Why Health Insurance is the #1 Retention Tool for UK SMEs in 2026

In 2026, keeping your best people is one of the toughest challenges for UK SMEs. In a tight talent market, it’s becoming clear that businesses need to be offering more than a competitive salary to build a loyal team. But if pay isn’t enough, it leads to the question, what really makes employees stay?

While a pay rise, at 63% is still the top reason people change jobs, new data shows benefits are a very close third at 53%, just behind flexible hours. Surprisingly, this indicates that employees value perks packages more than career progression, company culture and even remote work options. 

It’s becoming clear that the best employee benefits UK aren’t just a small incentive, they’re a major factor when it comes to retention. In fact, statistics show that long standing employees are more likely to be interested in perks than new hires, with employees that have been at a company for more than a year being 23% more likely to see perks as important, proving their power in long-term retention.

This is all well and good and lots of SMEs would want to offer perks, such as small business health insurance, but historically it has felt a bit out of reach. The perception that it’s too expensive and buried under too much admin has been spread. And for a time, that may have been the case, but it’s no longer true. 

Employment Hero, powered by our partner Kota, is changing the game. 

We’ve made offering premium health insurance simple, fast and affordable, giving you the power to provide the perks that will keep your best people by your side.

The real cost of losing your best people

No one likes losing a great employee, especially as it means that you’ll need to go through the hiring process again. And with 3 in 4 businesses saying recruitment is a challenge, we can see why you’d want to avoid this. But losing a member of your team is more than just an inconvenience, it can actually be a significant financial blow that many business owners and HR professionals underestimate. 

The reality is, when someone walks out the door, the costs add up quickly, impacting everything from your budget to your team’s spirit. Let’s break down what employee turnover actually costs your business.

The financial strain of employee turnover

Hiring is expensive and it seems like the cost of hiring is going up, with 45% of businesses spending more than they were in the past on recruitment (only 10% say they’re spending less and 45% are spending the same). This is less than ideal, but unfortunately it’s deeper than this. The real cost is often estimated to be anywhere from six to nine months of that employee’s salary. 

So hiring is expensive, it’s something all business owners and HR managers dread hearing. But where do the costs really come from?

• Recruitment costs: Advertising the role, agency fees and the time your team spends sifting through CVs and conducting interviews.
• Training and onboarding: Getting a new person up to speed takes time and resources. This includes formal training and the productivity dip of the managers and colleagues who are helping them learn the ropes.
• Lost productivity: A new hire can take up to a year to reach the full productivity of the person they replaced. In the meantime, work might slow down or other team members have to pick up the slack, often leading to burnout.

Recruitment can’t always be avoided, and we’re not saying it should be because sometimes it’s necessary and important. However, avoiding the financial strain of hiring when you could have retained a valuable member of your team is what SMEs should be striving for. 

The human costs of employee turnover

The financial impact is just the beginning. The ripple effects of losing a team member can be just as damaging.

• Damaged team morale: When a valued colleague leaves, it can create uncertainty and anxiety. The remaining team members may feel overworked covering the gap and they might start wondering if they should be looking elsewhere, too.
• Disrupted productivity: Your team’s workflow gets interrupted. Projects can stall, deadlines can be missed and the overall rhythm of the business is thrown off balance.
• Strained customer relationships: If the departing employee had strong relationships with your clients, their exit can put that loyalty at risk. Customers value consistency and familiarity and a change can make them feel unsettled.

These hidden costs erode your company culture and can create a negative cycle of turnover that is hard to break.

Using benefits to reduce employee turnover

It’s not all doom and gloom, we promise. Improving your perks package to include health insurance can drastically help retention. And compared to the staggering costs of replacing an employee, the investment in offering perks that encourage people to stay might not feel so expensive anymore. 

The best employee benefits UK, such as private health insurance, aren’t the massive expense they once were. Through Employment Hero, powered by Kota, you can access premium health insurance benefits for a fraction of what it costs to lose an employee. Ultimately, by making this a part of your perks package, you send a clear message that you value your team and their wellbeing. 

