Unemployment has been at record lows, with employers facing more job openings than applicants. Against that backdrop, companies of all sizes must consider what it takes to attract good employees – and retain them. With employers competing for the best talent, they must offer more than a half-hour lunch break and two coffee breaks each day. To build a competent, stable workforce, good benefits, such as a solid retirement plan, are critical.
Retirement plans, 401(k)s in particular, may be a benefit to the employee, but can also offer many benefits to the employer as well. Offering a retirement plan may lead to employees feeling more satisfied with their employers, which may then reduce employee turnover. And, employees who feel they are investing in their own futures through the company plan may be less likely to transfer to another company.
This is especially the case when employers make matching contributions to a retirement fund that increases an employee’s overall compensation. Individual companies can customize the matching contributions they offer, such as determining the match percentage, when to offer the match to employees, and whether to have a vesting schedule for the matching contributions.
Retirement plans can also be used to incentivize performance, furthering the company’s success. One example is to structure retirement benefits to require employees to meet certain benchmarks, and when they do, reward them with increased contributions to their 401(k).
In addition, for some business owners, contributions to their employees’ retirement funds and administrative work for the plan may be tax deductible.
Employees contributing to the plans will have different financial priorities that must be taken into consideration when determining investment strategies for the plan. As such, employers should offer 401(k) plans that give employees a variety of options for their funds. Some options may provide longer term capital gains, others, for example, may look for dividend growth.
Since not all retirement plans are the same, and they require considerable time and attention on the part of employers, a good investment on the part of the company may be the assignment of a plan administrator. At least, a consultant should be hired if the firm isn’t large enough to take on a fulltime employee for that purpose. Many smaller businesses outsource 401(k) plans to financial services companies, eliminating the complexities of managing the plans.
Employees who are offered plans that appeal to their personal life stages and benefit their futures may very well “feel the love” from their employers. And content employees may feel more loyal to their company, and more determined to help it succeed.
About the Author
Lori R. Sackler, CFP, CIMA, is a senior vice president, senior investment management consultant, financial advisor with Morgan Stanley Wealth Management in Paramus.
To access more business news, visit NJB News Now.Related Articles: