Endemicity & Corporate Spending
Corporate spending trends as we move towards endemicity
Businesses entered 2022 faced with unprecedented challenges. Once again, COVID cases were soaring and businesses delayed their return to work plans. Now, as the world slowly moves to a state of endemicity, Finance and accounting teams must balance navigating rapid changes to corporate spending, while also combating the ‘Great Resignation,’ as the fight to retain top talent persists. Andrew Hoag, CEO,TeamPaygives his predictions on what the pandemic means for corporate spending in 2022
1. The continued dominance of remote work will alter corporate spending patterns
The pandemic has fundamentally changed the way work gets done and the Omicron variant only further accelerated it. While January 2022 was once a widely accepted return to office date, business leaders subsequently shifted their strategies and timelines. Apple and Google, for example, delayed their returns indefinitely. With the tight labour market, employees' desires for flexible work arrangements continue to push the market towards a hybrid model.
Companies are canceling their allocated return to office expenses and pulling back on in-person events, and instead adjusting their budgets to provide employees with the tools they need to successfully work from home, such as refreshers of work-from-home stipends and access to wellness programmes. In December 2021, Apple provided its workforce a $1,000 bonus to furnish their home offices.
Companies are also seeking out technology that reduces friction for employees, including software that integrates directly into the collaboration tools employees are already using, in an aim to better cater to a remote workforce.
Expect more of the unexpected in 2022, as employers move back and forth between establishing leases and focusing on work from home. Digital transformation will continue in nearly every aspect of the workplace, including within accounting departments, which will need to work with and account for a distributed workforce.
2. Companies will focus spending on initiatives aimed at managing employee retention.
The labour shortage has placed employee experience front and center; companies are turning to significant compensation increases to attract and retain talent in today’s market. Recent research projects a 3.9% jump in wage costs in 2022, the highest rate since 2008. Employers are also spending more money on initiatives like virtual team building and increased benefits. For example, consulting firm Deloitte recently announced they are investing more than $1b in compensation and benefits, which includes raising employees’ salaries and offering employees a $1,000 wellbeing subsidy. Mental health benefits and spending will also be a cross-industry trend. In fact, according to a 2021 Lyra Health survey, more than 73% of employers plan to increase their investment in mental health, amid a sharp increase in employees’ anxiety and depression levels since the pandemic started two years ago.
The rise in coronavirus cases related to Omicron will also likely have had hidden financial costs for companies. Research from the Integrated Benefits Institute, published in December 2021, found that employers had paid $24.3 billion in sick leave, $16.6 billion in disability wages and $35.3 in employee benefits as a result of the pandemic, and pandemic-related absenteeism was creating $1 billion in employer losses each week. Companies are also increasingly spending on health and safety. Recent data from Teampay showed a sharp increase in companies buying Covid-19 rapid tests for their employees in Q4 2021. Finance departments and business leaders alike must understand the costs associated with Covid, reframe their thinking and implement a strategy to address the unexpected financial impacts.
3. Corporate travel will take time to recover and will look different when it does.
The Omicron surge upended business travel plans for the beginning of 2022. Corporate travel will likely begin to pick up later in the year as coronavirus cases decline and people feel safer traveling. In December, 61% were concerned or very concerned about the safety of business travel, according to the Global Business Travel Association (GBTA). GBTA also projects a full business travel recovery in North America by 2024. However, we can anticipate business travel will forever be different than it was before: companies have learned the cost and time-saving benefits of virtual meetings and will be more selective with travel moving forward. In place of regular travel, there will likely be a large shift to big team-wide, in-person meetings once or twice a year.
Accounting can expect to see a slow and steady uptick in travel spend in 2022 and beyond.
With companies making major shifts in how (and where) they spend money, accounting departments are tasked with becoming nimble and agile. Spend is increasingly distributed amongst staff, as offices remain remote and increase their focus on employee benefits and spending. We can expect continued uncertainty and challenges in 2022, and accounting must take this opportunity to build out a fool-proof system to stay flexible in this time of change.