With Generation Z entering the workforce in record numbers, organizations are looking for the best ways to attract and hire younger workers in a tight labor market.
According to the World Economic Forum1, Generation Z will represent 27% of the workforce by 2025. This makes catering your employee benefits package to fit their needs essential. Otherwise, you'll lose out on this large cohort of talent.
Benefits have always been vital for attracting and retaining employees of any generation. However, the wants and needs of the younger generations differ from their parents or grandparents. Many traditional benefits aren't as appealing or flexible as they need to be to hire the newest generation of employees.
In this article, we'll explain who's considered part of Gen Z, how to attract them, and what benefits these young workers want in the workplace.
Who's considered part of Gen Z?
Generation Z is the generation following the Millennial Generation, or Gen Y, but preceding Generation Alpha. There's no clear definition of where Gen Z begins and Millennials end, as many younger Millennials and older Gen Zers share similar traits. But there are two common definitions.
Many media outlets use the range of those born from 1995 to the early 2010s as Gen Z, while Pew Research Center uses 1997 as the starting year and 2012 as the endpoint. The U.S. Census and the Library of Congress cite Pew's definition of Gen Z.
Many refer to those born in 1996 and 1997 as "cuspers" or "Zillennials." These terms arose because they have traits of both Gen Z and Millennials and likely have more in common with their immediate cohort than with younger Gen Zers or older Millennials.
Members of Gen Z are also called the digital generation, Zoomers, in reference to Baby Boomers, and iGen.
While Millennials remain the largest living generation in the U.S., Gen Z has surpassed every other generation worldwide, including the Baby Boomer generation. They make up 32% of the global population, according to Bloomberg2.
With more than 60 million Gen Zers in the U.S., organizations need to prepare to welcome more of this generation of workers in the years to come.
What does Generation Z want in the workplace?
With their unique set of skills and perspectives, Gen Z employees can bring fresh ideas and innovation to your organization. Let's go over some tips on how to attract and retain Gen Z talent.
Flexible work arrangements and work-life balance
Gen Z employees prioritize work-life balance and value flexibility in their work arrangements. They prefer to work individually rather than in teams and often juggle multiple side gigs, such as freelance work and their own businesses. They need this flexibility to pursue their interests and work independently at their own pace.
Consider offering flexible scheduling or remote work opportunities for work-life integration. According to a Personal Capital survey3, 85% of Gen Zers would agree to a trade-off, such as a pay cut, to have the flexibility to work from home when they want to. Highlight these benefits in your job descriptions to attract Gen Z job applicants.
Professional development opportunities
Gen Z employees are ambitious. They're eager to learn and excel in their careers. Offer growth opportunities through professional development, mentorship programs, and clear career paths for advancement within your organization. Show them you value their career growth and that you're willing to invest in their future.
Because older members of the generation have grown up in the aftermath of the September 11 attacks, witnessed the Great Recession, and been through the COVID-19 pandemic just as they began to graduate from college and enter the workforce, many Gen Zers are cautious of the economy and employers.
Providing growth opportunities is a great way to attract and retain Gen Zers. They'll feel more stable as they advance up the career ladder and will be more likely to stick with your organization instead of looking for work elsewhere.
Understand their values
Gen Z employees value diversity, inclusion, and social responsibility. They want to work for companies that align with their values and strive to positively impact society and the environment. Showcase your company's commitment to these values in your job postings and corporate culture.
Diversity and inclusion in the workplace are also important to Gen Z because they're the most racially diverse generation in the U.S. According to Pew Research Center4, 52% of Gen Z are Caucasian. That's a smaller share than what you'll find for Millennials, which are 61% white.
Additionally, 35% of Gen Zers say they know someone who prefers gender-neutral pronouns—more than any other generation. As a result, they're looking for organizations that acknowledge diversity and sexual orientation and do their best to make everyone feel like they belong.
An accepting and inclusive environment will also help Gen Zers feel welcome in the workplace, improving their engagement levels.
Modern hiring process
Gen Z employees are digital natives who are comfortable with technology. These job seekers don't want to apply for jobs in person or visit job fairs. They're more interested in an easy online application that works on mobile devices. Ensure your company uses modern and efficient tools and systems to streamline the application process. You'll also want to develop a careers page on your company website.
Remember, Gen Z applicants are cautious about money, their financial future, and the economy. Your job postings should include a salary range, benefits, opportunities for career development, company culture, and job requirements to address their concerns.
Lastly, your hiring process should be quick. A Gen Z job seeker isn't likely to wait around for a decision. They expect an immediate response that you've received their application and a timely response indicating whether you're interested in them or not.
Embrace social media
As the first fully digital native generation, Gen Z employees are extremely active on social media platforms and often use them to research and connect with prospective employers. A CareerArc study5 found that 48% of Gen Z employees found their current jobs through social media.
Establish a strong social media presence and engage with Gen Z applicants through platforms like LinkedIn, Instagram, and X, formerly known as Twitter. Share company updates and employee spotlights, and showcase your company mission.
What benefits does Gen Z want?
Along with fair compensation for their work, Generation Z desires several benefits and perks in their ideal workplace. To entice young talent, you'll need to ensure that your benefits are flexible and individualized.
Despite what some claim, Gen Z still values traditional benefits such as health insurance and retirement plans. But, they do value more personalized benefits and immediate employee perks compared to other generations.
PeopleKeep's 2022 Employee Benefits Survey Report found that only 38% of Gen Z employees feel the benefits they're currently being offered are worth the cost to them. Additionally, 70% of Gen Z employees said they value being able to choose their benefits.
