Critical benefit considerations for hourly workers 

February 05, 2025

This year, our always-enlightening survey, Inside Employees’ Minds, gave the mic to hourly workers – many of whom have front-line, onsite jobs in healthcare, manufacturing, retail and hospitality or customer-service roles in finance and technology companies. Where labor shortages persist in the US, it’s often in these sectors, for these employees. Engaging hourly workers is essential – but as the new survey of more than 2,000 US workers revealed, employers are losing ground in this area. Not only are there significant gaps between salaried and hourly workers in all job satisfaction metrics, but the percentage of hourly workers expressing dissatisfaction with their jobs has grown since 2023 – including dissatisfaction with their benefits.

That’s concerning, because health benefits really matter to employees. Ensuring that workers can access and afford the healthcare they need is one of the most important things an employer can do to keep them loyal and engaged – not to mention healthy! The graph below shows the size of the gap between salaried and hourly employees in terms of their ability to afford the healthcare they need without financial hardship. But when we break down the results for hourly workers based on pay, we see that pay is the real issue. Only 50% of those earning less than $15 an hour believe they can afford the healthcare they need, and that doesn’t improve much in the next-highest pay group.  The gap with salaried employees only starts to close with employees earning $26/hour or more.

Clearly, earning less means you have less to spend on healthcare. But compounding the problem is that in organizations where pay is lower, health benefits tend to be skimpier as well. Using data from our National Survey of Employer-Sponsored Health Plans 2024, we divided respondents into four roughly equal groups (quartiles) based on the average pay in their organizations and compared their health programs. In the organizations in the bottom quartile, with average annual pay of $65k or less, employees pay $701 per month, on average, for family PPO coverage. That’s only slightly higher than the contribution in companies in the top quartile (where the average pay is $112K or more). However, out-of-pocket costs for employees in the low-average pay group are significantly higher as well: The median family deductible is $2,250, compared to just $1,500 in the companies with high-average pay.

In addition, the difference in total health benefit cost per employee between the two groups – less than $14,000 vs more than $19,000 – likely reflects not only the difference in cost-sharing, but also in other benefit features, such as employer-paid dental benefits, coverage for IVF, or an enhanced behavioral health care network, to name just a few possibilities. The combination of lower pay and health benefits that cover less is a one-two punch when it comes to health equity.

Taking on the affordability challenge

Of course, the business reality for companies with a lower-wage workforce may be such that there isn’t much room to grow the benefit budget. That doesn’t mean these employers aren’t concerned about affordability – they are. About three-quarters of the employers in bottom quartile pay group say that improving health care affordability is an important priority over the next 3-5 years. But so do 59% of those in the top quartile. Affordability is an issue for most employers, and with health benefit costs rising faster than inflation, it’s an issue that won’t resolve itself.

Let’s look at some of the actions employers are taking to improve healthcare affordability and support employee well-being in the process – with a focus on actions that can add real value without busting the budget. They’re in three broad categories, with a few examples in each.

Contributions. Consider changes to your contribution strategy to help hourly and lower-wage employees keep more of their paychecks. The most common way to set lower contributions for lower-wage workers is through salary bands; however, with this strategy, a pay increase can bump a worker up into a band with higher contributions, eroding the benefit of the pay increase. Depending on your situation, capping contribution amounts at a specific percentage of pay may work better. Another option is to provide a medical plan option with free employee-only coverage, which more than one in ten large employers do now, according to our National Survey.

Plan design. There are any number of plan design changes you could make that don’t cost a lot but would help with affordability. If you offer an HSA-eligible plan, consider fully funding the HSA at the beginning of the year and making larger HSA contributions for lower-paid employees. Employer-paid voluntary benefits can fill benefit gaps and reduce financial risk in the event of more serious medical needs, especially for those in a high-deductible plan. Behavioral healthcare can be made more affordable and accessible simply by enhancing existing EAP benefits – offering additional counselling sessions and alternative treatment modes, like text-based coaching.

Alternative medical plan options. Some new plan models coming into the market today offer both lower cost and relatively rich benefits – at least compared to the typical high-deductible HSA plan. Our National Survey found that employers are offering more medical plan choices to meet employees with different financial and medical needs. Narrow network plans, Exclusive Provider Organization plans, and copay plans like Surest are all worth investigating.

New impacts on health make healthcare affordability even more important

Our Inside Employees’ Minds survey found that one in ten hourly workers say their health has been negatively affected by extreme climate – and that jumps to one in five of the lowest-paid. These days all employers – but especially those with hourly and low-wage workers – need to think about how extreme climate can impact the health and well-being of employees and their families. While floods, tornados and wildfires can hit anyone, people with lower incomes and fewer financial resources will be less able to protect themselves and recover. In addition, extreme heat and poor air quality have the greatest impact on the health of those who work outdoors or don’t have the option of working from home. In your strategic planning this year, consider implementing policies and resources to help employees in the aftermath of a disaster, and guidelines to protect worker health and safety in extreme weather.

Improving healthcare affordability and taking visible, meaningful action to prepare for extreme climate events are both important ways to build your employees’ confidence that their employer is aware, concerned, and ready to support them when support is needed. As we learned during the pandemic, employers that take care of their employees are generally rewarded with a more resilient, engaged and loyal workforce.

Download Mercer's 2024-2025 Inside Employees' Minds survey findings to better understand the challenges shaping the hourly workforce.