More than three-quarters (77 percent) of UK small and medium-sized enterprises (SMEs) are reviewing their employee benefits with plans to boost packages, research has found.
The research from Howden Employee Benefits shows that SME are planning to make changes to healthcare and wellbeing, improve their pension offer, and rethink lifestyle and financial perks.
SMEs are focusing on updating their benefits to attract and retain top talent, address workforce challenges and tackle economic pressures, according to the Employee Benefit Trends in UK SMEs report from Howden in partnership with YouGov.
Provision gaps
The provider said the activity, such as the use of more preventative health and wellbeing options, is particularly timely as sickness absence rates have hit a 15-year high. ONS figures show there were 104.9 million workdays lost in 2023 due to long-term health conditions.
But the report’s findings also revealed that while 85 percent of SMEs offer a workplace pension, 15 percent of these do not meet legislative requirements. This means potential fines for employers.
Just over half (53 percent) of SMEs provide private medical insurance (PMI) and 49 percent offer mental health support.
Economic strain for both the SMEs and their employees was another big issue.
Half of SMEs said financial pressures are the biggest challenge for their workforce currently, while employers themselves have been affected by the rise in employer national insurance (NI) unveiled in the Autumn Budget in October. The provider highlighted salary sacrifice schemes as a cost-effective and tax efficient solution where employers can save 15 percent on NI for pension contributions.
Customised packages
SMEs are looking to flexible benefits, with 47 percent of them prioritising this option to give employees more choice and the ability to select and customise packages to suit their individual needs. This is becoming increasingly important for multi-generational workforces.
In terms of healthcare and wellbeing, 46 percent are expanding mental health support, and 43 percent are increasing access to PMI to provide faster routes to healthcare.
Two-fifths (40 percent) are planning to improve their pension with higher pension contributions to strengthen employee retirement security and to help address current pension inadequacies.
Almost two-fifths (38 percent) are adding gym memberships or lifestyle discounts to their employee package, while more than a third (36 percent) are considering critical illness insurance, and 31 percent are looking at group life assurance.
Close to a third (29 percent) of SMEs confirmed that recruitment and retention are big challenges and that offering competitive benefits is now essential to retain top talent. Jobseekers prioritise pensions, healthcare, and mental health support when choosing employers.
“SMEs are navigating a perfect storm of rising costs, recruitment pressures, and increased employee demand for healthcare, particularly mental health support,” said Cheryl Brennan, managing director at Howden Employee Benefits.
“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.”
Now that SMEs face higher employer NI and increased tax bills they can address both these challenges and the UK’s retirement shortfall by implementing salary sacrifice, if they don’t already, she said.
“Employers can save 15 percent on employer NI 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, said: “With 5.6 million SMEs at the heart of the UK economy, their success is vital. Despite rising operational costs and NI, 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.”
