Revamping Employee Benefits: How UK SMEs are Adapting to Attract and Retain Talent
A new report, Employee Benefit Trends in UK SMEs, reveals that a significant 77% of small and medium-sized enterprises (SMEs) in the UK are planning to revamp their employee benefits packages in response to workforce challenges, the rising cost of living and economic pressures. This shift comes as SMEs focus on offering more competitive and comprehensive benefits to attract and retain top talent in a competitive job market.
The Rise in Sickness Absence and the Push for Health and Wellbeing Benefits
One of the driving factors behind this change is the sharp rise in sickness absence rates, which have reached a 15-year high. In 2023, 104.9 million workdays were lost due to long-term health conditions. To address this, many SMEs are considering the inclusion of preventative health and wellbeing solutions in their benefits offerings, a timely response to combat the growing strain on the workforce.
Key Findings From the Report
- Benefits Gaps: Despite the fact that 85% of SMEs offer some form of workplace pension, 15% are not fully compliant with pension legislation, leaving them at risk of fines. Additionally, only 53% provide Private Medical Insurance (PMI), and only 49% offer mental health support—highlighting gaps in employee wellbeing provisions.
- Economic Strain: Financial challenges are impacting half of the surveyed SMEs, with the cost-of-living crisis and higher employer National Insurance contributions (NICs) being significant burdens. Salary sacrifice schemes, which allow employers to save on NICs for pension contributions, have emerged as a potential solution to alleviate some of this financial pressure.
- Demand for Flexibility: A growing trend among SMEs is the prioritisation of flexible benefits. Nearly half (47%) of SMEs are providing employees with more choice and control over their benefits packages, reflecting the need to cater for a diverse, multi-generational workforce. This shift towards flexibility allows employees to select benefits that best suit their individual needs, thereby helping businesses stay competitive in the talent market.
What Changes are SMEs Planning to Make?
In line with these findings, UK SMEs are planning significant changes to their employee benefits offerings:
- Healthcare and Wellbeing: Nearly half of the SMEs (46%) are expanding mental health support, recognising the growing importance of mental health in the workplace. Additionally, 43% are boosting access to PMI, offering employees faster access to essential healthcare services.
- Pension Improvements: With retirement security a growing concern, 40% of SMEs are increasing pension contributions to help employees build better retirement savings, thereby addressing current pension inadequacies and preparing them for their future financial needs.
- Lifestyle and Financial Perks: SMEs are also looking to enhance lifestyle benefits, with 38% offering gym memberships or lifestyle discounts. In addition, 36% are exploring Critical Illness Insurance, while 31% are considering Group Life Assurance, helping to provide greater financial security and peace of mind for employees.
Meeting the Needs of a Changing Workforce
As the UK economy faces increasing financial strain, SMEs are recognising the importance of offering a competitive and supportive benefits package. By focusing on healthcare, mental health, retirement savings and lifestyle perks, these companies are adapting to the evolving needs of their workforce.
The shift towards flexibility in benefits is particularly significant, as it allows businesses to offer personalised packages that can cater to the diverse needs of today’s multi-generational employees. As the demand for benefits that prioritise health, wellbeing and financial security grows, SMEs that adapt to these trends will be better positioned to attract and retain top talent in a challenging job market.
Research conducted by YouGov
Source: Howden.
