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

Principal® SMB Sentiment

Small and midsize businesses (SMBs) and employees agree on the most desired benefits. They are also aligned on the importance of financial wellness programs and the impact of inflation.

Two small business owners discussing benefits for their employees
5 min read |

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

The latest findings from the February 2025 survey.

Data shows

In the next 12 months:

  • 80% of SMBs want to add benefits.
  • A record 89% of employees want their employer to add benefits.

Both SMBs and employees agree on the most desired benefits to add:

  • Paid family and medical leave (PFML)
  • Mental health benefits
  • Retirement benefits

While desire to add benefits is high, budget constraints and economic uncertainty keep SMBs from adding benefits.

SMBs and employees agree about benefits, but to varying levels:
  SMBs Employees
Benefits are more important than ever 83% 93%
Benefits are important for employee loyalty 82% 92%
Hiring would be easier with a more competitive benefit package 63% 81%
Employees are asking for more employee benefits 57% 78%
Employee benefits

Data shows

In the next 12 months:

  • 80% of SMBs want to add benefits.
  • A record 89% of employees want their employer to add benefits.

Both SMBs and employees agree on the most desired benefits to add:

  • Paid family and medical leave (PFML)
  • Mental health benefits
  • Retirement benefits

While desire to add benefits is high, budget constraints and economic uncertainty keep SMBs from adding benefits.

SMBs and employees agree about benefits, but to varying levels:
  SMBs Employees
Benefits are more important than ever 83% 93%
Benefits are important for employee loyalty 82% 92%
Hiring would be easier with a more competitive benefit package 63% 81%
Employees are asking for more employee benefits 57% 78%
Issues facing SMBs

Data shows

Recruiting and retention is the No. 1 business challenge.

Employers and employees disagree on why it’s challenging to retain employees:

  • Employers: Can’t offer a competitive benefits package
  • Employees: Want more flexibility

Inflation is the No. 2 business challenge.

The impact of inflation is impacting employees more than employers.

  • 83% of households
  • 78% of employers
Top business priorities
1 Growth (85%)
2 Accommodating different generations (72%)
3 Mental health (70%)
4 Bundle multiple employee benefits (67%)
Increase pay to retain key employees (67%)
5 Expand workforce to meet business goals (63%)
Financial wellness

Data shows

38% of SMBs currently offer financial wellness to their employees.

SMBs and employees agree – retirement planning is the most desired financial wellness program.

Budgeting and insurance are also highly desired in financial wellness programs.

Importance of financial wellness programs
  SMBs Employees
Employee well-being 80% 83%
Employee productivity 76% 88%
Employee retention 75% 89%
Delayed retirement

Data shows

More than half of SMBs think employees are considering a delayed or phased retirement.

SMBs say delayed retirement will have a positive impact on their business:

  • Expertise and experience
  • Productivity
  • Employee morale
  • Career growth opportunities
  • Recruiting costs
Impact of delayed retirement
  SMBs Employees
Positive 38% 33%
Neutral 49% 46%
Negative 13% 21%

Uncertainty on the impact of delayed retirement is driving neutral responses.

Putting insights to work

Key takeaway 1

Employee benefits

55% of SMBs agree they’ll have to increase employee benefits to remain competitive.

See how your employee benefits compare to other organizations of your size, industry, and region.

Compare benefits

Key takeaway 2

Financial wellness

66% of employees are asking for financial guidance.

Support your employees through workplace and financial wellness initiatives.

Financial wellness guide

Key takeaway 3

Recruiting and retention

18% of SMBs say recruiting and retention are the biggest obstacles currently impacting their business.

Learn strategies to help retain employees and drive growth.

Employee retention guide