Business owners know how challenging it is to attract and retain qualified applicants, and keep them happy and productive. As businesses highly depend on their employees for success, providing competitive employee benefits is now a must if you want to have talented individuals running your business. One of the benefits potential employees are looking for when considering offers from companies is the 401(k) matching plan.
Since a 401(k) matching plan requires that employers match a certain percentage of their employees’ contributions on their retirement fund, some business owners are hesitant to do this as they feel intimidated with the possible costs. However, the truth is that offering this can be very cost effective in growing a business. Aside from the fact that employer contributions are tax deductible, it also helps empower a company’s workforce. How? Read on to find out.
4 Reasons Why Offering A 401(k) Matching Can Help Empower Your Workforce
1. It is a recruitment magnet and can attract talented workers.
Finding talented individuals is not easy -- anyone who’s handling recruitment knows that. Certain positions in a business are crucial, and average or mediocre skills just won’t make the cut. Workers with in-depth skills know their worth and won’t settle for just any company that offers them a position. So if you want to attract really qualified and skilled talent, you have to give them a good deal.
If a candidate is choosing between appealing job offers with several companies and your company offers a 401(k) matching plan, you will have a stronger chance of getting chosen over the others. Looking at the bigger picture, having top talent working for your business will probably mean more success.
2. It helps reduce employee turnover and increase retention.
According to one report around 40% of employees working for small businesses say that they would leave their current company for one that offers a 401K plan (Source: Quickbooks, 6 Reasons Your Small Business Should Offer a 401(k) Plan, 2011).
Also, having a 401(k) plan is included in the top 5 benefits employees value more than pay raises (Source: Glassdoor Employment Confidence Survey, 2015).
This data demonstrates that employees give a lot of importance to their retirement fund, and they will appreciate if you offer them a certain percentage of matching for their 401(k) plan. This will hopefully make your employees stay at your company longer -- which will reduce turnover and increase retention.
This can be more effective if you have a vesting schedule in place, where employees are required to stay at your company for a certain period of time before the matching contributions are vested. Vesting schedules can make employees who are thinking of leaving reconsider their decision or delay it for a later time, given the 401(k) matching benefit that they will lose.
3. It boosts employee morale, which helps with their productivity.
Most employees feel anxious about their future. According to the Employee Benefit Research Institute, 74% of retirees still plan to work even after retirement (Source: NJ.com, 5 Shocking Retirement Statistics, 2015). This is because most Americans have not saved enough for retirement. Even despite their willingness to still work even well into their 60s, they know that opportunities for employment might be very limited and scarce.
With the anxiety and stress of what the future holds looming over employees’ minds, productivity at work is affected. Employers who make an effort to care about the general well being of their employees -- including helping them feel more secure with their retirement -- are more likely to foster a higher productivity level with their workforce. Employees who feel more confident about their future and who feel appreciated by their company will be able to focus more on delivering great performance at work.
4. ROBS from 401K encourages and inspires employees to open their own business someday.
Rollover for Business Startups (ROBS) allows employees to take out money from their 401(k) even if they haven’t reached the retirement age yet -- without the 10% early withdrawal penalty or being charged income taxes. This can embolden employees to start their own business someday and make more out of their retirement money. It promotes goodwill toward the employees and will encourage them to stay and perform well until they fulfill the vesting schedule.
It also fosters an entrepreneurial mindset, which can positively impact your business -- as they will rise above having just an employee mindset and step up to learn more and offer more to your company’s advancement. You can even be proactive in prodding them to take advantage of learning the ins and outs of how certain processes or operations work for your business, which can benefit your company and can help them gain knowledge for their own business endeavors someday.
Offering a 401(k) matching plan to your employees is a good way to empower your workforce. It solves the challenges of recruiting talented new hires, decreases turnover, increases retention, boosts employee morale, and improves overall work productivity. All of this translates to a stronger workforce and a thriving business. At the end of the day, you have helped secure not only the future of your employees, but that of your company as well.