Why benefits will make or break employee retention in 2026

This is part two of a series that takes an in-depth look at Payroll Integrations's Employee Financial Wellness Report and offers key takeaways for employers. Read part one here. 

With the start of the new year, many employees traditionally consider exploring new jobs, alongside other resolutions like fitness goals or budgeting. But for the past two years, more workers have stayed in their roles — not because they're entirely satisfied with them, but because economic uncertainty has made them prioritize stability over the risk that comes with changing jobs.

Most often referred to as "job hugging," many employees are clinging to their jobs longer than they'd like. But a growing number will start to reach their breaking point after a few extra years in roles they already know no longer serve them. And when they do, benefits will be a major driver of whether they decide to stay or go.

According to Payroll Integrations' Employee Financial Wellness Report, 60% of employees say that they would leave their job for better health insurance and 59% say they would do the same for a stronger retirement plan or match. And it's not just traditional benefits: 57% would leave for more paid time off or schedule flexibility and 48% would make the same choice about comprehensive wellness perks. Family benefits, student loan assistance, continued education and mental health coverage are also benefits that, if not available or strong enough, would cause employees to leave their roles. 

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Different benefits become increasingly important as employees move through various life stages. An employee might find that their benefit priorities have changed — whether it's because they're starting a family, pursuing a degree or caring for an aging parent — and their current company may no longer meet those needs.

For employers in 2026, the goal is not to deliver every benefit, but to offer those that truly meet employees' needs across generations. But, of course, this is easier said than done.

Manual HR processes will start to disrupt employees' experiences

In order to identify what benefits employees need and create offerings that match them, employers need to first talk directly with their employees. Guesswork won't work here — the only way to align with employees' benefit priorities is to hear it straight from them.

The problem is most HR teams don't have the time. They often rely on decades-old manual processes to manage everything from recruitment and onboarding to payroll and benefits, and spend hours of their day on repetitive admin tasks that they could instead spend enhancing the employee experience.

In fact, HR leaders say if they cut down the time spent on administrative work, they'd focus instead on speaking with employees about benefits (60%), boosting engagement and relationships (58%) and providing benefits education (56%).

HR has been one of the last departments to adopt automation into daily operations. But as manual work scales and employees expect more from their benefits, HR teams will find themselves held back by outdated processes. This will make it difficult to deliver the modern experiences and diverse benefit strategies that employees need to stay.

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Fewer admin burdens means focusing on the benefits that matter

A one-size-fits-all benefits program no longer works for companies.

Employees' priorities vary widely as they navigate different chapters in their life — but companies need to not merely guess, but know what's important with each generation of employees by directly engaging with them.

When HR teams can offload their admin burdens and have the time to listen to employees — through 1:1 conversations, group discussions or ongoing surveys — they'll be able to implement the benefits that matter. 

Of course, companies can't guarantee that every benefit will address the needs of every employee. But by understanding generational differences they can design benefit programs that serve the majority of their employees. 

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Addressing the benefit generation divide

As Gen Z workers start to grow in their careers, it's become clear that their benefit priorities differ from their millennials, Gen X and boomer colleagues. 

For example, nearly half (46%) of Gen Z employees report having withdrawn from their retirement funds already. For the youngest working generation specifically, there's a need to pair benefits with better guidance so employees can fully take advantage of them. Millennials (93%) and Gen Z workers (85%) also place greater responsibility on employers to fill financial support gaps not currently met by government programs, compared with 80% of Gen X and 64% of Boomers.

And when asked which benefits they want that aren't currently available to them, 62% of Gen Z say health insurance, 43% of millennials value fitness and wellness offerings, 43% of Gen X prioritize additional compensation and 27% boomers focus on retirement plans and pet insurance.

While many employees have stayed in their roles longer than anticipated over the past few years, more will begin to reevaluate their roles, and the companies that offer the benefits that align with employees' needs will be those that will see the highest retention.