This isn’t just about creating a safety net; it’s a move that delivers long-term value. The cost of a health insurance policy is a predictable, manageable expense. The cost of turnover is a volatile, disruptive drain on your resources. By investing in your team’s health, you’re not just reducing the risk of them leaving; you are actively building a more loyal, engaged and productive workforce. It’s a cost-effective strategy that pays dividends in both talent retention and your bottom line.

Why health insurance is a game-changer for retention

The days of winning loyalty with a well-stocked snack drawer or a ping-pong table are over. Your team isn’t looking for gimmicks; they’re looking for genuine support. In today’s world of work, your team wants to know that you have their back, so your employee retention strategies 2026 need to prove this. Nothing says that louder than investing in their health.

When people consider their future, they prioritise security. Offering a strong health insurance plan isn’t just a perk; it’s a powerful statement. It shows your team that you care about them as people, not just as employees. It’s a tangible commitment to their well-being, building the kind of deep-seated loyalty that a pay rise alone can’t buy.

For too long, SMEs have fought an uphill battle for talent against corporate giants. The big players could always offer comprehensive benefits packages that felt out of reach for smaller businesses. That ends now.

Employment Hero, powered by Kota, is here to level the playing field. We’re making premium, “big-business” health perks accessible and affordable for SMEs. This empowers SMEs to:

• Attract top talent: Go head-to-head with larger companies and win. When a top candidate is weighing their options, your offer will stand out with perks that matter.
• Keep your stars: Your best employees no longer need to look to bigger corporations to find the security they and their families need. You can provide it right where they are, fostering a culture of loyalty and long-term commitment.

The Employment Hero and Kota advantage

Buying health insurance for a small business has historically been complicated. It usually involves chasing updates, drowning in paper forms and waiting weeks (sometimes months) for a quote. It’s the kind of admin heavy lifting that stops growing businesses from offering the best employee benefits UK that their teams really want.

We decided to fix it.

By partnering with Kota, we’ve brought the entire process inside Employment Hero. It’s not just a referral link to a broker; it’s a fully integrated experience that puts you in control.

Here’s how it works, end to end:

• Discover and decide: Employers find Health Insurance right within the EH Benefits catalogue or marketplace. No need to hunt, no hidden extras—just clear options at your fingertips.
• Guided, in-product journey: Click to launch our embedded Kota flow. You’ll move through a product-led, step-by-step journey: provide company and workforce details, review real-time, competitive quotes from UK providers, and compare plans in one view.
• Select, apply and secure: When you’re ready, pick the plan that fits, complete the application on the spot, and sign up—without switching tools, logging in elsewhere, or breaking context. Policy confirmation shows up right inside EH as soon as Kota binds the policy.
• Ongoing support made simple: Any questions about your policy or broker details? Kota’s got your back. Need help with platform navigation or finding what you need inside Employment Hero? That’s on us. It’s a clear support structure, so you’re never stuck between providers.

This isn’t just an integration. It’s a new standard—so SMEs can offer world-class benefits, all from the platform they trust. Faster, simpler and ready to help you win the race for talent.

The future of employee retention

The landscape of work has shifted and employee retention strategies in 2026 need to evolve to reflect this. The reality is, employee retention strategies 2026 don’t revolve around a pizza party on a Friday afternoon, it’s now all about businesses that prioritise the health of their team through comprehensive small business health insurance. 

For years, the excuse that health insurance was “too complex” for smaller businesses held weight. It doesn’t anymore. With Employment Hero and Kota, we’ve smashed the barriers that kept SMEs on the sidelines. We’ve made it simple to access the kind of world-class best employee benefits UK that were once reserved for corporate giants. It’s now financially strategic and managed without the administrative burden.

All data obtained from custom surveys commissioned by Employment Hero: (1) Worker attitudes survey, YouGov, UK, August 2025, n=1081 adults 18+ employed full-time or part-time; (2) Business productivity survey, QuestionPro, UK, March 2025, n=1018 business leaders/owners in companies 5-999 people.  Please refer to the full disclaimer at the bottom of this article regarding third-party data verification and financial advice.

Disclaimer: The information provided in this article is current as of [Insert Date]. The views expressed in this article are general information and opinions only, and are provided in good faith without taking into account your personal circumstances, financial situation or needs. Before acting on any information, you should consider whether it is appropriate for you and we recommend that you seek independent financial, legal and taxation advice. Certain information given is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising either directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article.