labour market, Canadian employers say attraction (64 per cent) and retention (57 per cent) are the top challenges impacting total rewards decisions, according to a new survey by Arthur J. Gallagher & Co.

The survey, which polled more than 500 employers, found just a third (29 per cent) were concerned about benefits costs, down from 37 per cent in 2022 and 52 per cent in 2021.

“Over the last three years, attraction and retention [have risen] as the top concerns among employers, [while] benefits costs actually dropped out of the top three concerns this year,” says Sarah Beech, chief executive officer of benefits and human resources consulting for Canada at Gallagher.

Read: Canadian employers investing in innovative wellness benefits to drive attraction, retention efforts: survey

The survey also found more than a third (36 per cent) of employers reported a turnover rate of 15 per cent or more in 2022 and nine per cent reported a turnover rate of 30 per cent or more. The No. 1 factor impacting turnover is compensation, cited by 60 per cent of employer respondents. This was followed by employee burnout or quality of work-life balance (22 per cent) and retirement (21 per cent). More than two-thirds (69 per cent) of employers said they’ve enhanced base salaries to meet their retention and recruitment objectives, while 29 per cent said they’ve increased variable pay and bonuses.

Nearly half (47 per cent) of employers changed their benefits plan design between early 2022 and early 2023, with program enhancements (36 per cent) the most common change reported. Employers were most likely to enhance their emotional well-being offering (74 per cent), followed by enhancements to financial (38 per cent), physical (36 per cent) and career (35 per cent) wellness programs.

The survey also found employers are increasingly incorporating diversity, equity and inclusion into their recruitment (78 per cent), communication (54 per cent) and emotional well-being (45 per cent) programs. While employers are increasingly focusing on inclusive benefits as a talent management strategy, says Beech, it’s important to establish how those benefits support a wider DEI initiative.

Read: Report finds DEI increasingly important in talent attraction, retention efforts

“I think the first step is for each employer to decide what their [DEI] strategy is, as opposed to picking and choosing what [another employer] is doing — [employers need to ask themselves] what they value and then make sure their benefits and everything else they do is tied to their [DEI] strategy.”

More than three-quarters (76 per cent) of employers said they allow remote working, up from 71 per cent in 2022 and 52 per cent in 2021, while 68 per cent said they offer flexible work hours. While these arrangements may support some aspects of employee well-being, they can also pose challenges, notes Beech.

“For example, employees may be able to choose the days [spent working in-office] that perhaps are more convenient from a travel perspective and alleviate that stress, but by working remotely, there are [employees] that end up feeling isolated — there’s lots of discussion around mental health and well-being for remote workers.”

Read: Expert panel: How hybrid, remote working can impact employee health, disability management