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Key takeaways:
- As plan prices go up, more employers are shifting the cost to employees.
- If you’re considering this strategy, you need to find the right balance between cost and value.
- Plans with pre-tax contributions like VCD are a great fit if you’re looking to reduce the burden on your employees.
Who should pay for benefits?
The current trend is for employers to shift benefits costs to employees, and there are several reasons to support this model in 2025.
However, you need to ask yourself if these costs are too much for your team, and watch out for perks that turn into burdens.
Why Employers Are Shifting Costs to Employees
Employees are increasingly paying out of pocket for benefits for two main reasons. The first one is that health plans and other perks cost more than ever:
- Healthcare prices are up, and they’re growing faster than inflation. Insurers have to adapt by increasing their premiums.
- Deep changes are happening in the insurance market because of the Big Beautiful Bill. By cutting subsidies, this bill drastically reduces the pool of insured Americans and concentrates risks on those with health conditions who keep their coverage. It’s another reason for insurers to increase their prices.
The other main reason employees contribute more to their benefits package is the labor market. Hiring slowed down over the summer, and while experts are still conflicted about a possible recession, Americans are less likely to switch jobs. Slightly less competitive perks aren’t a major concern in terms of retention, but it’s a trend you should keep a close eye on.
Shifting Benefits to Employees: When Is the Cost Too Much?
With plan prices going up and retention being less of a pressing issue, it seems logical for HR teams to decide to shift costs to employees. As long as you can maintain a balance, having employees pay for benefits isn’t all bad:
- Adopting an opt-in model where employees can pick and choose their benefits means they’re paying for things they perceive as valuable.
- Employers can still sponsor some benefits with a cost-sharing model, helping employees pay less for health, vision, dental, and other benefits.
- Even if the employee is covering the full cost, group discounts available through their workplace can be a plus.
It’s important to listen to employees to find the right balance between having employees pay more for benefits and lessening the impact of this decision on morale. You can introduce cost-sharing gradually and use this transition period as an opportunity to introduce new benefits that better align with what employees want.
Your enrollment rate is a telling data point. If you see employees turn down benefits rather than shouldering the cost, it’s a sign you’re pushing too far and need to introduce some employer-sponsored perks.
Don’t Overlook Pre-Tax Contributions
If you’re asking employees to pay more for their benefits, plans with pre-tax contributions (also known as Section 125 or cafeteria plans) are ideal. Here’s how they work:
- Employees pay for these benefits with their pre-tax income. Contributions directly come out of their paychecks.
- This reduces their taxable income. In addition to having access to affordable benefits, they pay less in taxes.
- As an employer, you also save on payroll taxes.
It’s how Vision Care Direct prepaid plans work. With Section 125 pre-tax contributions, employees can reduce their taxable income and access savings at the optometrist.
Plus, our plans don’t have any participation requirements and come with different tiers of savings, which is ideal if you want to let employees opt in and choose a prepaid vision plan that makes sense for their needs and budget.
Make Vision Benefits More Accessible With VCD
Increasing employee participation is a necessity given rising costs, but you can lessen this burden by choosing benefits that create real value and offering Section 125 pre-tax contributions.
If you’re looking into updating your benefits package with flexible vision perks, VCD could be a great fit. We’re a locally-owned plan with one of the largest networks of optometrists in Oklahoma. Instead of using a traditional reimbursement model, we offer prepaid plans with savings on eye health services. It’s a lot easier to navigate, and employees have a much better understanding of the value they’re getting.
Explore our prepaid vision plans here and learn more about pre-tax contributions for vision benefits.
FAQ
What are pre-tax benefits?
Pre-tax benefits are perks employees pay for with their gross income. They lower their taxable income and help employers save on payroll taxes.
How are prepaid vision plans different from traditional insurance?
Traditional vision insurance reimburses eye health services after a patient receives care. With a prepaid plan, the patient has access to upfront and transparent savings.
Should employers or employees pay for benefits?
Employer-sponsored benefits are great for retention, but you can still create value with a cost-sharing model as long as the perks reflect what employees want.
