For many companies, high employee turnover comes at a substantial cost.
When you replace entry-level employees, it can cost anywhere from 30 percent to 50 percent of their annual salary. It can cost 150 percent of a mid-level employee’s annual salary to replace them. And, for high-level or specialized employees, replacement can cost up to 400 percent of their annual salary. So, how can you combat the high cost of turnover and keep your valued employees?
If you have a retirement benefits plan in place, you already have a powerful tool at your disposal. According to a Towers Watson report, “60 percent of employees who plan to work for their company until they retire also identify their retirement program as a very important reason for staying.”
Explore these three tactics for boosting your retention rates with strong retirement benefits.
1) Automatically Enroll Your Employees
Make it easy for employees to enroll in your retirement plan. When employees must opt-in to a 401(k) plan, they’re more likely to put enrollment off, as they may decide filling out the paperwork and learning about the plan is too time-consuming.
Taking a proactive approach to enrollment also sends a message that you value your employees and want to support their financial future by making saving for retirement as easy as possible.
Help your employees by offering to automatically raise their contribution by 1 percent each year. You’ll help your employees reach the maximum contribution, without the hassle of additional steps or paperwork. Also, communicate this increase to keep your employees up to speed on the state of their plan and to inform them that they will be contributing more from their paychecks. When you communicate the benefit of contributing more from their pre-tax income and saving more for their retirement, your employees will understand the value of higher contributions.
2) Invest In Benefits Education
You may offer a comprehensive employee benefits plan, but if your employees don’t understand it, they aren’t likely to value it. Education is key to getting the full benefit from offering a retirement plan.
First, provide education on the general benefits of retirement planning. Most people need about 75 percent of their current salary to live comfortably in retirement. So, someone that makes $200,000 would need $150,000 to live on for each year of their retirement.
Next, you to need to take inflation into account. Estimate a 3 percent inflation rate. If you want to retire in 10 years, your base income of $150,000 (in today’s dollars) would be $201,587 per year when you retire in 2025. To get the total amount that you’d need to have when you retire in 2025, take $201,587 and multiply it by 25 years (the average length of retirement) for a total of $5,039,675. So, someone that makes $200,000 now would need about $5 million to fully fund their retirement. These calculations are simple to make, but it’s likely that your employees are unsure of the amount they should have in retirement savings.
Provide opportunities for your employees to learn about your retirement benefits and ask questions. Use meetings, webinars and online portals to explain the specifics of your plan. When your employees are informed about and involved in their 401(k) plans, they’ll better understand the investment you’re making in their financial futures.
3) Provide Custom Financial Advice
Many companies provide a 401(k) plan and stop there. But going one step further by offering financial advice can have a significant impact on employee participation and retention. Bring in a financial advisor to talk with your employees about retirement benefits and how to reach their financial goals.
A financial advisor can help your employees develop a robust plan for their retirement savings. A financial advisor provides your employees with the education they need to better understand their 401(k) plan and the benefits of participation. From understanding tax-deferred savings to planning future financial stability, your employees will have a resource to turn to in their financial advisor.
Employee retention is a pressing issue for many companies. Bolster your retirement benefits to demonstrate the value you place in your employees and you’ll likely see an improvement in your retention rates.
Would you like to learn more about the impact your employee benefits have on retention? Read our free e-book, Make Retirement Benefits Your Secret Weapon For Employee Retention.
