Lifestyle Spending Accounts: Perk or Strategic Workforce Investment?

Executive Summary

Do Lifestyle Spending Accounts Deliver Measurable ROI?

Lifestyle Spending Accounts (LSAs) have emerged as one of the fastest-growing trends in employee benefits. Their appeal is easy to understand: they offer flexibility, personalization, and support for the increasingly diverse needs of today’s workforce.

But popularity alone does not equal business value. For HR leaders, brokers, and executive teams, the real question is not whether employees like lifestyle benefits. The real question is whether lifestyle benefits deliver measurable ROI.

Do Lifestyle Benefits Generate Real Business Value?

Yes – but the answer is nuanced. When implemented strategically, Lifestyle Spending Accounts can improve participation, increase employee satisfaction, support recruitment and retention efforts, and reduce benefit waste. However, organizations that focus exclusively on utilization rates or employee sentiment may miss the broader picture.

The most successful organizations evaluate LSAs through both ROI (Return on Investment) and VOI (Value on Investment), measuring financial outcomes alongside workforce engagement, productivity, and employee experience.

Organizations seeing the greatest success are those that view lifestyle benefits as one component of a broader workforce wellbeing strategy rather than a standalone solution.

Related: The Power of Building an Inclusive & Healthy Workforce

How Are Employee Benefits Evolving to Meet Modern Workforce Expectations?

Not long ago, a competitive benefits package meant health insurance, retirement contributions, and perhaps a discounted gym membership tucked away somewhere in the employee handbook.

Today, employee expectations look very different.

Employees increasingly want benefits that reflect their actual lives, not simply their medical needs. A recent college graduate, a parent navigating childcare responsibilities, and an employee caring for aging parents may all work in the same department while having dramatically different well-being priorities.

This shift has fueled growing interest in Lifestyle Spending Accounts (LSAs), flexible employer-funded accounts that allow employees to spend benefit dollars on approved wellness and lifestyle expenses based on their individual needs.

For employers, the promise sounds compelling:

• Increase employee satisfaction
• Improve benefit utilization
• Support recruitment efforts
• Strengthen retention
• Reduce benefit waste

But beneath the enthusiasm lies an important question: Are Lifestyle Spending Accounts actually delivering measurable business value?

Related: Unlocking the Secrets to a Successful Wellness Program for Your Workforce

What Is a Lifestyle Spending Account?

A Lifestyle Spending Account is an employer-funded benefit that provides employees with a designated amount of money to spend on approved lifestyle expenses. Unlike traditional benefits that prescribe exactly how funds must be used, LSAs offer flexibility.

Common eligible expenses may include:

• Fitness memberships
• Mental health services
• Professional development
• Financial wellness resources
• Childcare support
• Home office equipment
• Nutrition programs
• Wellness experiences

Think of it like the difference between giving every employee the same pair of shoes versus giving them a stipend to purchase the shoes that fit best. One assumes everyone’s needs are identical. The other recognizes that well-being is personal.

Are Lifestyle Spending Accounts Becoming Mainstream?

Lifestyle Spending Accounts have moved from an emerging trend to a rapidly growing benefits strategy.

According to research from the Society for Human Resource Management (SHRM), approximately 7% of employers currently offer Lifestyle Spending Accounts, while another 38% are actively considering or planning to implement them. That level of interest reflects a broader movement toward personalized benefits and employee-driven wellbeing strategies.

Organizations that do offer LSAs commonly contribute between $500 and $2,000 annually per employee, with many programs falling near the $1,200 range.

The trend signals something important. Employers are increasingly shifting away from one-size-fits-all benefits and moving toward personalized experiences that give employees greater choice and flexibility.

For organizations competing for talent, that flexibility has become a meaningful differentiator.

Why Lifestyle Benefits Have Become So Popular?

Today’s workforce is more diverse than ever. Traditional benefits often struggle to accommodate varying life stages, financial realities, family structures, and well-being priorities. Lifestyle benefits help bridge that gap.

