Three quarters (77%) of small and medium-sized enterprises (SMEs) plan to overhaul their employee benefits offering to combat workforce challenges and economic pressures, a report by Howden Employee Benefits has found.
The report, published yesterday (9 December), also highlights that half (50%) of SME representatives report financial challenges as the biggest issue impacting their workforce.
Employment law changes and the proposals announced in chancellor Rachel Reeves’ budget have intensified the pressure on SMEs, according to Mark Fosh, Howden’s executive director of SMEs.
He said: “Salary sacrifice schemes offer a practical way for employers to offset rising national insurance costs while enhancing employee take-home pay and boosting retirement savings.”
Howden’s research comes as the number of sick days taken by employees increased by 41% over the last three years, according to a separate report by jobs platform Totaljobs, published in October 2024.
Steph Hind, co-founder of employee benefits platform Heka, suggested that SMEs are using benefits as a way to cope with mounting pressures. Hind said: “This shift reflects growing recognition that traditional perks no longer align with workforce needs.”
Howden’s report found that 46% of SMEs are expanding mental health support and 43% are boosting access to private medical insurance. Meanwhile, 38% are adding gym memberships or lifestyle discounts to their offer, 36% are exploring critical Illness insurance, and 31% are considering group life assurance.
Hind added: “While expanding wellness programmes may seem counterintuitive during economic uncertainty, personalised benefits yield substantial returns through reduced absenteeism and increased staff retention, enabling more accessible growth opportunities.”
While 85% of SMEs offer some form of workplace pension, the findings suggest that 15% are failing to comply with pension legislation, exposing them to potential fines. This comes as retirement saving inadequacy is on the rise.
However, 40% of SMEs are planning to enhance pension contributions.
Fosh said that prioritising pensions and health benefits will also help SMEs with recruitment: “With 29% of SMEs reporting challenges with recruitment and retention, comprehensive benefits like pensions, healthcare, and mental health support are vital to attract and retain top talent. Jobseekers increasingly prioritise these benefits, making them essential in today’s competitive labour market.”
