Retain Key Employees with 7 Easy Strategies
One of the most exciting things about running a company is being able to build your team by hiring new employees. Accomplishing effective growth is dependent on your ability to create the right culture and benefits portfolio that will allow you to attract and retain key employees. Building a high performing team depends on retaining key employees and motivating them to be long term elements of your company’s success. The following lists 7 ways to retain key employees and is an overview of seven easy strategies to accomplish this critical goal and stay within your budget.
Wellness programs can reduce healthcare expenses for you and make the work space a more inviting and relaxing environment for your employees. A recent Inc. Magazine article says, “Wellness programs are linked to greater productivity, less absenteeism, and a reduction of long-term health care costs.” Corporate Wellness is a modest investment, but it is one of the most vital that a company can make. Businesses that start Corporate Wellness programs aren’t only investing in the physical wellness, safety, and mental health of their employees, but are also taking preventive measures by creating a healthier environment that ultimately creates a more productive team. There are many levels of wellness programs from offering basic services and referrals online to discounted or subsidized gym memberships, nutrition programs and running clubs. All these programs add to the moral, health and productivity of your personnel and will aid your effort to retain key employees.
Quality Health and Ancillary Benefits
Health insurance is the foundation of a comprehensive employee benefits package. Health insurance is the preferred employee benefit of the majority of people who work and a solid health insurance package can significantly influence desirable candidates who are selecting from multiple job opportunities. There are many options you can offer your employees regarding employer contribution as well as an additional benefit packages that include (but not limited to) vision, dental, group life and disability. Working with a qualified partner can help you construct a package that minimizes the expense to you.
Deferred Compensation Arrangements
At a time when regulations limit the amount that your company can set aside for your key people, Deferred Compensation plans often hold the answer to key employee compensation. Deferred compensation arrangements allow an employer to compensate an employee at a date after which that income is actually earned. They can be set up to be non-ERISA controlled, allowing you to specifically target your key people with enhanced benefits. Deferred Compensation plans give businesses excellent opportunities to help their people. Most importantly, these programs are designed to retain key employees by leveraging future target dates to trigger the payout.
401(k) plans are part of a family of retirement plans known as defined contribution plans because the amount that is contributed is defined either by the employee or the employer. A well-designed 401(k) plan can help attract and retain key employees because they help to prepare for retirement by saving money, reducing taxes, and investing in their financial future. With a 401(k) plan, their elective contributions are made on a pre-tax basis. Funds invested grow on a tax deferred basis, and at retirement may be received in a lower tax bracket. Employers are entitled to a tax deduction for contributions to employees’ accounts and they allow you to offer a powerful benefit to a mix of rank-and-file employees and owners/managers. A 401(k) plan typically allows participants to take their benefits with them when they leave the company, easing administrative responsibilities.
An Employee Stock Ownership Plan is a defined contribution plan that provides a company’s workers with an ownership interest in the company. Companies can use ESOPs for a variety of purposes including motivating, rewarding and retaining key employees. In an ESOP, a company sets up a trust fund, into which it contributes new shares of its own stock or cash to buy existing shares. Alternatively, the ESOP can borrow money to buy new or existing shares, with the company making cash contributions to the plan to enable it to repay the loan. Regardless of how the plan acquires stock, company contributions to the trust are tax-deductible, within certain limits. In most cases, ESOPs are a contribution to the employee, not an employee purchase. Best of all there is an alignment between compensation value and company performance.
Split Dollar Arrangement
A split-dollar arrangement is a method of purchasing life insurance in which the premium payments and policy benefits are divided in some predetermined way between a business and a key employee. This is an executive benefit, with the employee being the insured. In a business setting, this allows the employer to provide a valuable fringe benefit to retain key employees, or to attract a new heavy hitter into the business. For the employee, the split-dollar arrangement provides life insurance protection for survivors at a much lower net cost than personally purchased policies.
One of the most power aspects of profit sharing plans is that they provide a powerful incentive for employees to work harder for the company and gain a sense of satisfaction from knowing they will directly participate in the profit created by their effort. What’s even more powerful is that the added productivity will often increase the overall financial performance of the company. An employer-sponsored profit-sharing plan could be structured to provide for the tax-deferred accumulation of funds in a retirement account of your employees. No taxes are levied on the gains in the account until employees begin taking distributions (withdrawals) at retirement. Profit-sharing is another defined contribution plan in which employers have discretion to determine when and how much the company pays into the plan. The amount allocated to each individual account is usually based on the salary and the contribution level of the employee. Profit sharing an excellent strategy to retain key employees because it aligns the benefit to the employee with the company performance and encourages productivity.
Programs to Retain Key Employees
These are only seven of the many creative strategies to retain key employees that Fifth Street Financial Group deploys for our clients on a daily basis. More importantly, retaining key employees is not about deploying point strategies, but it is about developing and executing a long-term plan that meets the goal now and adapts for the future. To discuss what will work for your business please contact us and we will work with you to a customized plan for your business.
Brian Dixon is Managing Partner of Fifth Street Financial Group as well as a Principal at Securieon Group. Brian brings a wide range of experience from several careers that have include currency trader, corporate currency hedger, financial advisor, insurance consultant, and now, business owner in two companies.Written by Brian Dixon