Employee benefits and retirement plan solutions Trends and Insights Principal® SMB Sentiment

Principal® SMB Sentiment

While 85% of small and midsize businesses (SMB) continue to show growth or stability, more than 75% are making changes due to continued inflation and potential recession concerns. SMB employees are also concerned about inflation, in addition to their personal financial situation, and lack of pay raises.

Small business employees in a meeting.
5 min read |

The Principal SMB Sentiment survey provides quarterly insights on top business issues and themes currently impacting SMBs and employees. The survey provides a holistic view by identifying alignment and points of friction with employers and employees.

The latest findings from the February 2024 survey.

Inflation and recession

Data shows

The most important business issue is maintaining cash flow (96%).

78% of SMBs are concerned about inflation and a recession, and more than three-fourths are making changes. The most common change is cutting and watching expenses (23%).

Inflation and potential recession concerns
Business has made/making changes (77%)
Business growth has been impacted (67%)
Business increasing capital on hand (36%)
Mental health

Data shows

36% of SMBs want to add mental health benefits within the year.

A flexible work arrangement is the No. 1 mental health benefit employees want.

SMBs and employees agree:

  • Offering flexibility is more important than ever (84%).
  • A flexible work schedule could help improve mental health (82%).
  • Flexibility is important to employee loyalty (81%).

Boomers are less likely to agree with the importance of flexibility.

Reasons for worsening employee mental health
Ranking SMB top benefits Employee top benefits
1 Inflation/rising cost of living (79%) Inflation/rising cost of living (88%)
2 Financial situation concerns (69%) Personal financial situation concerns (85%)
3 Uncertainty/fear of the unknown (64%)
Rising interest rates
Lack of pay raises/bonuses (81%)
4 Anxiety/stress/depression (63%) Anxiety/stress/depression (80%)
Excessive workload 
5 Increasing consumer debt levels (55%) Not having the right/enough benefits (76%)
6 Not having the right/enough benefits (53%) Increasing consumer debt levels (75%)
7 Personal relationship problems (51%) Employees not taking time off (74%)
8 Excessive workload (50%) Uncertainty/fear of the unknown (72%)
Recruiting and retention

Data shows

SMBs are significantly less concerned than employees about recruiting and retention issues:

  • Attracting qualified employees
    SMBs 39%
    Employees 82%
  • Employees leaving/taking other jobs
    SMBs 30%
    Employees 60%
  • Upskilling employees
    SMBs 34%
    Employees 59%
Reasons for hiring challenges
Employees say Gen Z / Millennials Gen X Boomers
SMBs can’t afford to pay as much 78% 86% 86%
SMBs can’t afford to offer the benefit variety 79% 90% 92%
Hard to find employees with the right skill sets 80% 76% 86%
Difficult reaching the right candidates 67% 65% 66%
Potential employees are looking for remote work 76% 67% 61%
Employees are hesitant to leave due to fear of an economic downturn 70% 72% 48%
Employee benefits

Data shows

In the next 12 months:

  • 79% of SMBs want to add benefits.
  • 75% of employees want their employer to add benefits.

There is a gap in awareness when SMBs add benefits.

  • 25% of SMBs added benefits in 2023.
  • 8% of employees were aware their employer added benefits in 2023.
Top benefits to add
Ranking SMB top benefits Employee top benefits
1 Mental health benefits (36%) Retirement benefits (31%)
2 Paid family/medical leave (PFML) (27%) Health insurance (29%)
Mental health benefits
3 Telehealth services (22%)
Health insurance
Dental insurance
Paid family/medical leave (PFML) (28%)
4 Retirement benefits (21%)
Financial wellness programs
Dental insurance (25%)
5 Employee assistance programs (18%) Employee assistance program (EAP) (19%)
Life insurance
6 Life insurance (17%) Short-term disability (16%)
7 Childcare assistance (15%) Long-term disability (15%)

Putting insights to work

Key takeaway 1

Inflation and recession

88% of employees say inflation has a negative impact on their mental health. 85% say concern about their personal financial situation does the same.

Financial wellness guide

Key takeaway 2

Mental health

63% of employees say employers should be concerned about their employees’ mental health.

Mental health guide

Key takeaway 3

Recruiting and retention

45% of employees are actively looking for a new job. This response is higher with Gen Z and Millennials.

Employee retention guide

Online tools and resources to help you and your business

Principal® Benefit Design Tool

See how your benefits compare to what other organizations of your size, industry, and region offer their employees.

SMB Sentiment

Download the infographic to see key SMB and employee insights.

SMB resources

Access resources, tips, and insights to help your small or midsize business prepare for the year ahead.