A new report from Howden Employee Benefits, in partnership with YouGov, reveals that 77% of small and medium-sized enterprises (SMEs) in the UK are planning changes to their employee benefits packages.
The adjustments are aimed at addressing workforce challenges, improving recruitment and retention, and mitigating economic pressures.
The report identifies a growing focus on health and wellbeing solutions as sickness absence rates reached a 15-year high in 2023. According to the data, 104.9 million workdays were lost due to long-term health conditions, underscoring the need for preventative measures in the workplace.
The study found significant gaps in the benefits offered by SMEs. Although 85% of SMEs provide workplace pensions, the remaining 15% risk non-compliance with pension legislation, leaving them exposed to potential penalties.
Private medical insurance (PMI) is currently offered by 53% of SMEs, while only 49% provide mental health support for employees.
Financial pressures are another critical issue, with half of SMEs reporting that rising costs are the biggest challenge affecting their workforce. The recent increase in employer National Insurance contributions (NICs), combined with the cost-of-living crisis, has exacerbated the situation.
Salary sacrifice schemes, which allow employers to save 15% on NICs for pension contributions, are cited as a potential solution to address these challenges and improve cost efficiency.
Flexibility in benefits is becoming a priority for many SMEs, with 47% planning to offer more customisable packages that cater to the diverse needs of a multi-generational workforce. Such flexibility reflects a broader trend in workplace benefits as businesses seek to align offerings with employee expectations.
SMEs are planning several specific changes to their benefits packages. Mental health support is a key area, with 46% of SMEs planning to expand these services. Additionally, 43% intend to increase access to PMI to provide quicker healthcare solutions for employees.
Pension contributions are another focus, with 40% of SMEs aiming to enhance these offerings to address retirement security concerns. Lifestyle and financial perks are also being considered, as 38% of SMEs look into offering gym memberships or lifestyle discounts, 36% explore Critical Illness Insurance, and 31% consider Group Life Assurance.
Recruitment and retention challenges are driving many of these changes. The report found that 29% of SMEs view these issues as significant, with competitive benefits now seen as essential to attracting and retaining top talent.
Jobseekers have identified pensions, healthcare, and mental health support as top priorities when evaluating potential employers, suggesting that SMEs are aligning their strategies with employee demands.
Cheryl Brenan, managing director at Howden Employee Benefits, noted that SMEs are facing increasing pressure from rising costs, recruitment difficulties, and employee demand for improved healthcare benefits, particularly mental health support.
“Employers can save 15% on Employer NICs on employees’ pension contributions, helping offset some additional costs whilst making a positive contribution to their employees’ retirement outcomes. Investing in the right benefits can lay the foundation for a more productive and resilient workforce,” Brenan said.
Mark Fosh (pictured above), executive director of SME at Howden Employee Benefits, emphasised the critical role of SMEs in the UK economy, noting that there are 5.6 million such businesses at its core.
“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,” Fosh said.
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