With the costs of hiring rising, along with the rate at which employees switch jobs, business owners need every tool in their toolboxes to help find and retain the best talent.
With all the options available to improve employee retention, one benefit stands out for owners of small businesses—a 401(k).
How Much Does Employee Turnover Cost?
Finding the right employees is harder than ever. A study done by the Society of Human Resource Management (SHRM) found that it typically costs 50%-75% of an employee’s annual salary to replace them.
Recruiting: Besides the hard costs of posting job ads, hiring recruiters or running background checks, soft costs may be even more expensive. Managers must spend time vetting and interviewing candidates, which can take weeks or even months.
- Onboarding — Typical onboarding costs include training, equipment purchases, uniforms or other needed supplies. Small companies often spend more than 30 hours training a new hire, which costs them on average $1888 per employee.
- Lost Productivity — The most valuable employees are almost always those that have been around the longest. Not only do they have plenty of industry experience, they also have company-specific knowledge. It takes time for new employees to get up-to-speed and, in the meantime, errors made by well-meaning but under informed new workers may cost you.
- Emotional Engagement — When one employee leaves, it creates an emotional response in those remaining. They may question their own job security. Those who fill in for the missing employee may feel unfairly treated, or they may be spread thin or less engaged than usual.
The Factors that Affect Employee Satisfaction
SHRM’s job satisfaction report tells us that the biggest contributors to job satisfaction are:
- Respectful treatment of all employees
- Compensation
- Trust between employees and senior management
- Job security
Opportunities to Use Skills
These factors are emotional, and affect not just individual employees, but an entire organization, a company culture that can either attract or repel potential talent in the future.
If your business has higher than average turnover rates, it might be time to look at the benefits of a 401(k) plan.
How a 401(k) Plan Helps with Employee Retention
Millions of workers do not have access to an employer-based retirement plan. Paired with the tax benefits for employers, the financial and emotional impact a 401(k) plan could have on employees is a win-win for many small companies.
Consider these factors:
Appreciation — A 401(k) plan grows in value over time, just like an employee does. When employment ends, no matter who does the leaving, the retirement account means the employee will leave with something of value.
Compensation — Although overall job satisfaction in the US is high, compensation is the area that has perhaps the biggest gap between what workers value most and how satisfied they are currently. It also is the factor that is most heavily affected by the addition of a company retirement plan. In decades past, good employees could expect promotions, larger offices or expensive meals to show appreciation. But for many of today’s employers, the salary is the only way to communicate value. A 401(k) gives them not only more compensation in the form of employer matching, but also an account that appreciates, even if the employee is not actively involved. Additionally, since benefits are not consumed with an increased standard of living the way a pay raise is, the emotional effect on the employee lasts longer.
Competition — Even happy and loyal employees will leave if they get a better offer. A 401(k) that comes with matching and immediate vesting is very attractive to both existing and potential workers.
Engagement & Morale — Remote workers are at increased risk of feeling disengaged from the company, and many of them would actually prefer additional benefits over a pay raise. Investing in employees this way can help them to engage fully with their jobs. Employers who invest in the general well-being of their employees get happier, more productive workers and an enjoyable work environment.
Retirement Plans Also are Good for Employers
In addition to giving employees a good reason to stay, retirement benefits provide substantial tax benefits to employers. The ability to mitigate tax burdens is often the number one reason business owners start a retirement plan.
The Secure Act gives tax credits for employers who implement a 401(k) program up to $16,500 over 3 years. Additionally, 401(k) contributions are often exempt from state and payroll taxes, meaning both employers and employees can reduce taxable income with contributions.
Reducing turnover and tax liability are great reasons to start a 401(k) plan, and these benefits can be enjoyed almost immediately with the automated technology available through the innovative *401GO platform. With 401GO, a new 401(k) can be set up in minutes, it can integrate with most payroll providers, and they provide live customer support to ensure any questions or problems are resolved quickly. Affordable plans are available to even the smallest of companies.
Having built several successful businesses, Dan Beck, co-founder of 401GO, understands the plight of small business owners and entrepreneurs. Out of frustration, when he couldn't find the benefit he wanted at a price he could afford, he put his entrepreneurial expertise to work and built it. Through his obsession to details, his ability to boot-strap and relentless drive, he ensures today's small businesses can offer world-class benefits to employees.
Like what you're reading?
Subscribe to our FREE newsletter and we'll deliver content like this directly to your inbox.