As small and mid-sized businesses continue to look for ways to attract and retain key employees, a new survey finds they’re putting employee benefits in place.
The Principal Financial Group conducted a “check-in” with more than 1,000 business owners at the beginning of 2022 and found that 84% of SMBs offer key employee benefits and 55% want to offer more. In addition, the number of key employees continues to increase among SMBs, with 40% saying they have four or more key employees compared with 35% in 2021.
According to the survey, 70% agree employee benefits help to improve recruitment efforts, while 71% of business owners said offering more employee benefits helps improve retention. Additionally, two-thirds (67%) say employee benefits improve productivity—a percentage that has grown from 42% in 2015.
At the same time, however, more than a quarter of owners said employee turnover has increased over the past year, up from 20% a year ago and 15% two years ago.
“As business owner confidence improves and the need to invest in and grow their business intensifies, the need to attract and retain talent is more urgent than ever,” says Nate Schelhaas, senior vice president and head of life protection solutions at Principal. “Employee turnover remains a top concern for owners in 2022 and having a customizable and competitive employee benefits package is crucial to addressing this challenge and enabling growth.”
Key Benefits
Common key employee benefits are deferred compensation, executive bonus plans and retirement protection disability coverage, along with disability income insurance. Compared with a year ago, significantly more business owners offer disability income insurance for their key employees—44% versus 35% last year, Principal found.
“Key employee benefits are growing in their importance as it becomes more challenging to lock in top talent in high-demand jobs,” notes Kathleen Souhrada, vice president of nonqualified and life administration at Principal. “Offering an executive bonus plan or a non-qualified deferred compensation plan can help meet the needs of employees critical to the success of the business.”
Focus on Digital Platforms
The survey also found that 25% of business owners use digital platforms to help with insurance and employee benefit needs. Among owners with 10 or more employees, digital platforms are the third most-used resource to help with employee benefit needs.
“Small and mid-sized businesses typically don’t have a dedicated human resource professional. Access to online resources and digital platforms simplifies the process to help them select the appropriate offerings for their workforce,” Schelhaas observes. “Digital tools help streamline the customer experience from initial set-up to ongoing administration and claims payment.
Demographic Shift
Additional findings show that there has been a demographic shift in the composition of business owners. Compared to last year, there are now significantly more business owners in 2022 who are:
- female (44% versus 36%);
- millennial (40% versus 26%); or
- have owned their business 10 years or less (57% versus 34%).
As to financial priorities and succession plans, business protection remains the No. 1 priority—as it has since 2010—yet fewer than half have solutions in place, Principal notes. This includes key employee life and disability insurance to protect against an unexpected death or disability that could disrupt business operations.
More business owners also say retirement is farther away. According to the findings, 48% of owners say retirement is 11 or more years away, compared to last year’s 37%. Still, only 14% of business owners say they don’t ever expect to retire. Principal notes that this statistic has dropped significantly since the first survey in 2010, when 31% said they don’t plan to retire.
The survey was conducted by Dynata and included 1,018 online interviews conducted Jan. 10–21, 2022, with the results weighted based on the number of employees and annual sales.
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