With employee benefit costs climbing and wages under pressure, many SMEs are cutting back on wellbeing initiatives. But Andrew Woolnough, founder and director at Un:fade Consulting, warns that neglecting financial wellbeing is a false economy, and argues that a fresh approach could boost retention, productivity, and engagement.
For many SMEs, the rising cost of employee benefits has become a pressing concern. With increases to the minimum wage and employer National Insurance contributions adding to the pressure, benefits budgets are being squeezed like never before. The result? Corners are being cut, “nice-to-have” initiatives are being shelved, and proactive wellbeing — particularly financial wellbeing — is too often the first casualty.
Neglecting financial wellbeing is a false economy — it fuels absenteeism, disengagement, and rising costs elsewhere.
Research consistently shows that financial stress is now one of the leading causes of absenteeism, disengagement, and poor mental health at work. A 2023 survey from Drewberry revealed that more than half of employees feel unsupported during the cost-of-living crisis, two-thirds want a pay rise, and only 9% of employers currently offer financial wellbeing programmes. The CIPD has also found that financial stress is now the leading cause of absenteeism in UK workplaces.
For SMEs already under pressure to retain talent and control costs, this creates what can only be described as a dangerous negative spiral: employees feel unsupported, stress levels rise, absenteeism increases, productivity falls and the business faces rising costs in other areas as a result.
Why now is the time to act
Most benefits strategies in place today were designed 10 or even 20 years ago. The world has changed dramatically since then. The coronavirus pandemic blurred the line between personal and professional life. The cost-of-living crisis has highlighted how fragile many households’ finances are, even at higher income levels. And employees increasingly expect their employer to play an active role in supporting their financial health.
Most SME benefits strategies were designed a decade ago. Today’s workforce demands a very different approach.
At the same time, traditional solutions such as across-the-board pay rises are becoming increasingly difficult for SMEs to sustain. The challenge is clear: how can employers deliver meaningful support without breaking the bank?
The answer lies in rethinking benefits strategy from the ground up. If you were starting from scratch today, with today’s workforce and today’s pressures in mind, what would your benefits package look like?
Building a sustainable approach
The first step for SMEs is to take back control of benefits spending. That doesn’t necessarily mean spending more, but it does mean spending more wisely. By reallocating budget towards proactive, preventative initiatives such as financial wellbeing, businesses can create a virtuous cycle where employees feel supported, productivity improves, and long-term costs are contained.
Crucially, communication plays a huge role. Too often, benefits communication is technical, product-led, and uninspiring. Employees are bombarded with updates about pension fund charges or insurance terms but rarely shown the real-world value of those benefits.
Imagine instead showing an employee what a good retirement could look like, then explaining how their pension contributions, and employer support, can get them there. Or reframing life insurance not as a policy document, but as protection for their family’s future. That is what makes benefits meaningful, engaging, and ultimately effective.
Making financial wellbeing practical
SMEs don’t need vast budgets to make a difference. Even modest initiatives can have a big impact if they directly address employees’ day-to-day financial concerns. Examples include:
- Flexible pay (earned wage access): allowing staff to access a portion of their pay before payday, reducing reliance on overdrafts or credit cards.
- Cashback and discounts: helping employees stretch their take-home pay further on everyday purchases.
- Financial education: workshops, one-to-one coaching, or online resources to build financial confidence.
- Debt support: access to counselling or management programmes.
- Retirement guidance: ensuring employees understand the long-term value of pension contributions.
Even modest steps, like cashback, flexible pay, or financial education, can make a tangible difference to employees’ lives.
These interventions are often more cost-effective than employers realise. In many cases, providers structure them in ways that minimise impact on cashflow, while still delivering significant value to employees.
Breaking the negative spiral
The evidence is clear: businesses that invest in financial wellbeing see measurable returns. According to Deloitte, every £1 spent on mental health support, including financial wellbeing, delivers an average return of £5 through reduced absenteeism, lower staff turnover, and increased productivity.
Every £1 spent on financial wellbeing can return £5 through higher productivity, lower turnover, and reduced absence.
For SMEs, the challenge isn’t just about cost. It’s about mindset. Strategy too often slips down the priority list, crowded out by more immediate concerns. But waiting until the problem becomes urgent is rarely the most cost-effective path.
The time to act is now. Rising costs are not going away, but by modernising and refocusing benefits strategies, SMEs can turn the negative loop into a positive loop, where wellbeing improves, employees feel supported, and businesses thrive.
Because when employees are financially healthier, they’re not just less stressed, they’re more engaged, more productive, and more loyal. And in today’s competitive market, that could be the difference between keeping talent and losing it.