A new era for workplace benefits: Gen Z demands more

Traditional workplace benefits are no longer enough to meet the expectations of today’s employees and companies are racing to adapt their offerings to stay competitive in the changing market. That is the takeaway in new research from EY (Ernst & Young) and LIMRA.

With Gen Z now outnumbering baby boomers in the labor force, and millennials making up the largest demographic overall, more than half of small employers surveyed and two-thirds of large ones expect to offer more benefits over the next five years.

The 2025 Workforce Benefits Study surveyed 800 U.S. employers and 2,000 workers, painting a clear picture: employers continue to face cost pressures, compliance burdens, and a workforce that spans five generations. Most employers—84% overall and 95% of large firms—believe benefits are essential to attracting talent. However, the majority also recognize that their current one-size-fits-all approach is outdated.

Yet rising medical costs, compliance demands, and a lack of digital tools are making it harder to scale those offerings effectively.

As of 2024, Gen Z – sometimes called Zoomers – officially outnumbers baby boomers in the workforce, with millennials being the largest generational cohort. Gen Z represents those born between 1997 to 2012. This shift has elevated demand for benefits tied to wellness, flexibility, and financial security. Employees increasingly want emergency savings programs, student loan repayment assistance, and mental health benefits—all of which are now climbing the ranks of must-have offerings.

“Benefits absolutely remain at the heart of the employee value proposition,” said Chris Morbelli, EY Americas Life & Group Insurance Transformation Leader “Even with 53% of employers citing benefits cost as one of their top concerns, 57% of small employers and about 65% of mid-to-large employers expect to offer more benefits in the future. Wellness benefits are becoming a must have.”

'Core four' benefits expand to add leaves

Paid family and medical leave have now joined medical, dental, and vision coverage in the so-called 'core four' of benefits, with 71% of employers naming them as essential. However, interest in these benefits varies widely across generations, causing a more nuanced, customizable approach, the EY-LIMRA survey said.

Amid this complexity, brokers are playing an increasingly consultative role, helping employers navigate a fragmented regulatory environment while advising on holistic, data-driven strategies. Employers rank data on employee preferences, utilization rates, and cost trends as top decision-making tools—and brokers are eager to deliver.

But ongoing consolidation in the brokerage world could stifle local innovation and leave small businesses underserved. This may open the door for general agencies and professional employer organizations (PEOs) to gain market share, especially in the small to midsize employer segments.

Leave benefits are growing rapidly in scope and importance, but most employers are still playing catch-up when it comes to managing them. Only 24% of workers who took leave said the process was 'very easy,' revealing a considerable experience gap.

“Leave management is now a core four benefit with medical, dental and vision,” said Morbelli. “But the regulatory environment is rapidly getting more complex, making administration even more complex, which is quickly opening the door for leave mismanagement. 79% of employers said they did not view leave management to be very complex in 3-5 years, yet only 24% of employees said their leave experience was “very easy” today.”

Employers are responding by considering a broader array of leave types—from caregiving to sabbaticals—and increasingly outsourcing administration to third-party providers and carriers that offer integrated solutions. As one broker noted, “I've seen more leave of absence cases in the last 12 months than in the prior nine years combined.”

Digital tools now expected

The study confirms that digital tools are not just nice-to-have—they are expected. Employers are prioritizing seamless online enrollment, mobile access, and claims automation. AI is emerging as a momentous change, especially in claims adjudication, personalized benefit recommendations, and real-time decision support.

“AI has the potential to orchestrate more personalized experiences at scale in several impactful ways,” said Morbelli. “It can create new product designs tailored to microsegments, or the ability to quickly test next generation offerings. AI can also expand distribution reach and proactively target underserved market segments. Additionally, it can enhance education efforts to demystify benefit options and deliver deeper insights into overall wellbeing. Decision support tools can be augmented to highlight generationally relevant needs and offerings, while ongoing servicing and claims processes can be transformed through digital agents and real-time decisioning.”

By 2025, 74% of employers said they prefer carriers that integrate well with existing tech platforms over those simply offering the lowest cost. The message is clear: integration and experience now outweigh price alone, the study concluded.

The 2025 Workforce Benefits Study makes one thing plain: the benefits landscape is undergoing a seismic shift. The winners will be those who embrace digital tools, leverage AI for personalization, and build benefit portfolios that reflect the diverse needs of a multigenerational workforce.

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].