Securing Employee Retention Through Mandated State Retirement Programs
As business environments change, a solid long-term strategy is essential to keep your company competitive and profitable. But what does that mean? New research shows that state and local employees view their jobs as a public service and value retirement and healthcare benefits more than salary.
With older workers working longer and Millennials making up a significant portion of the workforce, retirement savings plans are more critical than ever. Thankfully, there are options for small business owners to consider.
State-mandated retirement programs allow businesses to comply with these laws without administering their plan. Typically, these plans allow employees to enroll automatically and choose how much to contribute. Employees can also opt-out if they prefer not to participate. To retain their talent, many countries are taking action.
After the Great Recession took a toll on public pensions, state lawmakers considered and adopted reforms to put their systems on a more stable footing. These changes have impacted associated costs and levels of risk to state pension funds. Still, more research needs to be conducted on how they have impacted employee retention discussions and decisions or the ability of states to recruit and retain talented employees.
A recent study found that when companies offer benefits of a state retirement plan, workers are 40% less likely to leave their jobs in the first year of employment — and this holds across all industries, even those in more traditional sectors like Retail and Food and beverage, which are typically less likely than other employers to offer retirement plans.
These findings support the long-held belief that retirement benefits are a critical factor in retaining top talent in the workplace and should be part of any company’s strategy for attracting and retaining its best workforce.
While retirement plans are essential to employee retention, only some are ready to retire simultaneously. Many workers return to the workforce in retirement because they find it a rewarding experience and a way to achieve their personal and financial goals. Studies have shown that when a worker defers their retirement, it reduces the offer rate for new hires and increases layoff rates.
The effect is more pronounced for lower-level jobs and firms where seniority is critical to promotion decisions. For employees who return to work in retirement, options include returning to their previous careers or taking on new ones.
In addition, workers can explore consulting or part-time opportunities in retirement to achieve the desired work/life balance. Lastly, some retirees choose to return to the workforce on a phased basis, decreasing their working hours over several years before retiring completely.
It’s essential to keep in mind that some team members will inevitably leave your business. While you can’t stop them from pursuing opportunities with other organizations, you can make it harder for them to leave your firm by offering retirement benefits.
According to a recent study, retirement benefits are among the highest-valued workplace benefits. It also states that 62% of employees consider retirement benefits when deciding whether to stay with their current employer. With this in mind, business owners must ensure their organization is providing retirement solutions that are both affordable and educational.
State-mandated savings programs are a newer, more straightforward option that can reduce the costs and complexity of retirement plans. They allow business owners to choose the right plan for their company and employees while meeting state-mandated compliance requirements.
In addition to attracting new talent, retirement benefits help you retain current employees. According to research, employees with access to a company-sponsored retirement plan are 40% less likely to leave their jobs. Employee turnover can be expensive, especially for small businesses. Recruiting, training, and onboarding a new employee costs money and time that could be better spent on retaining your existing workforce.
The average cost of finding a replacement for a top employee can be more than $100,000, which is a high price for losing valuable experience and expertise. Retirement benefits are a great way to keep your employees happy and loyal, which can help you increase productivity, boost your business’s bottom line, and maintain profitability.
Moreover, 62% of workers consider the availability of a retirement savings program when considering whether to stay at a company. Many states have passed laws that require private-sector businesses of a specific size to offer employees a retirement savings program or face penalties. These state-mandated plans vary from one jurisdiction to another, but many have similar features.
Generally, these programs are administered through payroll deductions, and employees can choose how much to contribute. Businesses may also sponsor a plan through a private provider to meet these requirements, which can offer additional employee benefits and reduce administrative costs and reporting obligations for the business.