The benefits shift: What small businesses need to know

Benefits play a significant role in how employees feel about their employer. According to ADP’s 2025 ADP TotalSource^® Employee Benefits Survey of 12,429 U.S. workers, 78% of employees say they feel valued because their employer offers medical benefits. Even more, 83%, say they feel valued because of nonmedical benefits like life and disability insurance, dental, vision, etc. Medical insurance remains the most valued workplace benefit, followed by retirement savings plans.

For small businesses, these insights present a challenge and an opportunity. But the upside is when small businesses help their employees understand their benefits, it can build trust, improve retention and help people see the full value of their compensation.

Benefits remain a powerful employee retention tool

Healthcare costs, rising economic pressures and growing concerns about retirement are changing how people view workplace benefits. While competitive health insurance and retirement plans remain essential, workers are looking for more than access to coverage. They want help navigating complex decisions that affect both their financial well-being and their health.

The Employee Benefits Survey’s findings suggest that benefits are one of the most visible ways people judge an employer's commitment to their well-being. Many view pay and benefits as a single package that contributes to both short-term financial stability and long-term security.

For small businesses that may not always be able to match the salaries offered by larger organizations, benefits can reinforce the value of total compensation and help attract strong talent.

Employees expect more than access to benefits

Benefits decisions have become more complicated. Choosing healthcare coverage, understanding out-of-pocket costs and planning for retirement all require people to make decisions that can have a lasting impact.

Nearly three-quarters of people believe their employer will provide benefits that meet their needs. That level of confidence creates an opportunity for small businesses to play a more active role in supporting employee decision-making.

Simple explanations, educational resources and year-round benefits communication can help people better understand their options and use available resources more effectively. In many cases, people may place as much value on guidance and support as they do on the benefits themselves.

Rising healthcare costs are changing employee behavior

Affordability has become one of the defining issues in employee benefits. Rising healthcare expenses are forcing many workers to make difficult choices about care and coverage.

More than one-quarter of people surveyed report skipping medical care for themselves or a family member because of out-of-pocket costs. And nearly 1 in 4 say they have taken less medication than prescribed to save money. Another 15% have declined dental or vision coverage so they could afford medical insurance.

These decisions may help people manage short-term expenses, but they can create larger challenges over time. Delayed care can lead to more serious health conditions, higher treatment costs and increased absenteeism.

At the same time, more people are taking an active role in managing their health. More than two-thirds report using the internet to seek medical information, while more than one-quarter have used generative AI tools for health-related advice. In addition, 78% say they are paying closer attention to wellness habits such as exercise, nutrition and mindfulness. Preventive care usage has also increased.

People are caught between wanting to stay healthy and struggling to afford it. Small businesses can help close that gap through better benefits education, decision-support tools and plan options that work across different income levels.

Retirement security is becoming a core employee concern

While healthcare remains a major focus, retirement readiness is moving rapidly up the list of employee priorities: 63% of employees rank a 401(k)-retirement savings plan as a top-tier benefit. Retirement savings have now surpassed dental insurance to become the second most valued workplace benefit, only behind medical. The shift reflects growing concerns about long-term financial security.

For small employers, retirement benefits are becoming a competitive necessity rather than a nice-to-have offering. Not having retirement offerings may put small businesses at risk of losing out on top talent, as people place greater value on employers that help them prepare for the future.

Fortunately, several developments have made retirement plans more accessible for small businesses. The SECURE 2.0 Act expanded tax credits that can offset much, and in some cases all, of the startup costs for eligible small businesses. Additional incentives tied to employer contributions and automatic enrollment can further reduce the financial burden.

Access to a retirement savings plan, employer matching contributions and financial education resources can help address one of the fastest-growing sources of employee anxiety.

Employees have more savings but less confidence

Perhaps the survey's most surprising finding is that employees report saving more money while feeling less financially secure. Nearly 40% say they are unprepared to handle unexpected out-of-pocket healthcare expenses. Meanwhile, the percentage of people with less than $500 saved for unexpected medical costs has increased from 20% to 28% over the past five years. Even workers who are putting money aside often worry that they are not prepared for a medical emergency or other unexpected expense.

Small businesses can support employees by strengthening financial wellness efforts. Benefits education, retirement planning resources and tools that help employees estimate healthcare costs can improve understanding and reduce uncertainty. Even modest improvements in benefits literacy can help your employees feel more prepared to manage financial challenges.

What employers can do now

The data points to several practical steps employers can take to improve the employee benefits experience:

• Simplify benefits communication. Use plain language and focus on helping people understand how plans work and how to use them.
• Extend education beyond open enrollment. Provide year-round resources that help people make informed healthcare and financial decisions.
• Promote financial wellness. Offer retirement planning support, educational workshops and resources that help people prepare for future expenses.
• Leverage technology. Decision-support tools, benefits calculators and personalized resources can help employees compare options and choose coverage that fits their needs.
• Highlight the full value of benefits. Many underestimate the investment employers make in benefits. Regular communication can help reinforce the value of the total compensation package.

The new measure of benefits success

Benefits have always been important for attracting and retaining talent. What is changing is the role small businesses play in helping their people understand and use them.

People are not necessarily asking for more benefits. They are looking for benefits that are easier to navigate, better aligned with their needs and supported by practical guidance. As healthcare and financial decisions become more complex, offering strong benefits combined with ongoing education and support may help businesses gain a meaningful advantage in building trust, engagement and stability.

This story was produced by ADP and reviewed and distributed by Stacker.