Almost eight out of 10 (77 per cent) of SMEs are planning to revamp their employee benefits packages in a bid to win and retain talent and address growing problems around employee absence.
This survey, by Howden Employee Benefits, found that many of these SMEs wanted to focus on preventative health and wellbeing solutions as part of this benefits overhaul. This comes at a time when sickness absence rates have reached a 15-year high —with an estimated 104.9 million workdays lost in 2023, due to long-term health conditions.
The survey found that currently only 53 per cent of SMEs offer PMI insurance and less than half (49 per cent) offer mental health support in their benefit packages.
The report also found that while 85 per cent of SMEs offer some form of workplace pension, an estimated 15 per cent are failing to comply with pension legislation, exposing them to potential fines.
Meanwhile the survey found one in two SMEs said financial challenges were the biggest issues impacting their workforce, with the cost-of-living crisis and rise in employer National Insurance contributions (NICs) announced in the Budget adding to these strains. Howden points out that salary sacrifice schemes, which allow employers to save 15 per cent on NICs for pension contributions, are a cost-effective and tax efficient solution could address these challenges.
It also found that 47 per cent of SMEs are prioritising flexible benefits, giving employees more choice and the ability to select and customise packages to suit their individual needs. Howden says this approach is an increasingly vital factor for multi-generational workforces.
When it comes to overhauling benefits packages, 46 per cent of SMEs are planing to expand mental health support, and 43 per cent are looking to offer access to PMI to provide faster access to healthcare solutions.
A further 40 per cent are looking to enhance pension contributions to strengthen employee retirement security and to help address current pension inadequacies.
Meanwhile 38 per cent are looking to add gym memberships or lifestyle discounts; 36 per cent are exploring critical illness insurance options and 31 per cent are considering group life assurance.
In total just under a third (29 per cent) of SMEs said recruitment and retention are significant challenges, and offering competitive benefits is now essential to retain top talent. The report also highlights that jobseekers prioritise pensions, healthcare, and mental health support when choosing employers.
Howden Employee Benefits managing director Cheryl Brennan, says: “SMEs are navigating a perfect storm of rising costs, recruitment pressures, and increased employee demand for healthcare, particularly mental health support.
“However, the research shows that many businesses understand that offering comprehensive benefits can be a powerful tool to improve employee wellbeing, reduce absenteeism, drive productivity and strengthen recruitment and retention of talent.”
She adds: “Now that SMEs face higher employer national insurance (NIC) contributions and increased tax bills further to the recent budget, they can address both these challenges and the UK’s retirement shortfall by implementing salary sacrifice, if they don’t already.
“Employers can save 15 per cent on Employer NICs on employees’ pension contributions, helping offset some additional costs whilst making a positive contribution to their employee’s retirement outcomes. Investing in the right benefits can lay the foundation for a more productive and resilient workforce.”
Mark Fosh, executive director of SME at Howden Employee Benefits adds: “With 5.6m SMEs at the heart of the UK economy, their success is vital. Despite rising operational costs and national insurance contributions, SMEs still have practical options to address these challenges.
“By adopting salary sacrifice schemes and working with an employee benefits consultant to review and optimise their benefits packages, businesses can ensure they’re getting the best value for money while accessing additional value-added services. These steps can provide immediate financial relief, result in a better experience for employees and build a stronger, more engaged workforce.”
