And almost 60% of firms believe their staff would rather be offered a company car over a cash alternative.
The research was completed by vehicle management group FleetLine, part of LeasePlan, which polled 255 small to medium enterprises (SMEs). FleetLine director David Harnett said: 'Our research shows a company car is considered a more effective benefit in retaining staff than flexible working hours, company pension and increased holiday allocation.
'This research provides great insight to employers. In an age of human capital, it is increasingly important to focus on productivity and employee retention. Employees are not just accepting the lower standards benefits.'
The research showed that almost two thirds of staff now expected more employee benefits than they did five years ago and more than a third believed a company car scheme was saving their business significant staff recruitment and retention costs.
Harnett said: 'It is quite telling that our research shows a company car is considered a more effective benefit in retaining staff than flexible working hours, company pension and increased holiday allocation.'
The research also showed that price, value for money and service are the most important factors for small businesses considering fleet suppliers and 46% of those polled rated the Government's current transport policy as 'poor'.
Fleet executives were also asked about their bugbears in the survey. The two most time-consuming tasks for fleet managers are 'hassle' from drivers and tax implications. Additional research completed last week by Employee Benefits magazine and The Work Foundation showed that almost half of employers believed benefits offered to staff were outdated.
Stephen Bevan, director of research at The Work Foundation, said: 'It is no longer the case that employee benefits have a long shelf life. 'They must be constantly refreshed to keep them relevant and motivational.'
The research which polled almost 500 companies found that 61% of employers offer company cars, but 98% only offer them to selected staff.