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 told HR magazine: “Recent employment law reforms, such as the Worker Protection Act (Amendment of the Equality Act 2010), combined with rising national insurance costs, have placed significant pressures on SMEs.”
Read more: Worker Protection Act: Rules on preventing sexual harassment are changing
He added: “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 UK 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 told HR magazine: “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. The number of people not saving enough for a minimum retirement lifestyle increased by 1.2 million people in the last year, a report from pensions provider Scottish Widows revealed in July.
Read more: Inadequate pension saving soars
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.”
Howden commissioned YouGov to survey 901 representatives of UK SMEs (520 with fewer than 30 employees, 198 with between 30 and 99 employees, and 183 with between 100 and 249 employees) from 29 May to 12 June 2024. Findings were published yesterday (9 December 2024).