Rather than attempting to predict what employees value most, organizations create a framework that allows employees to decide for themselves. This approach often leads to stronger participation and a higher perceived value of benefits because employees can choose resources that align with their unique circumstances.

The result is a benefit that feels more relevant, more personal, and more useful.

What Is The Problem With Measuring ROI?

Here’s where things become more complicated. When organizations invest in software, equipment, or operational improvements, calculating ROI is often relatively straightforward.

• You spend money.
• You reduce costs.
• You measure the difference.

Benefits rarely work that way.

The value of a healthier, more engaged, less stressed workforce does not always appear neatly on a quarterly financial report. That does not mean ROI doesn’t exist. It simply means organizations need to evaluate benefits differently.

The strongest benefits strategies look beyond utilization rates and reimbursement totals to understand how benefits influence engagement, retention, productivity, and organizational culture.

One Important Caveat: Tax Treatment Matters

One of the biggest differences between Lifestyle Spending Accounts and benefits such as Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs) is tax treatment.

In most cases, LSA reimbursements are treated as taxable income for employees. While this does not eliminate the value of the benefit, it does require thoughtful communication and administration.

Organizations that fail to explain tax implications upfront may experience:

• Lower perceived value of the benefit
• Employee confusion during tax season
• Unexpected payroll questions
• Reduced program satisfaction

The strongest LSA programs combine flexibility with transparency, helping employees understand both the advantages and tax implications of participation.

What Metrics Matter Most?

When evaluating Lifestyle Spending Accounts, leaders should focus on several key performance indicators.

Participation and Utilization

The first question is simple: Are employees using the benefit?

A benefit that goes unused provides little value regardless of its intent. Participation rates help determine whether the offering resonates with employees and aligns with workforce needs.

Recruitment and Talent Attraction

Benefits increasingly influence candidate decisions. Flexible lifestyle benefits can help organizations differentiate themselves in competitive hiring markets and demonstrate a commitment to employee well-being.

Employee Retention

Retention matters because turnover is expensive. Replacing an employee often costs between six and nine months of that employee’s salary, once recruiting, onboarding, training, and lost productivity are factored in.

For an employee earning $60,000 annually, replacement costs can easily exceed $30,000. Even modest improvements in retention can create meaningful financial returns.

Related: The Hidden Cost of Manager Burnout (and Why Wellness Is the Solution)

Productivity and Performance

Employees who have access to resources that support physical, mental, emotional, and financial well-being are often better positioned to perform at their highest level.

Productivity gains can be difficult to quantify, but they remain among the most valuable outcomes of workforce wellbeing investments.

Benefits Cost Efficiency

Lifestyle Spending Accounts can also reduce benefit waste. Rather than funding multiple underutilized programs, organizations can provide flexible funding that employees direct toward resources they actually value. For many employers, reducing waste can be just as valuable as increasing engagement.

Are Employees Using LSAs for More Than Wellness?

One of the most interesting trends emerging in the statistics in the Lifestyle Spending Account market is how employees choose to spend their funds.

While fitness and mental health remain common categories, employers are increasingly seeing reimbursement requests tied to:

• AI tools and subscriptions
• Professional certifications
• Continuing education
• Career development programs
• Productivity resources

This trend reflects a broader shift in how employees define well-being.

Increasingly, employees view career growth, learning opportunities, financial confidence, flexibility, and professional advancement as important components of overall well-being alongside physical and mental health.

At WellSteps, we know that true well-being comes from nurturing all aspects of your life. That’s why our platform, solutions, resources, and expert guidance are built around the 6 Pillars of Wellness. A comprehensive approach to achieving balance and holistic health. These pillars are the foundation of our wellness philosophy, designed to help individuals thrive and lead healthier, more fulfilling lives.

Organizations that recognize this shift may be better positioned to design benefits that support both employee satisfaction and business objectives.

How Do the Six Pillars of Wellness Support Organizations?

