More than half of UK employees (53%) are moving jobs in search of better company benefits, data from Employment Hero has found. While the vast majority of workers (63%) still want better pay, it’s clear that UK small businesses (SMEs) can no longer afford to rely on salary alone to entice prospective employees.
Why Salary Increases Alone Won’t Keep Your Best Employees
The trend, known as “benefitsmaxxing”, has largely emerged against a backdrop of insufficient wage growth. With UK small businesses now unable to simply pay more to entice candidates, analysis of 115,000 employee records reveals that SME wages rose by 3.1% year-on-year this December – a real-terms dip when measured against the 3.4% inflation rate.
Driven primarily by Gen Z and Millennials, candidates are making up for this shortfall by hunting for roles based on the total value of a package rather than the headline salary. And SMEs have little choice but to appease them.
Against the backdrop of the general cost of doing business and increased National Insurance Contributions, a lot of founders have had to think outside the box to avoid losing their best people.
“We’re seeing a fundamental shift in what employees value,” says Kevin Fitzgerald, UK Managing Director at Employment Hero. “Pay obviously matters, but today’s workforce cares just as deeply about how they feel at work. Benefits have become a key part of that equation.”
The True Cost of Staff Turnover for UK SMEs
Employment Hero’s research shows 45% of UK businesses have reported spending more on recruitment than they have in previous years. And those challenges tend to be exacerbated by the ripple effects associated with losing employees.
According to research from Oxford Economics and Unum, losing a skilled worker is akin to a £30,614 financial blow for employers, with the lion’s share coming from a 28-week productivity gap as new hires get up to speed, costing the business an average of £25,182 in lost output alone.
As real wage growth remains sluggish through 2026, think tanks like the Resolution Foundation point out that economic churn and the failure of low-productivity businesses are increasing, meaning SMEs can no longer afford the sort of efficiency dips that follow in the wake of resignations.
Levelling the Playing Field
With these challenges to contend with, traditional perks such as health insurance, pensions and flexible working have essentially become baseline expectations for employees. What’s fast becoming more enticing, are benefits that speak to specific pressures employees face.
Earned wage access, for example, which lets employees draw down their wages before payday, is now offered by 15% of UK employers. Pet insurance is gaining traction too, with Gen Z spending £145 per month on pets while vet costs have risen 70% in recent years. Progressive employers are also increasingly adding menopause support and fertility testing to their packages.
For SMEs, the issue isn’t just offering these benefits but administering them without dedicated HR teams or extra finances – a gap that’s currently being remedied by the growth in integrated HR and payroll platforms.
Staff Retention Strategies: Practical Steps for UK SMEs
If your business is feeling the pressure of this benefits-first recruitment trend, consider these adjustments:
Audit your ‘invisible’ value
Smaller teams often offer more autonomy and faster career progression. Make sure these advantages are highlighted in your employer branding and recruitment materials.
Prioritise health benefits
With NHS wait times weighing on workers’ minds, private medical insurance is often perceived as having a higher value than a small, taxable pay rise. It’s one of the most requested benefits among UK employees.
Consult your team
Don’t guess which perks matter. A simple survey might reveal that your staff value a specific type of insurance or mental health support over other incentives. Ask them directly what would make a difference.
Automate the admin
Use integrated platforms to manage your benefits offerings so that providing corporate-grade employee benefits schemes doesn’t create a manual bottleneck for your leadership team. The right technology means you can compete with bigger employers without hiring a full HR department.
