By Rieva Lesonsky
Attracting and retaining employees is a tough job for small businesses—and it’s about to get harder. According to the Transamerica Center for Retirement Studies’ 15th annual Transamerica Retirement Survey,72 percent of companies polled have hired new employees in the past 12 months. Not only are more businesses hiring, but salary competition is also heating up: A whopping 74 percent of companies have increased salaries in the past 12 months.
Another way companies are retaining qualified workers—and attracting new ones—is by offering retirement plans. Some 79 percent of companies overall now offer 401(k)s or similar plans, up from 72 percent in 2007. But if you think retirement plans are only for big companies, think again: Among companies with 10 to 99 employees, 73 percent offer a retirement plan. Nearly eight in 10 companies that have plans offer matching contributions, up from 70 percent in 2012.
Even if you can’t afford to give your team raises, implementing a retirement plan is a smart way to reward them (and to attract new job candidates). The economic recession brought savings to the forefront of many workers’ minds. The study found more employees are participating in retirement plans than in years past, and they’re saving a higher percentage of their salaries, too.
Today, you can find 401(k) plans even for one-person businesses. Instituting a retirement plan benefits you, too, since a raft of studies have shown that small business owners often fail to plan for their own retirements, assuming they’ll sell their businesses and live off that income. Check out the IRS and SBA websites for guidance on choosing the right type of plan for yourself, your business and your employees.
You say you already offer a retirement plan to your staff? Here are some ways the study suggests you can make it even better:
- Make it more convenient for employees to save. Consider automatically enrolling employees into the plan or automatically increasing their savings annually (with opt-out options, of course).
- Make it easier for employees to invest wisely by offering professionally managed accounts or asset allocation suites. About two-thirds of companies with retirement plans offer the services of a professional investment advisor, while slightly more than half offer target date funds that change allocation percentages as participants get closer to retirement age, and 56 percent offer target risk funds or strategic allocation funds that match investments to participants’ tolerance for financial risk.
- Make 401(k) plans open to part-time employees. Currently, just 49 percent of companies do this.
- Educate employees about the value of their retirement benefits. Bring in experts from your retirement plan to periodically talk to employees about the plan options and encourage employees to contact the plan administrators for more information and advice.
Don’t put your small business out of the running when it comes to attracting and keeping employees by failing to implement something as simple as a retirement plan.