Human resources leaders are no strangers to the concept of doing more with less, but the pressure of constrained budgets added to evolving employee expectations has made the role of total rewards leaders particularly onerous.
The concept of total rewards sits at a uniquely complex intersection of culture, cost and employee trust—and that tension is only intensifying in 2026 amid continued economic uncertainty, rising healthcare costs and rapid technological change.
New research from the Institute for Corporate Productivity (i4cp) highlights just how complex adapting to that challenge has become. Based on a recent survey of total rewards leaders across industries, i4cp found that leading organizations are focused on managing escalating healthcare costs, shifting resources toward holistic wellbeing, relying more heavily upon non-monetary recognition, and cautiously testing AI.
See also: How Dow is refreshing its global total rewards for max impact
Managing the (healthcare) elephant in the room
Managing healthcare costs remains a top priority among total rewards leaders heading into 2026. To help curb the effect of soaring costs of healthcare, a majority of leaders have taken on three common strategies.
Seventy-four percent of leaders said they are negotiating aggressively with healthcare vendors, while 63% are offering high-deductible plans with HSAs, and 57% are adding wellness programs to reduce chronic condition costs.
Leaders are increasingly layering prevention strategies such as onsite health clinics, mental health champions and wellness education sessions to reduce long-term chronic condition costs.
Most companies have avoided shifting costs to employees through higher premiums or co-pays, and even fewer reported that they are limiting plan choices or narrowing networks as a lever to manage costs.
Companies are moving away from a limited focus on cost management to consider more care management, prioritizing early intervention and long-term sustainability over short-term savings.
Moving from wellness to holistic wellbeing
The shift from cost management to more holistic wellbeing has been buttressed by shifting employee needs and expectations. In the years following the pandemic, employees have continued to seek support to help combat burnout and manage daily stressors in and outside of the workplace.
Employees have expressed a real desire for mental health benefits, college admission counseling services for dependents, and financial education offerings, to name a few. And companies have responded. Over half of leaders shared that they are adding or increasing mental health and wellbeing support, and 50% said they are actively reevaluating underused offerings and low-impact offerings to better address their employees’ changing needs.
Wellbeing is no longer considered a “nice-to-have” benefit or a costly perk. Research from i4cp finds that leading companies position wellbeing as a core business strategy tied to retention, engagement and healthcare cost mitigation.
The best programs combine an employee’s physical, mental and emotional states, recognizing that these are all interconnected and will often have a measurable impact on work performance.
Recognition and rewards in a constrained environment
In a season of tighter merit budgets, leaders are also prioritizing non-monetary and targeted recognition to engage and recognize top performers.
A majority of total rewards leaders shared that they are leaning into giving spot or discretionary bonuses (63%), followed by non-monetary recognition and career opportunities (53%), and development and visibility opportunities (50%).
i4cp finds that high-performance organizations are three times more likely than low-performance organizations to have mechanisms for employees to recognize and celebrate peer contributions, contributing to improved culture health and market performance. This can look like formal or informal written appreciation, verbal appreciation shared during a team meeting, celebration events, or public shout-outs.
Recognition, especially when aligned to skills, values and performance, has emerged as a scalable engagement strategy in uncertain times.
AI ambition is still outpacing execution
When it comes to the use of AI within the total rewards function, there’s high awareness but low maturity. While AI adoption among total rewards and HR leaders is on the rise, most organizations remain in the pilot stages of application, especially as it relates to total rewards-specific use cases.
Current AI applications remain largely administrative. In response to a survey question asking what total rewards tasks are currently being piloted, performed, or powered by AI, just over half of leaders (56%) shared that they are using chatbots to handle employee questions about compensation, benefits, and PTO and leave policies. Only about a third of leaders reported using AI for employee communications, while a quarter said they are using the technology for salary benchmarking.
Only a small group of total rewards leaders are piloting AI for ROI modeling (3%). The findings reveal that the opportunity for total rewards leaders is not in more AI tools, but rather stronger applications in partnership with functions like people analytics to better support benefits optimization, personalization and strategic decision-making.
No matter what the year may bring, leaders who manage to reframe healthcare strategy, successfully embed holistic well-being, elevate recognition, and invest in strategic AI applications will be best positioned to demonstrate value and influence in 2026.
