Employee turnover increased for the nation’s small businesses due to COVID-19, according to a new survey from Principal Financial Group®. The company’s latest polling of more than 1,000 small business owners revealed a 20% uptick over the past 12 months, reaching its highest levels in years. Among those surveyed, 97% believe the pandemic impacted the turnover.
In response, employers are taking steps to boost employee retention. More owners are revisiting employee benefit offerings to improve workforce retention and productivity, despite tight budgets. When considering employee benefits, small businesses rank affordability (50%) and their ability to attract and retain employees (42%) as most important. Other factors like providing financial wellness, and the advice of HR and legal counsel are growing in importance.
“It’s encouraging to hear from so many business owners who are taking the time to better understand why their employees are leaving so they can proactively address these concerns for current and prospective workers,” said Mark West, national vice president of business solutions for Principal®. “We’re committed to working with employers to ensure we have benefit offerings that are targeted to their employee needs, especially as they evolve in the wake of COVID-19.”
The survey also reveals that the number of key employees1 per organization has increased since 2010 (23%), with significantly more owners saying they have four or more in 2021 (35%). Over half of business owners (55%) would like to reward their key employees with additional benefits. In businesses with 50 or more employees, 75% view additional benefits as critical for key employees.
Emerging from a rough 2020
Looking back one year after the start of COVID-19, business owners are reflecting on the biggest challenges they faced and how they might continue to overcome them, as the nation moves toward recovery. Many reportedly struggled with cash flow as the pandemic forced them to close their physical locations. Some had to figure out how to continue paying rent, even though they shifted to remote work. Others are just now grappling with how to repay loans.
Nearly three out of four business owners (73%) are using a financial professional to help with the financial curveballs thrown their way over the last year. This is more than any other year Principal® has conducted its survey – in 2015, only slightly more than half (54%) of business owners said they worked with a financial professional. When looking for a financial professional, owners prioritize expertise (63%) and cost (62%).
“Financial professionals and the advice they can offer, will be critical given the significant new legislation and programs offered to businesses this past year as a result of the pandemic,” said West. “We’re seeing increased engagement from the businesses we serve via our business solutions team as employers navigate the economic impacts of COVID-19 along with relief programs rolled out to assist them.”
Additional report highlights include:
- Business protection2 is the most important solution for the sixth survey in a row since 2010. Among those who have a plan in place to protect their business, key person life insurance (60%) and disability insurance (44%) are the most popular.
- Confidence towards achieving their business goals. According to the survey, 87% are confident in their ability to achieve business stability and 78% affirmed they will be able to maximize profits in the next five years. Seventy two percent are confident in their capacity to change their business model and adjust to shifting demands.
- Family business and legacy planning. Of those small business responding, 66% are family-owned. Of those family businesses, just over half are first-generation owners. Wills remain the most popular wealth transfer approach (57%), but family trusts, family limited partnerships and irrevocable life insurance trusts are examples of other strategies that continue to be used.
To see more survey results, visit the 2021 Principal Business Owner Insights (PDF).
News Release Contact
Benefits and protection
Ashley Miller, 515-878-6295