How UK SMEs Are Rethinking Employee Benefits in 2026

Retaining your best people in 2026 is a top priority, but in today’s job market, it can sometimes feel like a struggle… especially for SMEs who are managing tight budgets. For many businesses, it feels important to reward your team and this is a surefire way to stand out against other employers, yet the cost of meaningful employee  benefits, like private health insurance, can seem out of reach. 

This often leads to a frustrating cycle for SMEs, health insurance is often seen as too expensive to afford and too complicated to manage. The paperwork, the back-and-forth and the manual admin feel like a mountain you don’t have time to climb.

But what if there was a way to offer premium health benefits without drowning in administration? 

It’s time to rethink what’s possible. Employment Hero, powered by Kota, is changing the game for UK SMEs. We’ve built a solution that embeds employee benefits directly into our platform, making it simple, fast and affordable to give your team more for less.

Why health insurance matters for SMEs in 2026

The landscape of work has shifted and in 2026, employee expectations are higher than ever. Health, wellbeing and financial security are no longer “nice-to-have” perks offered by big corporations, they’re a core part of what people look for in an employer. Yet, for too many small businesses, it can still sometimes feel like an elusive goal trapped behind barriers of cost and complexity. 

The talent retention challenge

3 in 4 businesses say recruitment is a challenge and 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)* keeping your top performers is more important than ever. But in a competitive job market, it’s getting harder and harder for businesses to not only hire, but to retain their people. 

The data backs this up. When surveyed on the most important factors when changing jobs, benefits consistently rank among the top priorities. Salary increases come first at 63%, followed by flexible working hours at 57%, with benefits close behind at 53%. Crucially, benefits rank ahead of remote or hybrid working, progression and career path, company culture, compensation beyond base salary, job title or status, travel opportunities and even passion for the industry or company.

This demand is particularly strong among mid-career professionals. Employees aged 35–44 are the most likely to prioritise benefits when considering a move, a group that typically includes experienced, high-value talent SMEs can least afford to lose. 

This is where private health insurance becomes a powerful differentiator. Offering health cover can level the playing field for SMEs. While competing on salary alone is difficult against larger organisations, a strong benefits package can significantly boost employer appeal, improve loyalty and reduce costly staff turnover.

The cost barrier

Despite the benefits, tight margins, economic uncertainty and rising operational costs mean SMEs always think carefully about any additional spend, including health insurance.

However, the perception that health insurance is “too expensive” is often outdated, as it may be treated differently from salary in terms of tax and payroll, depending on individual circumstances. And in 2026, there are more flexible, scalable options designed specifically for SMEs. This ranges from entry-level cover to modular plans that allow employers to control costs and only pay for what their workforce actually needs.

When weighed against the cost of recruitment, onboarding, absenteeism and lost productivity, health insurance is often viewed by employers as a valuable part of a broader employee benefits strategy.

The admin barrier

But it’s not just the cost of health insurance that puts businesses off. Traditionally, buying and managing health insurance has been a frustrating process for SMEs. Long back-and-forth conversations, complex policy documents, manual paperwork and slow turnaround times have made it feel time-consuming and inaccessible… especially for businesses with a small (or no) HR team. 

This extra admin can feel like a step too far when the to-do list is already never ending, so it’s no surprise that the complexity has been a major blocker. SMEs simply don’t have the time or resources to scope various providers, chase renewals or answer employee questions about coverage.

In today’s world of work, expectations are evolving. SMEs want simple, digital-first solutions that are easy to set up, easy to manage and easy for employees to understand, minus the endless admin. 

The game-changer: Embedded health insurance with Employment Hero

It’s been alluded to, but we’re just going to say it out loud; the old way of managing employee benefits and perks is broken. It’s slow, expensive and built on manual processes that drain your time and resources. There had to be a better way… so we built one. 

We’re thrilled to announce the launch of embedded health insurance for UK SMEs, available directly within the Employment Hero platform. Powered by our partner Kota, this feature transforms how you provide health benefits, turning a once-painful process into a simple, powerful and automated experience. It’s designed to finally put health cover within reach for every business. 