The Six Pillars of Wellness provide organizations with a framework for addressing the whole employee rather than focusing on a single aspect of health. By supporting physical, mental, and emotional well-being, as well as nutrition, occupation, finances, and social well-being, organizations can create employee wellness programs that are more relevant, inclusive, and impactful.

Each pillar contributes to organizational success in different ways:

Physical Wellness

Supports employee energy, resilience, and overall health through exercise, preventive care, sleep, and healthy lifestyle habits. A physically healthier workforce is often associated with improved productivity, reduced health risks, and lower absenteeism.

Mental & Emotional Wellness

Helps employees manage stress, build resilience, improve emotional intelligence, and navigate workplace challenges. Strong mental and emotional well-being can contribute to higher engagement, stronger relationships, and improved workplace performance.

Nutritional Wellness

Encourages informed food choices and healthy eating habits that support energy levels, cognitive function, and overall well-being. Proper nutrition can help employees maintain focus and perform at their best throughout the workday.

Occupational Wellness

Focuses on helping employees find purpose, fulfillment, and balance in their work. Organizations that support occupational wellness often see stronger job satisfaction, improved morale, and healthier work-life integration.

Financial Wellness

Addresses one of the most common sources of employee stress. By helping employees improve budgeting, saving, debt management, and financial decision-making, organizations can support greater financial confidence and peace of mind.

Social Wellness

Builds connection, belonging, and community. Strong workplace relationships can improve collaboration, strengthen culture, reduce isolation, and enhance employee satisfaction.

Why This Matters for Employee Wellness Programs

Organizations often struggle with low participation when wellness programs focus too narrowly on fitness or biometric outcomes. These 6 pillars create more opportunities for employees to engage by allowing them to participate in areas that align with their personal goals and life circumstances. A new parent, an employee preparing for retirement, and a recent graduate may all have different wellness priorities, yet each can find meaningful ways to participate.

Related: Engage, Thrive, Succeed: 15 Ideas for a High Engagement Wellness Program

Supporting Long-Term Organizational Outcomes

They also support broader organizational goals by helping employers create programs that address workforce well-being from multiple angles. WellSteps’ approach combines these pillars with behavior-change science, engagement strategies, challenges, campaigns, technology, and expert guidance to support sustained participation and meaningful outcomes. Rather than treating wellness as a one-time initiative, the six pillars create a framework for continuous improvement at both the individual and organizational levels.

In short, utilizing these pillars, WellSteps helps organizations build healthier employees, stronger workplace cultures, higher engagement, and more sustainable wellness programs by addressing the full spectrum of employee wellbeing rather than focusing on a single dimension of health.

Why Should Organizations Measure Both ROI and VOI?

One of the most important shifts in benefits strategy today is moving from ROI-only thinking to a combination of ROI and VOI.

ROI (Return on Investment)

Measures financial outcomes such as:

• Reduced turnover
• Lower absenteeism
• Improved productivity
• Healthcare cost reductions

VOI (Value on Investment)

Measures broader organizational outcomes such as:

• Employee satisfaction
• Workforce engagement
• Organizational culture
• Employer brand strength
• Employee experience

The most sophisticated organizations measure both ROI and VOI. Financial outcomes matter. Human outcomes matter too. Together, they provide a more complete picture of benefit effectiveness.

Organizations that focus exclusively on cost reduction may miss some of the most valuable outcomes generated by effective well-being strategies.

Related: Wellness ROI vs VOI: The Best Employee Well-being Programs Use Both

Why Does Engagement Matter More Than Ever?

Employee engagement remains one of the largest opportunities facing employers today. Gallup reports that employee engagement levels have declined from recent highs, with only about one-third of U.S. employees describing themselves as actively engaged at work.

For employers, this highlights an important reality: Benefits alone rarely create engagement. The organizations achieving the strongest workforce outcomes connect benefits, communication, leadership support, wellbeing initiatives, and employee experience into a cohesive strategy. Lifestyle benefits can contribute to that strategy. They are rarely the strategy itself.

