New York — July 25

Although tentative, the economic outlook for small businesses shows some signs of improvement. But according to MetLife’s ninth annual Study of Employee Benefits Trends, small businesses (those with fewer than 500 employees) may now face a new challenge — employee retention — as there has been a significant decline in employee loyalty.

In November 2008, 62 percent of small business employees reported feeling a very strong sense of loyalty toward their employer, but in 2010 that number dropped to 44 percent. In fact, 34 percent of small business employees surveyed would like to work for a different employer. In contrast, small business employers’ perceptions of that loyalty remained essentially unchanged over the last few years with 54 percent currently believing their employees feel a strong sense of loyalty.

Benefits Status Quo

During the down economy many small businesses held the line on benefits. The study found that, overall, the percentage of small businesses offering certain benefits remained nearly the same in 2010 as in 2007.

However, the status quo may not be sufficient in a recovering economy. Approximately 50 percent of surveyed small business employees who are not very satisfied with their benefits hope to be working for a different employer. On the other hand, 72 percent of surveyed small business employees who are very satisfied with their benefits feel a very strong sense of loyalty to their employer.

“The MetLife study is a reality check for smaller employers who may still be viewing their workforce through rose-colored glasses,” said Jeffrey Tulloch, vice president, U.S. business, MetLife. “Economic recovery will not only present opportunities for employers but also for top performers. One area small businesses may overlook is whether their benefits programs are designed as strategically as they could be. It is not necessarily about spending more, but optimizing offerings to attain three top objectives: employee retention, increased productivity and cost control.”

Voluntary benefits are another option for small business employers seeking a cost-effective way to increase their benefits offerings. The study shows that approximately half of employees find it important to have benefits like life, dental, and disability insurance available to them through the workplace even if they have to pay all of the cost themselves.