Our report also identified the benefits and perks that Gen Z wants most in the workplace:
- Health benefits
- Paid time off (PTO) and sick leave
- Dental insurance
- Vision insurance
- Flexible work schedule
- Retirement benefits
- Mental health benefits
Wellness benefits are also becoming increasingly desirable to Gen Zers, Millennials, and Gen Xers.
Because Gen Z values a work-life balance, unlimited PTO, flex schedules, and parental leave are incredibly desirable benefits.
According to MetLife6's 17th Annual U.S. Employee Benefits Trends Study, 50% of Gen Zers said employers recognizing work-life balance is a must.
Young people want to have the option to travel, take mental health days, and support their new and growing families. Not offering generous PTO will likely keep Gen Z candidates away.
While Gen Z doesn't have as much student loan debt as the previous generations, student loan repayment and tuition reimbursement remain attractive employee benefits. According to Experian7, the average student loan debt among Gen Z in 2020 was $17,338. With tuition becoming more expensive, this number will likely increase as more Gen Zers head to college.
Commuter benefits are also increasingly desired by younger generations who work in person, especially for public transportation fares or mileage reimbursement.
How to offer a flexible health benefit to attract Gen Z workers
Much like other generations, Generation Z values healthcare benefits. However, Generation Z employees are young, so they don't necessarily need the same level of traditional employer-provided group health insurance as older employees. These plans can be expensive for employers and employees, especially since Gen Z will likely use their benefits less than older employees. This, in turn, means they may see less value in their medical benefits than older generations.
Gen Z wants more flexibility in all aspects of the workplace, including health benefits. The rigid structure of a group health insurance plan doesn't provide the level of personalization that Gen Z has come to expect.
Health reimbursement arrangements (HRAs)
HRAs are great options for businesses of all sizes looking to provide more flexibility than traditional group health insurance plans. With an HRA, employers can reimburse employees for their individual health insurance premiums and qualifying out-of-pocket medical expenses.
You can set monthly or annual allowances for your employees. Once you approve an expense, you simply reimburse your employees on their next paycheck.
Best of all, HRAs are tax-free, meaning you don't have to pay payroll taxes on reimbursements for eligible expenses. Your employees also don't have to pay income taxes on their reimbursements as long as they have a health insurance policy that meets minimum essential coverage (MEC).
HRAs allow your Gen Z employees to choose their own individual health insurance plan that best fits their needs. They can also select which eligible expenses they want to have reimbursed up to your set allowance.
Three of the most popular HRA types include:
- Qualified small employer HRA (QSEHRA) - The QSEHRA is specifically designed for businesses with fewer than 50 full-time equivalent employees.
- Individual coverage HRA (ICHRA) - The ICHRA is great for businesses of all sizes that want to offer different benefits to different classes of employees.
- Group coverage HRA (GCHRA) - The GCHRA, also known as an integrated HRA, pairs with your group health insurance policy.
If your Gen Z employees are eligible for advance premium tax credits for their individual health insurance premiums, a health stipend might be better than an HRA.
Health stipends can work like an HRA, requiring your employees to submit a request for reimbursement for their health expenses. However, they're taxable. You must report them on your employees' W-2s.
Because HRAs are tax-free, employees can't use both their HRA and their full tax credit. A stipend allows your employees who qualify for tax credits to receive their stipend and still use their credits.
Since employers control which expenses they reimburse under a health stipend, you can also choose to reimburse employees for mental health visits such as counseling or therapy, even if the employee doesn't have a diagnosed mental illness. This can be a huge benefit for Gen Z workers who often look for mental health resources and benefits in the workplace.
How to provide wellness benefits
Wellness benefits are one of the top workplace wants for Gen Z talent. This is partly because Gen Zers face more stress and uncertainty than other generations.
According to the American Psychological Association8, Gen Z is more likely to report their mental health as fair or poor compared to other generations. They're also more likely to say they've received treatment or therapy for mental health issues. These rates have only increased following the COVID-19 pandemic.
With mental health needs on the rise, wellness benefits are more important than ever for your employees.
Wellness stipends help you easily offer an employee benefit while giving your employees the freedom to choose what wellness programs matter most to them.
Like with HRAs and health stipends, you can set a monthly allowance for employees' wellness expenses. Your employees then submit their expenses for reimbursement up to their available allowance.
Employees can use their wellness stipend on fitness and yoga classes, meditation classes and apps, gym memberships, sleep and nutrition trackers, and more. These activities can have a positive impact on your employees by helping reduce stress and improve the overall health and well-being of your employees. This, in turn, helps them to be more productive at work.
Remote work and flexible schedules are two of the best ways to attract and retain Gen Z employees. If you allow your employees to work remotely, you can extend your benefits by offering a remote work stipend.
With a remote work stipend, you can reimburse your employees for their internet access costs, cell phone bills, and home office setup costs.
By offering a remote work stipend, you can ensure your employees have the tools they need to do their jobs from home. You'll also satisfy local and state laws in some places that require remote work expense reimbursement.
If you want to hire Gen Z employees, you need to focus on personalized and flexible benefits that support employee health, wellness, and a work-life balance. Ensuring that you create an inclusive, diverse workforce with PTO and opportunities for growth will allow you to attract and retain Generation Z workers.
When offering health and wellness benefits, HRAs and employee stipends are great choices because they provide flexibility and put control of the benefits in the hands of employees. You can also offer employee stipends for various expenses, including transportation benefits, education, and more. This allows you to create a comprehensive benefits package with the flexibility Gen Z wants.
If you're ready to offer flexible benefits to your employees, PeopleKeep is here to help. Our personalized benefits administration platform allows organizations of all sizes to provide HRAs and employee stipends without the hassle.
This blog article was originally published on March 30, 2022. It was last updated on November 9, 2023.