How it works

We’ve integrated Kota Embed directly into EH Benefits, bringing you a seamless, fully EH-branded health insurance journey. Employers can discover health insurance through the EH Benefits feature on the dashboard. One click launches Kota’s embedded flow, right inside EH, where you enter a few company and workforce details.

Kota provides quote options and simple plan comparisons. You choose the policy, apply and sign up, all within Employment Hero. No switching portals or losing focus. Kota powers the broker journey in the background, so moving from quote to plan selection to policy confirmation is fast and completely in-app. Once done, confirmation appears instantly in EH, keeping everything centralised.

Support is clear and easy, Kota manages policy and broker queries, while EH takes care of platform navigation.

Why it’s better

This isn’t another clunky integration or a half-step. It’s a fully embedded, product-led workflow designed to eliminate manual admin, pointless duplication and broken processes. You get insurance quotes in a fraction of the time, so you can make choices with confidence and lock in policies without the traditional headaches. Employment Hero manages ongoing admin, so adding new joiners or updating coverage is just a matter of clicks. It’s employee benefits, designed to be simpler and easier to manage.

Comparing salary increases and employee benefits

When deciding how to invest in your team, employers often weigh up different ways to enhance their overall reward offering. This can include increasing base salary or introducing additional benefits, such as private health insurance.

Each approach is structured differently and can have varying implications for both employers and employees.

Salary increases

Increasing an employee’s salary is a straightforward way to reward performance and support retention. However, employers may also need to consider additional on-costs associated with salary, such as employer National Insurance contributions and pension obligations.

Over time, salary increases can also influence future costs, as they form part of an employee’s ongoing pay and may impact areas like pay reviews and pension contributions.

Employee benefits

Offering benefits such as private health insurance is an alternative way to enhance total reward. Unlike salary, benefits are typically provided as non-cash offerings and may be treated differently for tax and payroll purposes.

In many cases, employer-provided benefits may be considered allowable business expenses, although the exact treatment will depend on individual circumstances and current legislation. Employers should always seek appropriate advice to understand how this applies to their business.

Benefits can also provide employees with access to services or support that may be difficult or more expensive to arrange independently. For example, private health insurance can offer quicker access to medical care and additional peace of mind.

A different approach to total reward

Rather than viewing salary and benefits as competing options, many employers take a balanced approach by combining both. This allows businesses to support employee wellbeing while managing overall reward structures in a way that aligns with their goals and budget.

For some SMEs, benefits like health insurance can play an important role in creating a more attractive and supportive workplace, particularly in competitive hiring markets.

Simplifying the complexity: How Employment Hero does the heavy lifting

Managing benefits usually means drowning in paperwork. Business owners or HR managers need to spend time updating spreadsheets, manually adjusting payroll for every team member and hoping they didn’t make a mistake. It’s a nightmare. 

We fixed that.

With Employment Hero, the manual grind is gone. Our platform automates the process by integrating seamlessly with your existing employee list, meaning you can set up coverage instantly without switching systems. You get accuracy and speed without the headache.

This seamless experience is powered by Kota, our partner and the broker engine behind the service. Kota connects you to the UK’s popular health insurers.

Instead of chasing brokers for quotes or waiting weeks for paperwork, Kota’s technology delivers quick and reliable options. It turns a complex insurance market into a simple marketplace you can access with a few clicks. The heavy lifting of broker negotiations are handle by Kota and technical integration is handled by us, so you can focus on looking after your team.

A more accessible way to offer employee benefits

For too long, offering health insurance has felt like a luxury reserve for big corporations. SMEs were excluded under the pretence that it was too expensive and too difficult to manage. That story ends today. Affordable  health insurance is no longer out of reach. 

With Employment Hero, powered by Kota, the entire process is simple, fast and impactful. We’ve removed the complexity and automated the admin, connecting you to Kota, so you can deliver top-tier benefits without the traditional cost or hassle. This is more than just another feature, it’s a better way to reward your team and build a business where people want to work.

To find out more about health insurance, visit https://employmenthero.com/uk/products/business-health-insurance/ 

*Work That Works, Employment Hero commissioned research with QuestionPro, UK, March 2025, n=1200 (employees in companies of 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 10th April 2026. 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.