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Employee benefits are getting pricey—especially for contractors running tight margins. A simple fix that helps both you and your crew?

Employee benefits are getting pricey—especially for contractors running tight margins. A simple fix that helps both you and your crew?

Use a Section 125 Cafeteria Plan.

Employees choose the benefits they want, and pay for them with pre-tax dollars.You save on payroll taxes, and they get more out of their paycheck.OBBBA didn’t change any of this—it's still a solid strategy.

Why it works:

Lowers taxable wages

Reduces employer FICA/FUTA costs

Lets employees customize their benefits

Keeps morale high without increasing your budget

Cafeteria Plan vs. FSA

An FSA is just one type of cafeteria plan—used for health, dependent care, or adoption expenses.

Key rules for FSAs:

2025 health FSA limit: $3,300

“Use it or lose it,” unless you choose ONE of these:

Grace period: extra 2.5 months to spend funds

Carryover: up to $660 into 2026

(You can offer one—not both.)

TLDR:

A cafeteria plan helps control rising labor costs without cutting benefits. Smart, simple, and contractor-friendly.