Cost Pressures Are Reshaping Today’s Small and Mid-Sized Business Workforce

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.

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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.”

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