Small and mid-sized businesses (SMBs) are facing mounting pressures from rising healthcare and operational costs, according to MetLife’s 2026 U.S. Employee Benefit Trends Study (EBTS). The research highlights how affordability challenges are reshaping benefits priorities, employee wellbeing, and workforce retention strategies.
SMBs are operating in an increasingly complex economic environment where cost pressures affect both business operations and employee experience. MetLife’s 2026 U.S. Employee Benefit Trends Study (EBTS) finds that 72% of SMB employers cite rising medical costs, while 68% point to the increasing cost of doing business as top stressors. For the first time since 2022, controlling healthcare costs has emerged as the number-one benefits priority among smaller employers.
Broader economic pressures compound these challenges. Findings from the MetLife & U.S. Chamber of Commerce Small Business Index (SBI) show that 70% of small businesses report that rising prices have affected operations in the past year, while 34% identify cost as the primary barrier to growth. These constraints are forcing SMBs to carefully balance investment in talent with operational efficiency.
Employee Financial Stress and “Job Hugging”
Employees are feeling the squeeze as well. Nearly nine in ten SMB workers report that rising living expenses and medical costs are top stressors, and 71% cite economic uncertainty as a major concern. This financial strain erodes holistic health—wellbeing across physical, mental, social, and financial dimensions—and impacts engagement.
The study also highlights a trend MetLife calls “job hugging,” where employees stay in their roles out of necessity rather than engagement. Among SMB employees who remain due to necessity, 81% are not holistically healthy, and 44% are not engaged, indicating hidden retention risks.
“When retention looks strong on paper, but employees are staying out of fear, the underlying health of the workforce is at risk,” said Bradd Chignoli, Head of Regional Business at MetLife. “For SMBs, reduced wellbeing and engagement can quickly impact productivity, service quality, and growth potential.”
Affordability Challenges Meet Strategic Opportunities
Despite tight budgets, many SMBs continue to invest in employee benefits, particularly voluntary offerings that allow workers to opt into coverage supporting financial, physical, and emotional wellbeing. MetLife data shows that more than half of SMB employers (56%) introduced new voluntary benefits over the past year. These benefits help companies enhance the employee experience without significantly increasing spend, offering a cost-effective way to support retention and engagement.
SMB employers also see tangible returns from health-focused investments. According to EBTS, organizations estimate a $2.20 return for every $1 invested in employee health, driven by improvements in productivity, retention, and reduced absenteeism and costs.
Rather than relying on a single benefits lever, the research emphasizes a holistic approach to employee experience. Effective strategies include reducing friction in accessing care, supporting preventative health measures, and reinforcing workplace connection through targeted, high-impact initiatives.
“SMBs don’t need to outspend large employers to compete,” Chignoli said. “But they do need to invest intentionally in benefits and the employee experience. In a period of job hugging, those investments can turn need-based retention into real commitment.”
Market Landscape
The SMB landscape remains vulnerable to economic volatility and inflationary pressures. Payroll data shows that firms with fewer than 50 employees shifted from significant job cuts in late 2025 to flat growth in early 2026, followed by modest gains in February. This ongoing volatility underscores the importance of flexible benefits strategies that address both employee wellbeing and financial realities while supporting operational resilience.
Top Insights
- SMB employers cite rising medical costs (72%) and operational costs (68%) as primary stressors, making healthcare cost control the top benefits priority.
- 89% of SMB employees report financial stress from living expenses and medical costs, with 71% concerned about economic uncertainty, impacting engagement and holistic health.
- “Job hugging” shows employees remain in roles out of necessity, not commitment; 81% of these employees are not holistically healthy, and 44% are disengaged.
- Voluntary benefits help SMBs support employee wellbeing without substantially increasing costs; 56% of SMB employers introduced new voluntary options in the past year.
- Investments in holistic employee health provide measurable returns: $2.20 in benefits for every $1 spent, through higher productivity, retention, and reduced absenteeism.
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