77% of UK small and medium-sized enterprises (SMEs) plan to enhance their employee benefits. These changes aim to attract and retain talent, address workforce issues, and manage economic pressures, according to Howden Employee Benefits and YouGov report.
Sickness absence rates hit a 15-year high in 2023, with 104.9 mn workdays lost due to long-term health issues. To address this, many SMEs are prioritising preventative health and wellbeing initiatives.
Currently, 85% of SMEs offer workplace pensions, but 15% remain non-compliant with pension regulations, risking fines. Only 53% provide Private Medical Insurance (PMI), while 49% offer mental health support.
Financial strain is a key issue for 50% of SMEs, driven by the cost-of-living crisis and increased employer National Insurance (NIC) contributions. Salary sacrifice schemes, which cut employer NICs on pension contributions by 15%, offer a cost-effective solution to ease these pressures.
Flexible benefits are also a growing priority, with 47% of SMEs aiming to offer employees more control over their packages. This approach supports a multi-generational workforce with diverse needs.
Planned enhancements include mental health support (46%), expanded access to PMI (43%), and increased pension contributions (40%) to close pension gaps. Other updates involve gym memberships or lifestyle discounts (38%), Critical Illness Insurance (36%), and Group Life Assurance (31%).
Recruitment and retention remain a challenge for 29% of SMEs. Competitive benefits are seen as a key tool for keeping top talent. Pensions, healthcare, and mental health support rank as the most important benefits for jobseekers, driving SMEs to adjust their offerings.
SMEs are facing rising costs, recruitment challenges, and growing employee demand for mental health support. Our research shows that comprehensive benefits improve wellbeing, reduce absenteeism, and support recruitment and retention
Cheryl Brenan, Managing Director at Howden Employee Benefit
By adopting salary sacrifice for pensions, employers can reduce NIC costs by 15%, offsetting tax increases from the recent Budget. This also boosts employees’ retirement savings, strengthening workforce resilience.
Mark Fosh, Executive Director of SME at Howden Employee Benefits, added, “With 5.6 mn SMEs forming the backbone of the UK economy, their success is critical. Rising costs and NIC contributions are tough, but salary sacrifice and expert benefits consulting offer practical relief. By optimising benefits packages, SMEs can lower costs, improve employee experiences, and build a stronger, more engaged workforce.”
