Turnover climbs as employers plan growth on constrained workforces

When employers are asked what drives engagement, manager behavior ranks at the top. Forty-five percent of employers focused on improving engagement work on clear performance goals, 45 percent on communication that builds trust, and 42 percent on timely feedback. None of those outcomes depends primarily on a benefits plan, but all of them affect how employees experience one. A workforce that trusts its leadership is more likely to use the benefits it has, which raises the floor on plan value even before design changes.

AI adoption runs ahead of readiness

The report’s AI findings carry a separate set of implications. Seventy-three percent of employers say they are likely to increase AI use in HR by 2028, while 45 percent have already implemented it in parts of the business. In benefits administration, large employers are significantly ahead of small ones – 37 percent versus 14 percent. The gap reflects where the advisory work concentrates: smaller employers are half as likely to have adopted AI in benefits administration, and the compliance and governance infrastructure that responsible adoption requires is often absent.

AI adoption in HR is running ahead of the governance structures needed to support it. Only 51 percent of employers have expanded their risk management practices to cover AI, while just 45 percent have conducted ethical impact assessments. Data privacy and security are the top concern, cited by 72 percent. Nearly 29 percent say concern about eroding employee trust is itself a barrier to adoption. That finding points to a communication and change management problem as much as a technology one.

“The data show that many organizations are navigating a difficult balancing act,” said John Tournet, US chief executive officer of Gallagher’s benefits and HR consulting division. “Business leaders are pursuing growth while managing cost pressures, workforce capacity constraints and retention challenges. Organizations that succeed will be the ones that focus on the fundamentals: helping managers lead effectively, creating realistic workloads and ensuring employees understand how their work contributes to organizational goals.”