Why Do Some LSAs Succeed While Others Fall Flat?

Not every Lifestyle Spending Account delivers meaningful results. In many cases, underperforming programs suffer from one of three challenges:

• Poor employee awareness
• Misalignment with workforce needs
• Lack of connection to broader wellbeing goals

Simply offering flexibility is not enough. Employees need to understand the benefit, see its relevance, and feel encouraged to use it.

Organizations experiencing the strongest outcomes typically integrate lifestyle benefits into a larger wellbeing strategy that includes leadership support, employee engagement, communication, and ongoing measurement.

Why Doesn’t Employee Choice Automatically Lead to Behavior Change?

This is where many organizations unintentionally overestimate the impact of lifestyle benefits. While Lifestyle Spending Accounts can give employees more choices, simply offering choice does not automatically lead to healthier behaviors, higher engagement, or better outcomes.

According to Gallup, teams with high engagement consistently outperform others across a range of important business results. Highly engaged organizations experience higher productivity, stronger profitability, lower absenteeism, and reduced turnover than their peers. Gallup has reported that highly engaged teams can achieve 23% higher profitability and 18% higher productivity.

Lifestyle Spending Accounts create opportunity. Engagement creates outcomes.

Imagine purchasing a gym membership. The membership creates access. It does not create consistency.

Employees often benefit from guidance, accountability, education, and engagement strategies that help turn available resources into meaningful action. The most successful organizations pair flexible benefits with guided and intentional well-being initiatives that encourage participation and support long-term behavior change.

This is where guided employee wellness can make a meaningful difference. While flexible benefits create opportunities, employees often need support to turn good intentions into lasting habits. WellSteps combines behavior-change science, expert research, engaging challenges, educational resources, and dedicated wellness professionals to help employees take meaningful action across all dimensions of wellbeing. Rather than simply offering benefits and hoping employees engage, guided wellness programs provide structure, encouragement, and accountability that help individuals make sustainable progress toward their health and well-being goals.

For employers, this often translates into stronger participation, higher engagement, improved employee experiences, and a wellness strategy that delivers measurable outcomes rather than simply offering resources that may go unused.

Related: How Fransen Pittman Cultivates Employee Wellness and Culture with WellSteps

What Are 4 Questions Every Employer Should Ask Before Launching an LSA?

1. What does our workforce actually want?
2. What business objective are we trying to solve?
3. Should benefits be fully flexible or category-based?
4. How will success be measured?

Organizations that answer these questions before implementation are far more likely to create programs that employees value and leaders can confidently evaluate.

What Does The Future of Lifestyle Benefits Look Like?

The trend toward personalization shows no signs of slowing. Employees increasingly expect benefits that reflect their unique circumstances rather than one-size-fits-all offerings. At the same time, organizations face growing pressure to justify every benefits dollar they spend.

The future of lifestyle benefits will likely focus on:

• Greater personalization
• Better utilization analytics
• Stronger outcome measurement
• More flexible benefit structures
• Integration with workforce wellbeing initiatives

The organizations that thrive will be those that successfully balance employee choice with measurable business outcomes.

Final Thoughts: Are Lifestyle Benefits Delivering ROI?

The question isn’t whether employees appreciate Lifestyle Spending Accounts. Most do.

The more important question is whether those benefits contribute to workforce engagement, retention, well-being, and organizational performance. When evaluated through that broader lens, the conversation shifts from simply funding expenses to creating a culture where employees can thrive.

At WellSteps, we’ve consistently seen that benefits create the greatest impact when they are connected to a broader strategy focused on engagement, behavior change, leadership support, and long-term workforce well-being.

Lifestyle benefits can be a valuable tool. But like any tool, their effectiveness depends on how thoughtfully they are used. When flexibility is paired with expert guidance, measurement, and a commitment to employee well-being, Lifestyle Spending Accounts become more than a benefit. They become part of a healthier, more resilient workforce.

Frequently Asked Questions

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