As organizations focus on offering long-term incentives to boost retention, HR leaders must get creative to appeal to the multigenerational workforce and maintain cost-effectiveness.
By Maggie Mancini
Despite a slower pace of hiring and slight increases in unemployment in 2024, salary budget increases for 2025 are slated to continue close to the fastest pace in two decades, according to research from The Conference Board. Amid a period of uncertainty, it seems that companies are doubling down on efforts to retain existing talent. The report finds that one-time bonuses—while beneficial in a tight labor market—are losing momentum, with some organizations planning to discontinue them as part of a broader strategy to shift away from short-term rewards. And long-term, more sustainable incentives like recognition programs and equitable compensation policies are quickly gaining steam.
“As we approach 2025, employers are shifting their focus from pandemic-era initiatives like sign-on and retention bonuses to more sustainable benefits that support long-term employee well-being,” says Bill Welter, director of total rewards and people operations at Betterment, a technology-driven financial services company.
One trend to note, he says, is comprehensive financial wellness programs—like 401(k) plans and health savings accounts (HSAs)—because they are designed to provide employees with greater security and flexibility.
“I’ve also seen a trend toward offering flexible benefits and customizable reward programs, which allow employees to tailor their benefits to better meet the needs of a diverse workforce,” Welter says.
Shifting Workforce Demographics
Over the next several years, global workforce demographics are set to change. Amid the impending mass retirement of baby boomers known as “peak 65,” Gen Z will make up 30% of the workforce by 2030. As this younger generation makes headway in their early careers, they are bringing fresh expectations with them, Welter says. Many are focused on immediate and tangible rewards, such as higher salaries and performance-based bonuses.
“They also value flexibility and opportunities for professional growth,” he says. “Balancing their expectations with business goals means creating a flexible benefits structure that adapts to diverse needs while aligning with the company’s financial objectives. By leveraging technology and innovative HR practices, we can meet Gen Z’s demands without compromising overall strategy.”
Though salary remains the most important factor for employees when deciding on a job, research from Deloitte indicates that salary is less important to Gen Z employees than older employees. Rather, younger employees are more likely to engage in “quiet vacationing” and may use their sick time to take vacations, according to data from SurveyMonkey.
HR leaders can emphasize work-life balance through the availability of remote work options, flexible schedules, flexible PTO, and the use of mental health days to meet some of Gen Z’s employee expectations without sacrificing overall business strategy, Welter says.
While understanding the needs and expectations of the youngest members of the workforce is important, Gen Z is just one slice of a much larger pie. Supporting a multigenerational workforce means tailoring an organization’s approach to benefits to align with people throughout each of their life stages.
“Supporting a multigenerational workforce requires a nuanced approach to total rewards strategy,” Welter says. “One approach is to embrace flexibility and customization, allowing employees to choose benefits that resonate with their life stages and goals.”
He explains that while Gen Z may prioritize immediate financial rewards and career development paths, other generations may place more emphasis on retirement planning, family healthcare benefits, and caregiver support for their aging parents.
In this way, offering a mix of short- and long-term incentives and benefits can help make sure that total rewards programs are inclusive and appealing to employees in all age groups.
Keeping Benefits Competitive
In a tight labor market, benefits and rewards play an outsized role in boosting retention and keeping employees satisfied with their experience. However, with employers anticipating a third consecutive year of healthcare cost growth in 2025 and an ongoing period of economic uncertainty, the need for cost-containment when it comes to benefits—both short-term incentives and long-term investments—is paramount.
While keeping benefits competitive while maintaining cost-effectiveness can be a challenge, it’s still achievable through several strategic approaches, Welter says. These include:
- discretionary matching in 401(k) plans, which help increase participation without imposing a fixed cost burden;
- a la carte benefit options, which allow employees to select the benefits that matter most to them; and
- streamlined internal operations, which utilize technology to enhance benefits administration and reduce overhead costs.
By taking a strategic approach to cost-containment, focusing on sustainable benefits, and investing in customizable, personalized benefits and rewards, HR leaders can meet the needs of a diverse, multigenerational workforce without breaking the bank.