U.S. paychecks set to shrink amid health cost hikes
NEW YORK, UNITED STATES — Workers across America are bracing for a financial squeeze in 2025 as merit raises remain flat while healthcare costs continue to climb.
According to a Mercer survey of over 1,100 organizations, merit raises are expected to average just 3.3% in 2025, while employer-provided health insurance costs are projected to increase by 5.8%.
Healthcare costs continue upward trend
Beth Umland, Mercer’s director of research for health and benefits, noted that many companies, which have been absorbing rising healthcare costs, will now pass more of the burden onto employees. This shift will likely come in the form of higher deductibles and increased healthcare premiums.
The anticipated rise in healthcare expenses follows a 7% increase in employer health costs for two consecutive years (2023 and 2024), adding pressure on workers who are already grappling with rising living costs.
Strategic benefits navigation
Kara Washington, a 31-year-old HR professional at Kraft Heinz in Chicago, emphasizes the importance of thoroughly evaluating benefit packages. “That experience made me more diligent about evaluating the full scope of benefits, including copays, deductibles, and employer contributions, when considering job offers,” she told The Wall Street Journal.
Similarly, Raheela Gill Anwar, CEO of Group 360 Consulting, advises that prospective employees should spend as much time understanding the cost of benefits as they do negotiating salaries. She noted that new hires often take a job with a 10% higher salary, only to find their increased pay eaten up by higher health insurance costs.
“A company or recruiter should be able, in less than five minutes, to send you everything related to its healthcare plan,” Anwar said. “You should be able to know exactly what it’s going to cost.”
Job-switching premium decreases
The salary advantage for job changers has reached its lowest point since spring 2021, with average pay increases dropping to 6.6% in September from 7.3% in August. In comparison, those staying in their current positions saw an average increase of 4.7%.
Alternative compensation strategies
As employees prepare for a year of financial adjustment, understanding the full impact of healthcare costs and exploring creative ways to negotiate compensation will be crucial. Experts suggest asking for signing bonuses or lifestyle perks, such as gym memberships or childcare reimbursements, to help bridge the gap.
“You won’t get it year after year, but making a run at a makeup payment can be effective,” noted Tessa White, a career consultant.
Career coaches strongly recommend that employees and job seekers have detailed discussions with HR departments to understand the full impact of benefits on their take-home pay.
