How High Costs Will Drive Big Shifts in Employee Benefits in 2026

As the price tag on employee benefits dramatically rises (from general inflation, surging healthcare costs and more), most employers will pass those costs along to their workers in 2026. Given that, HR functions and their total rewards (TR) professionals should assume responsibility for easing employees’ financial burdens and improving their work-life balance in ways that are affordable for their organizations. The HR/TR teams that strike this balance in 2026 may sustainably improve employee satisfaction, retention and performance.

This article shares three trends that should be on HR/TR teams’ radar as they approach the new year.

Trend #1: Easing employees’ financial burden will be a top priority.

According to the 2025 Bank of America Workplace Benefits Report, 77% of U.S. workers are stressed about the current economic climate. While financial stress is felt across generations, younger workers are in particularly rough shape — 88% of millennial and Generation Z respondents said they carry some type of debt, while 58% said they have credit card debt. This has forced younger workers to delay milestones such as buying a home, and it puts them in a precarious financial position. Forty-five percent of overall respondents said they haven’t saved enough for emergencies because they’re focused on repaying debt.

It’s no wonder a 2025 Morgan Stanley survey found 84% of surveyed workers think their employer should more actively assist them with their finances. This is all the more critical as employees turn to emergency financial solutions that may be harmful in the long run — 401(k) hardship withdrawals are on the rise and millions of Americans rely on extremely high-interest payday loans. As workers increasingly mortgage their future to address their immediate financial needs, HR/TR teams should consider ways to reverse this trend. Two-thirds of respondents to the Morgan Stanley survey said financial stress is negatively affecting their work, while 83% of HR executives believe employees’ financial issues are affecting their productivity.

A more proactive approach to improving employees’ financial well-being will likely have substantial benefits across the board in 2026 and beyond.

Trend #2: The rising cost of benefits will be a core focus for HR/TR teams.

A recent Mercer survey of 1,700 U.S.-based employers found the health benefit cost per employee will increase by an average of 6.5% in 2026 — the biggest spike since 2010. It’s no surprise that 59% of employers that responded to the Mercer poll said they will make changes to cut costs from their plans, as costs are projected to increase by 9% if they don’t act. Workers should expect paycheck deductions for healthcare to jump by 6% to 7%.

One consequence of skyrocketing health insurance costs will be a shift from preferred provider organization (PPO) and low-deductible plans to high-deductible plans. While this reduces premiums for employees that participate in the insurance program, it also puts them at greater risk of severe financial harm if they get sick or injured. U.S. workers have ranked emergency savings a top financial goal for five years straight (Morgan Stanley is among the financial institutions calling that out), but rising levels of debt — total household debt is nearly $18.6 trillion, including $1.23 trillion in credit card balances — and increasing costs are making it difficult to pursue this goal. The drastic increase in healthcare costs will likely limit HR/TR teams’ ability to add new benefits that increase corporate costs, which will make it more difficult to alleviate these employees’ financial burdens.

At a time when high inflation remains sticky and the labor market is weak, the pullback in benefits is compounding workers’ financial woes. This is why HR/TR teams will likely need to construct ways to stretch their benefits budgets as far as possible in 2026.

Trend #3: HR/TR teams will embrace flexible and personalized benefits.

With a contracting job market and the rapid adoption of artificial intelligence (AI) — which working Americans are concerned will lead to permanent job losses — workers will feel increasing pressure to sacrifice work-life balance for greater productivity. But the culture of overwork at U.S. organizations is already oppressive — a Harris poll showed more than three-quarters of American workers fail to use all the paid time off (PTO) available to them. This status quo is especially alarming for HR/TR teams given a recent Randstad survey of 26,000 global workers found work-life balance is an even more important motivator than pay.

According to Morgan Stanley, 91% of surveyed workers said they will be more likely to stay with their employer if they receive benefits that meet their specific needs. HR/TR teams can personalize benefits with flexible programs like convertible PTO, which redirects the value of unused time off toward priorities like retirement contributions, student loan payments and health savings accounts. HR/TR teams also can offer greater flexibility with benefits like earned wage access, which allows employees to receive their pay when they need it — a way to prevent them from loading up on credit card debt or taking out payday loans.

Closing the Knowledge and Need Gaps

Workers need to know what options are available to them. The aforementioned Bank of America poll found there are significant gaps between the benefits employers say they provide — such as investment services, mentoring, small loans for emergencies and wellness reimbursements — and employees’ knowledge of those benefits.

In 2026, the HR/TR teams that focus on closing those knowledge gaps and providing flexibility and personalization will be better able to offset the rising cost of benefits and provide robust support for employees. 

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Benefits
• Employee Experience
• Finance and Budgeting
• Well-Being