While the job market has cooled a bit from the competitive hiring landscape post-COVID, another major labor shortage wave looms, according to a data report from Lightcast, a provider of trusted global labor market data, analytics, and expert guidance. The firm projects U.S. population growth to outpace labor force growth eight to one by 2032. The hospitality, health care, and service industries are expected to be hit the hardest.
To prepare, employers need to offer competitive compensation and benefits to ensure they’re attracting and retaining top talent. If you don’t keep employees happy, your competitor will. Stay ahead of the curve with an understanding of the compensation and benefits trends for 2025.
Major Compensation Trends for 2025
2025 compensation trends include the following:
Pay Transparency and Equity
Despite many pay equity laws, wage gaps still exist. U.S. Department of Labor data shows women working full time year-round earn 84% of what men are paid. There are more earning disparities when it comes to race and ethnicity. Black workers make just 76 cents per the white worker’s dollar, while Hispanic/Latino workers make 73 cents.
According to a JUST Capital report, 32% of the largest U.S. companies surveyed in 2023 reported analyzing pay disparities, which was up from 23% in 2022. As more workers demand transparency, we expect more companies to audit pay practices and address inequities.
Speaking of pay transparency, Illinois, Minnesota, and Vermont have pay transparency laws starting in 2025, which will require employers to list salaries in job postings. They join nine other states who already have pay transparency laws in place. Employers have been getting ahead of the trend. In 2023, 50% of jobs listed on Indeed showed salary ranges, compared to 20% in 2019.
Performance-Based Compensation
Performance or merit pay is known to increase productivity and performance. And studies show the benefits outweigh the costs. More typical in sales roles, companies are implementing performance-based pay in other roles as a way to increase engagement and reward high performers.
In addition, performance-based compensation is becoming increasingly sophisticated. Organizations are moving beyond simple numerical metrics to develop more holistic evaluation systems that incorporate 360-degree feedback, qualitative assessments of teamwork, and alignment with core company values. Advanced HR technologies enable more nuanced performance metrics tracking, with AI-powered platforms providing real-time insights and continuous feedback mechanisms.
Technology in Compensation Management
Many benefits leaders will turn to technology to simplify and streamline compensation management. A tool like Paycor Compensation Management Software enables companies to significantly reduce the effort and time spent planning budgets and completing merit, bonus, and equity cycles. This frees up more time to focus on compensation strategies for recruitment and retention, like performance-based pay or vesting schedules.
Employee Benefits Trends for 2025
Employers are constantly crafting new benefits to compete for top talent. Trends to watch for in 2025 include the following:
Health and Wellness Benefits
As the cost of group health care continues to increase, many employers are looking for higher-quality, lower-cost options they can offer to keep costs manageable and avoid having to pass more burden to their workforce. In Mercer’s Survey on Health Benefits Strategies for 2025, 36% of respondents say they do or will offer a non-traditional medical plan in 2025, while an additional 29% say they are considering it. The non-traditional options discussed were:
- National carrier high-performance networks
- Independent high-performer networks
- Other high-performance network plans (regional health plan, reference-based pricing plan, etc.)
- Variable copay plans
Mental health benefits continue to be a valuable benefit in 2025, with 45% of respondents noting they offer (or will offer in 2025) employee assistance programs beyond telephone or video calls, such as coaching services or text therapy. Other notable statistics of what employers currently offer or will offer in 2025 include:
- 29% offer in-person counseling at one or more work sites
- 54% provide digital or in-person stress management resources
- 46% run campaigns to reduce the stigma of receiving behavioral health care
Other wellness benefit trends for 2025 include nutrition/weight loss programs, caregiver support, and a focus on inclusive and equitable benefits.
Flexible Work Arrangements
The COVID-19 pandemic opened employers’ and employees’ minds to flexible work arrangements, and the trend is here to stay. Paycor’s 2025 HR and Predictions survey of more than of more than 7,000 HR, finance, and IT professionals found flexibility is the No. 1 reason employees stay at a company.
In addition to hybrid and remote work benefits, employers are starting to offer compressed work schedules, flexible hours, and job sharing.
Financial Wellness Programs
According to Transamerica’s 5th Transamerica Prescience 2026 report, 47% of employers plan to offer a financial wellness benefit by 2026. Financial wellness programs include retirement planning support, personalized financial counseling, financial education workshops, and access to digital financial planning tools.
In addition to financial wellness programs, employers are adding benefits that offer financial support to help employees keep up with the increased cost of living. Mercer’s Survey on Health and Benefits Strategies for 2025 shows the percentage of employers that currently of will offer certain financial benefits in 2025:
- 21% subsidized phone/internet for remote working
- 18% employer-provided or subsidized transportation
- 17% free of subsidized meals at work
- 16% stipend for home office setup or supplies
- 15% lifestyle account for wellbeing
- 13% student loan refinancing assistance
Emerging Trends to Watch
The following emerging trends offer value to the employee while supporting employer recruitment and retention efforts. Stand out from the pack by offering these benefits.
Personalized Benefits Packages
As workforce demographics continue to diversify, employers are moving toward more customizable benefits solutions. Typically, employers give a budget and employees choose the benefits that matter most to them. This approach recognizes that a one-size-fits-all benefits strategy no longer meets the complex needs of today’s multigenerational workforce.
Personalized employee benefits empower workers to align their packages with their unique life stages, whether they are managing caregiving responsibilities, pursuing continuing education, or prioritizing financial wellness.
Sustainability and Green Benefits
In the 2023 Net Positive Employee Barometer, a survey led by former Unilever CEO Paul Polman, 61% of employees say they want to see their company take a stronger stance on the environment. As employees become increasingly eco-conscious, sustainability-focused benefits are gaining traction. Employers are introducing programs that align with environmental values, such as incentives for electric vehicle purchases, public transit subsidies, employee carpools, and bike-to-work programs. Companies are also investing in green office initiatives, like energy-efficient workspaces and waste reduction efforts, to demonstrate their commitment to sustainability.
Frequently Asked Questions
Still have more questions? Read on.
What Are the Top Compensation Trends for 2025?
Top compensation trends for 2025 include performance-based pay, pay transparency strategies, pay equity, and the use of technology in compensation.
How Can Companies Ensure Pay Equity?
Companies can ensure pay equity by conducting regular pay audits, analyzing compensation data to identify gaps, and implementing transparent salary structures. Leveraging technology to track and report pay metrics also helps maintain fairness across roles and demographics.
What Are the Most Popular Employee Benefits for 2025?
Popular employee benefits for 2025 include flexible work arrangements, financial wellness benefits, mental health support, and personalized benefits packages.
How is Technology Changing Compensation Management?
Technology is transforming compensation management by enabling real-time data analysis, automating pay processes, ensuring compliance, and improving pay transparency. Advanced tools also help align compensation strategies with performance goals.
What Are Personalized Benefits Packages?
Personalized benefits packages allow employees to choose the benefits most relevant to their needs, such as health plans, financial support, or wellness programs. Employers provide a set budget, enabling flexibility to meet the unique needs of a multigenerational workforce.
How Paycor Helps
Benefits play a major role in a company’s recruitment efforts and employee retention strategies. Paycor Benefits Administration software empowers HR leaders to build attractive benefits packages, simplify the open enrollment process, and ensure compliance with ACA and workers’ compensation. Learn more with a guided tour.
Want to know what other HR trends are on the horizon for the new year? Check out our HR in 2025: Insights and Predictions, based on a survey of 7,000+ HR, finance, and IT pros.