The Death Of Traditional Employee Benefits—And What Comes Next

You’re losing 17% of your employees’ work time.

Instead of focusing on their jobs, they’re stuck dealing with personal distractions.

And your benefits? They’re doing nothing to help.

That’s the hidden cost businesses are paying today. For decades, the formula for employee benefits was simple: offer healthcare, retirement plans, and a few perks—like gym memberships or wellness stipends—and employees would stay loyal, engaged, and productive. This worked in a world where people climbed corporate ladders and stayed employed, sometimes even with the same employer for decades.

But that world is gone.

Today’s workforce is fluid, mobile, and increasingly independent. Employees bounce between jobs, industries, and even career paths, often combining salaried roles with freelance gigs or entrepreneurial ventures. Job tenures are shrinking, and the gig economy is reshaping how—and why—people work.

The benefits offered must be relevant to these evolving career paths. Yet, most companies are still offering benefits designed for a stable, long-term workforce that no longer exists. And what’s more, they are doing so facing rising costs with diminishing returns, while employees feel unsupported and disconnected from the resources meant to help them thrive as they navigate the relentless challenges of macro-level disruptions—pandemics, economic uncertainty, environmental disasters—and daily distractions such as home repairs, family logistics, and constant digital interruptions. Traditional benefits, designed for stability and predictability, are no longer fit for purpose.

The real question isn’t whether employee benefits need to change—it’s how fast companies can evolve before the entire system collapses under its own weight.

The Employers’ Burden: Rising Costs, Shrinking Returns

Anthony Knierim, Managing Director at Reward Gateway | Edenred, explained in an upcoming episode of The Future of Less Work podcast that

“the old benefits model was built on the assumption that employees would stay for years, so companies could invest in long-term health and retention strategies. But that’s not how the workforce works anymore.”

The pressure isn’t just about employee turnover—it’s financial. As benefits costs rise year over year without measurable outcomes, CFOs are increasingly stepping into the conversation and questioning the value of these investments. Knierim captures this growing frustration:

“If our people aren’t happy with what we’re offering and we’re not seeing measurable outcomes, why are we still investing in this model?”

Adding to the complexity is the rise of the independent workforce. Contractors, freelancers, and gig workers don’t fit into traditional benefits frameworks and often lack access to employer-sponsored healthcare or wellness programs. For example, a freelance graphic designer juggling multiple clients might struggle to access affordable health coverage or paid time off, leaving them without crucial support during periods of illness or high stress. While that might not seem like a concern for employers, it is a concern for the people they want to hire. The more people know that they will, at some point, combine or transition to independent work, the more they voice their dissatisfaction with benefits that are only benefits as long as they stay employed with this employer.

And so companies must rethink how they support a workforce that is more dynamic, diverse, and transient than ever before.

Flexible Benefits Aren’t Enough: The Hidden Cost of Everyday Stress

The solution isn’t to abandon employee benefits but to rethink how they’re offered. One possible model is the “well-being wallet”—a flexible, personalized spending account that gives employees control over how they invest in their health and lifestyle.

Younger generations, in particular, prioritize well-being over traditional perks like entertainment or dining. And they seek workplaces that support their personal goals, whether related to fitness, mental health, financial security, or family. Employers need to stop asking, “How can we get employees to stay longer?” and instead focus on, “How can we create the happiest, most appreciative experience with our employees for the time that we have them?”

But even with greater financial flexibility, employees remain overwhelmed by the mental load of everyday life. From scheduling home repairs to managing healthcare claims and family logistics, these routine tasks drain energy and productivity. Jon Cooper, CEO of Overalls, a concierge-style life support service, highlighted how these seemingly small issues create a significant hidden burden.

“Most benefits address a small sliver of the workforce,” Cooper explains. “And yet when you survey the workforce, 80% of employees say they’re stressed.”

The root cause? It’s not major life crises—it’s the constant stream of small, disruptive problems that wear employees down, ultimately chipping away at productivity and focus throughout the workday.

“The things that come up over and over again are just the little daily distractors,” Cooper says. It’s the washing machine breaking, a snow day shutting down school, trying to contest an incorrect charge on a credit card.

These issues don’t wait for employees to clock out. Cooper’s data reveals that 90% of these life problems occur during working hours, typically between 11 a.m. and 2 p.m. The result? Employees lose an average of six and a half hours a week dealing with personal issues—an invisible drain on focus and productivity that amounts to nearly a fifth of their workweek.

Traditional benefits fall short in addressing these daily stressors. Most problems don’t fit neatly into one benefit category. A financial issue might also be a caregiving issue, or a housing problem. Employees often bounce between multiple benefit solutions in search of support, which only adds to their frustration and stress.

The Future of Benefits: A Smarter, Purpose-Driven Approach

The traditional benefits model—designed for a workforce with long-term stability—is no longer sustainable. To meet the needs of today’s workforce, companies must offer dynamic, flexible support that empowers employees to manage their well-being while reducing their cognitive load.

Technology, particularly AI-driven platforms, will play a pivotal role in reshaping how benefits are delivered. In the future, AI can proactively recommend relevant resources to employees, offering a seamless and intuitive experience. Imagine an AI assistant that doesn’t just respond to inquiries but anticipates needs by asking: “What do you need today?”

The future of employee benefits isn’t about offering more—it’s about offering smarter, more personalized, and impactful support. Companies that embrace this evolution will not only attract and retain top talent but will foster environments where employees can thrive, both personally and professionally.

Because at the end of the day, your best employees don’t work for you because they have to—they work for you because they want to. The most forward-thinking organizations will ensure that working for them helps employees achieve not just professional goals, but their personal purpose in life.