SMEs facing recruitment and retention challenge

Recruiting and retaining employees is becoming increasingly difficult for SMEs, with many companies turning to flexible working practices to attract talent, new research from Paragon Bank has revealed. A study of over 1,000 SMEs, conducted on behalf of Paragon by Opinium, found that 61% of companies report a skills shortage for their sector, with 59% stating it has become increasingly difficult to retain employees over the past 12 months. Meanwhile, 65% of companies said they have had to increase salaries to recruit candidates.

Sectors where skills shortages are most acute include agriculture (79% of business report skills shortages), education (78%), hospitality 71%), IT (68%) and healthcare (67%).

Working from home and flexibility had helped companies attract employees. Nearly six in 10 companies (58%) said working from home arrangements had enabled them to recruit from a wider talent pool, whilst companies said that flexible working hours is now nearly as important as pay and benefits for many employees.

Flexible working hours was cited by 81% of SMEs as being important to new recruits, equal to pension and just below training and development (84). Salary was, understandably, the key driver for new recruits (87%).

Six in 10 companies said they had introduced flexible working practices as a result of the pandemic, with 17% of firms already having flexible working in place. Those businesses that introduced flexible working practices highlighted improvements across a number of areas in their companies, including:

  • Employee morale (73%)
  • Staff retention (72%)
  • Productivity (70%)
  • Operating cost reduction (68%)
  • Recruitment (74%)

John Phillipou, Paragon Bank Managing Director of SME Lending, said: “The battle for talent has been intense over the past year, with the UK at record levels of employment. SMEs are having to be more creative in how they recruit and flexibility is key to that, offering flexible hours or the ability to work from home.

“Those companies that have adopted flexible working practices tell us they are seeing the benefits of that across a number of areas, such as morale, retention and productivity, and I would expect flexibility to be a permanent fixture of businesses going forward.”

SME Publications/ SME XPO 2024
SME Publications/ SME XPO 2024