Cost Pressures Are Reshaping Today's Small and Mid-Sized Business Workforce
New MetLife data reveals how rising costs and "job hugging" are changing how SMBs support and retain talent
Small and mid-sized (SMB) businesses are navigating an increasingly complex environment marked by rising costs, heightened employee financial stress, and growing expectations. New insights from MetLife's 2026 U.S. Employee Benefit Trends Study (EBTS) show that affordability pressures are reshaping how SMB employers operate and how their employees experience work.
Employers with fewer than 1,000 employees cite rising medical costs (72%) and the increasing cost of doing business (68%) as top stressors, prompting employers to rank controlling health costs as their number one benefits priority for the first time since 2022.1
Small businesses are also facing broader cost issues: the MetLife & U.S. Chamber of Commerce Small Business Index (SBI) found that 70% say rising prices have impacted operations in the past year2, and 34% cite cost as the biggest roadblock to growth3, highlighting how rising expenses are constraining margins and expansion plans.
SMB employees are also feeling the strain, and it is beginning to show up in their overall wellbeing and confidence. Eighty-nine percent cite rising living expenses and medical costs as top stressors, while 71% point to economic uncertainty as a major concern. That sustained financial pressure is eroding holistic health—defined as wellbeing across physical, mental, social, and financial dimensions.
"Small and mid-sized businesses are feeling cost pressures from all sides, often with fewer buffers than large employers, while employees are dealing with rising costs in their personal lives," said Bradd Chignoli, Head of Regional Business at MetLife. "That combination is changing workplace dynamics and increasing risk for employers as financial stress rises."
From affordability pressure to workforce uncertainty and "job hugging"
Affordability challenges are unfolding alongside a softening and increasingly unpredictable labor market. Recent payroll data points to continued workforce uncertainty among small employers, with firms with fewer than 50 employees moving from significant job cuts in November 20254 to flat job creation in January 20265 and modest growth in February 20266. This volatility reinforces a climate of caution rather than confidence.
In this environment, many employees are staying put not because they feel engaged, but because leaving feels too risky—a dynamic known as "job hugging." Nearly two in three SMB employees who intend to stay say necessity is a factor. Among those staying out of necessity, 81% are not holistically healthy and 44% are not engaged, underscoring the hidden risks of need‑based retention.
"When retention looks strong on paper, but employees are staying out of fear, the underlying health of the workforce is at risk," Chignoli said. "For small and mid-sized businesses, reduced wellbeing and engagement can quickly show up in productivity, service quality, and growth potential."
A strategic opportunity to compete through holistic health and the employee experience
MetLife's findings point to a practical path forward: cost discipline does not have to come at the expense of employee outcomes. SMB employers estimate a $2.20 return for every $1 invested in employee health, driven by gains in productivity, retention, and reduced absenteeism and costs.
Yet many SMBs face difficult trade-offs. The SBI found that 40% cite limited budgets and 37% cite rising benefit costs7 as the biggest barriers to offering benefits. Even so, many SMB employers continue to invest in benefits, particularly voluntary benefits, as a way to support employees' financial, physical, and emotional wellbeing without significantly increasing employer spend. In fact, over half, 56% of SMB employers have offered new voluntary benefits in the past year. As rising healthcare and operating costs constrain budgets, voluntary benefits offer a flexible way to expand support without adding significant budget pressure, allowing employers to provide opt‑in coverage that enhances the employee experience while maintaining cost control.
Rather than relying on any single lever, MetLife's research shows stronger outcomes come from a holistic approach to benefits and the employee experience—one that reduces friction, improves access to care, supports prevention, and reinforces connection at work through focused, high-impact actions.
"SMBs don't need to outspend large employers to compete," said Chignoli. "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."
About MetLife's Employee Benefit Trends Study & Methodology
MetLife's U.S. Employee Benefit Trends Study (EBTS) is a leading source of insights into workplace trends, employee expectations, and employer strategies. MetLife's 2026 EBTS is based on two quantitative studies, conducted October 2025, including surveys of 2,480 HR decision-makers and leaders, and 2,541 full-time employees from organizations of various industries and sizes, with an additional survey of 2,550 employees in January 2026. Respondents are aged 21+ and nationally representative of the full-time U.S. workforce in terms of demographics, job roles and firmographics. New to the 24th EBTS, MetLife used cultural insights and semiotics to explore shifting habits, motivations, and feelings among workers. The research is collected in partnership with STRAT7, a global strategy, insight, and planning consultancy.
About MetLife
MetLife, Inc. (NYSE:MET), through its subsidiaries and affiliates ("MetLife"), is one of the world's leading financial services companies, providing insurance, annuities, employee benefits and asset management to help individual and institutional customers build a more confident future. Founded in 1868, MetLife has operations in more than 40 markets globally and holds leading positions in the United States, Asia, Latin America, Europe and the Middle East. For more information, visit https://www.metlife.com.
1 Unless otherwise stated, all data is from MetLife's 24th Annual U.S. Employee Benefit Trends Study. This release contains data collected for but not reported in the primary report.
2 June 2025, The MetLife & U.S. Chamber of Commerce Q2 2025 Small Business Index
3 September 2025, The MetLife & U.S. Chamber of Commerce Q3 2025 Small Business Index
4 November 2025, ADP National Employment Report
5 January 2026, ADP National Employment Report
6 February 2026, ADP National Employment Report
7 June 2025, The MetLife & U.S. Chamber of Commerce Q2 2025 Small Business Index
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