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SMEs suffering 'brain drain'

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Around 450,000 people employed at SMEs switched positions each year in the past five years

Small firms are suffering from 'brain drain' due to poor benefits structures, with nearly one in five employees (18%) at SMEs leaving their job each year, according to research from Pure Benefits.

Small businesses with fewer than 50 staff employ more than 12.4 million across the UK and have total annual turnover of more than £1.2 trillion. The study found that around 450,000 of those employed at SMEs switched positions each year in the past five years, claiming a major reason to be lack of benefits at their firm.

Despite this employers were confused by the employee benefits they could offer, with 63% of small business owners reporting that they do not know how to find cost-effective solutions for staff. More than a fifth of owners (22%) said they do not offer any benefits at all.

When it came to benefits offered, the most common was a pension scheme, provided by 77% of SMEs with 25 to 49 staff, and 72% of firms with between five and 25 employees. The smaller SMEs were least likely to offer critical illness cover (provided by only 14%).

SMEs with 25 to 49 workers, however, were less likely than smaller firms to offer tax-free bike schemes, with 23% of the smaller group providing these and only 20% of larger businesses.

Stuart Gray, founder and chairman of Pure Benefits, warned of a small business “brain drain", as talented people may choose to leave for an organisation with a stronger benefits package. “Well-designed and cost-effective employee benefits are a major driver in enabling businesses to grow and ensure staff feel valued and are more productive as a result,” he said.

Gray warned that organisations could be held back by not offering a competitive benefits package. “Around 80% of companies told us they want to grow, while 47% say they want to protect their business,” he said. “[The SME brain drain] is a major brake on the ambitions of small business owners who our research shows are committed to expansion.”