Most SME benefits packages were built for compliance, not strategy — and employees know it
The majority of SME benefits packages consist of a pension scheme set up for auto-enrolment, perhaps a group life policy, and a collection of ad hoc additions accumulated over time. Employees neither understand what they have nor feel that it reflects genuine investment in their financial security. Changing this is not expensive. It requires a different starting point.
Why most SME benefits packages underperform
Built for compliance, not people
Auto-enrolment created pension schemes as a legal obligation. Most were set up as quickly and cheaply as possible, with default contribution rates, default funds, and no review since.
Not communicated
Even where a good benefits package exists, employees often do not know what is included. A benefit that employees are unaware of generates no engagement and no loyalty. It costs the employer money for no return.
Not reviewed
Benefits accumulated over time without a framework become inconsistent and inefficient. Charge rates creep up. Schemes no longer match the workforce. NI efficiency is lost. A review almost always identifies savings.
What a good SME benefits strategy looks like
A well-constructed benefits strategy for an SME has three characteristics: it is commercially justified, it is understood by employees, and it addresses the actual financial concerns the workforce has — not a generic template.
The building blocks are typically:
- A reviewed and optimised workplace pension — correct charge levels, appropriate default investment, salary sacrifice in place
- Group life assurance — cost-effective and valued, particularly by employees with dependants
- Group income protection — addresses the gap between statutory sick pay and the employee's actual income needs
- Financial education — workshops or one-to-one access that help employees understand and use what they have
- Access to regulated financial advice — the most valued benefit across most workforce segments, and available through Aetas Wealth as part of the programme
The right starting point — audit before you build
The most common mistake employers make when reviewing their benefits is adding rather than restructuring. Adding a new benefit without first understanding what the workforce actually needs, what is already in place, and what is performing well tends to increase cost and complexity without improving outcomes.
The Aetas Workplace Performance Audit starts with the employer's current position. It maps what is already in place, identifies what is not performing, quantifies the cost of gaps, and only then proposes a programme. The result is a benefits strategy built around your workforce, not a generic package applied to it.
How to present benefits so employees actually engage
Communication is as important as the benefits themselves. Employees who do not understand what they have will not value it, will not use it, and will not cite it as a reason to stay. The most effective communication:
- Uses plain language and avoids jargon — "we contribute 5% to your pension each month" lands better than "defined contribution employer contribution at 5% of pensionable pay"
- Puts a pound figure on benefits — "your total employment package is worth £X, not just your salary" changes how employees perceive their compensation
- Is repeated, not just announced — an annual benefits statement and a welcome pack for new starters are the minimum
- Offers a conversation — access to someone who can explain what individual benefits mean in practice is the most effective engagement tool available
Aetas manages employee communications as part of every programme engagement, including drafting, scheduling and delivery. The employer retains full approval throughout.
Common questions
How much should an SME spend on employee benefits?
There is no single answer, but a useful benchmark is total benefits cost as a percentage of total payroll. For most SMEs, this sits between 3% and 8% including pension contributions, group risk premiums, and any flexible benefits spend. The question that matters more than the total is whether the spend is performing — generating engagement, reducing turnover, and meeting employee needs.
What are the most valued benefits for SME employees?
Research consistently identifies pension contributions, flexible working, and financial planning access as the most valued benefits across most employee segments. Group life assurance and income protection are also highly valued, particularly by employees with dependants. Generic perks and discount schemes rank consistently lower than financial security benefits.
Should we offer a flexible benefits platform?
For most SMEs under 150 employees, a flexible benefits platform adds administrative complexity without proportionate value. A well-structured core package, clearly communicated and regularly reviewed, typically outperforms a platform in engagement and cost-efficiency at this scale. Platforms become more appropriate as headcount and workforce complexity increase.
How often should we review our benefits package?
An annual review is the minimum. The review should cover: whether charge rates on pension and group risk schemes are competitive, whether the workforce composition has changed in ways that affect benefit relevance, whether auto-enrolment obligations are being met, and whether employee engagement with benefits has been measured and is trending in the right direction.
Research on employee benefits effectiveness and workforce engagement is published by the CIPD. Auto-enrolment contribution requirements are set out by The Pensions Regulator. HMRC guidance on tax-efficient employee benefits is available at gov.uk/employer-reporting-expenses-benefits.
Start with what you already have
The Workplace Performance Audit reviews your existing benefits, identifies what is not performing, and proposes only what is justified by the numbers.
Book a Workplace Performance Audit