Workforce Realities
Hiring may be cooling, but the challenges haven’t gone away. From rising benefits costs to shifting employee expectations, small businesses are still working hard to attract—and keep—the right talent.
For years, offering employee benefits was something many small businesses approached cautiously—doing what they could within tight budgets and limited resources. But that dynamic is shifting, and the role of small business owners is shifting with it. They’re no longer just employers—they’re becoming advisors, helping employees navigate increasingly complex decisions about healthcare, finances, and long-term security.
Today, benefits are no longer just a line item—they’re a competitive differentiator. And increasingly, small business owners are expected to do more than offer options—they’re expected to help employees understand and navigate them.
Employees are navigating one of the most complex benefits environments in years. Healthcare costs are rising, out-of-pocket expenses are climbing, and the gap between what workers have saved and what they feel prepared to cover is widening. In fact, employees have an average of just $2,304 set aside for unexpected healthcare costs, and more than a quarter say they feel less prepared than they did a year ago. At the same time, their expectations are rising.
New research from ADP illuminates just how quickly that shift is happening—and why it matters. Now in its 8th year, the ADP TotalSource Benefits Survey offers a revealing look at how workers are thinking about their benefits—and what they expect from employers. The survey identified five major trends shaping the current moment:
- Employers have become the anchor of trust in a changing benefits environment.
- Cost pressure is driving employees to make healthcare tradeoffs.
- Employees have more money set aside yet feel less secure.
- Employees are spending more time evaluating and choosing benefits.
- Retirement anxiety is rising faster than healthcare anxiety.
Other key findings from the report:
- 78% of people feel valued at work because of their medical benefits; 83% because of non-medical benefits.
- 74% remain confident they will have employer-sponsored medical benefits that fit their needs, despite regulatory uncertainty.
- 68% use the internet for medical advice; 27% have turned to generative AI.
- On average, employees spend nearly 2 hours (119 minutes) reviewing options before changing their medical plan during open enrollment.
All of this is reshaping the role of the small business owner.
They’re not just offering benefits—they’re becoming a source of guidance and trust. Employees are spending more time evaluating their options, often relying on online research and even AI tools to help make decisions. But that doesn’t mean they feel more confident. In many cases, the opposite is true.
For small employers, this creates both a challenge and an opportunity. Those who can help employees navigate increasingly complex choices—explaining options, offering clarity, and providing ongoing support—may gain a meaningful edge in recruiting and retention. That’s especially important in a labor market where hiring remains competitive, even as conditions at larger companies soften.
Small Businesses Are Leading Job Creation
Small businesses also continue to punch above their weight in the labor market. ADP data shows that businesses with fewer than 20 employees were responsible for more than 525,000 jobs created in 2025—more than any other group of private-sector employers. That momentum has carried into 2026: from January through March, the smallest businesses added 169,000 workers, outpacing all larger employer categories, including mid-sized and enterprise companies that have shed jobs or posted weak hiring numbers.
ADP Chief Economist Nela Richardson, writing in her latest Main Street Macro, highlights three standout data points behind this trend:
- Turnover is at its lowest ever. In March, the turnover rate at establishments with fewer than 50 employees hit a record low of 3.9%.
- The pay gap is shrinking. The difference in annual pay growth between the largest and smallest employers peaked at 3.8 percentage points in May 2022. By March 2026, that gap had narrowed to just 2.3 points.
- Job creation is accelerating. Small businesses averaged roughly 43,800 new jobs per month in 2025—and that pace has already jumped to approximately 66,700 per month in Q1 2026.
What’s changing isn’t just hiring—it’s how small businesses are thinking about their role as employers. The record-low turnover signals genuine workforce stability. But stability comes with its own pressures: when employees stay longer, expectations around compensation, benefits, and overall experience tend to rise.
In this environment, benefits are no longer optional—they’re strategic.
For small business owners, the takeaway is clear: Offering benefits is only part of the equation. Helping employees understand and use them effectively may be just as important. In a competitive labor market, that guidance isn’t just helpful—it’s a differentiator.
Rieva Lesonsky is the founder of Small Business Currents, a content company focusing on small businesses and entrepreneurship. You can find her on Twitter @Rieva, Bluesky @Rieva.bsky.social, and LinkedIn. Or email her at Rieva@SmallBusinessCurrents.com.
Photo courtesy Getty Images for Unsplash+
