“The purpose of employee benefits is to recruit and retain valuable employees.” This lesson is taught the first day at any benefits school – and it was the only reason for an organization to spend money on benefits before the Affordable Care Act (ACA).
Viewpoints from Matt Sears
These words ring true as most industries are experiencing a frantic “post-pandemic” employment situation. Is the traditional approach to offering benefits enough to sway potential hires to join your workforce?
Taco Bell is now offering their managers $100,000 salaries, but is giving people taxable cash income the best approach? And can you get away with cookie-cutter medical, dental and vision plans or a basic life or disability insurance plan? When the company down the street is competing for the same employee, how do you set yourself apart and become the employer of choice?
Don’t ignore the importance of your work culture and reputation.
It’s worth the effort to continually monitor what your current employees are saying about your company. Keep an eye on social media commentary and career search sites like Glassdoor or Indeed. Survey your workforce, review your staff development and career path opportunities and take action on the feedback you receive.
Close the back door.
Perhaps key is making efforts to keep your valuable employees – and it’s becoming more difficult. News reports are full of articles about the aptly named “Great Resignation” of 2021. A survey by Microsoft found that over 40% of workers worldwide are considering quitting their job, or even their profession. The cost of finding, recruiting and training new staff is significant. It’s more costly to hire someone new than it is to keep your current employees, even if you must give pay raises to do so.
Flexibility is rising to the top of the list among candidates – geographic/work-from-home and work-life balance questions are now among the first candidates ask in interviews.
Flexibility extends to your employee benefits plans.
Which plans help accomplish your goals while being accessible to your entire population (think varying levels of deductibles, copays, networks, etc.)? Have you added medical plans with a consumer-driven approach such as health savings accounts (HSAs)? Do you offer a selection of dental and/or vision plans? Don’t overlook the value of life and disability insurance designed to meet the varying needs of employees at different levels of your organization. You can give key personnel extra benefits while complying with nondiscrimination rules and set multiple levels of executive Medical, Life & Disability plans to reflect the difference between “key people” and “really key people.”
You can structure these extra, rich benefit plans to be tax advantaged in ways that benefit both the employer and the employee. Giving a highly paid employee an additional $10,000 in cash can be less valuable than $10,000 in tax-free benefits, helping to tip the scales in your favor when recruiting and retaining employees.
Don’t neglect retirement.
When was the last outside review of your retirement program? 401(k) plans are not “set and forget” – they require careful monitoring for compliance and to have a positive impact on employees.
Consider using “golden handcuffs” – plans that reward employees while tying them to the company long-term can be very helpful with retention and aligning employees’ goals with yours.
Reward key employees for their efforts in building company profitability through deferred compensation arrangements that lower their taxable income. Consider arrangements that have a vesting schedule or are lost if your employee goes to a competitor. Deferred compensation plans can be designed to have no long-term cost to the organization.
Cash may be king, but tax-free (or tax-advantaged) usually wins the day.
Targeting benefits to meet the needs of every segment of your workforce is vital. The “care and feeding” of key employees can be the difference between the success or failure of your business. Throw out the cookie cutters and consider a strategic overhaul that helps you recruit and retain talent! Our consultants can show you how.
EPIC offers these opinions for general information only. EPIC does not intend this material to be, nor may any person receiving this information construe or rely on this material as, tax or legal advice. The matters addressed in this article and any related discussions or correspondence should be reviewed and discussed with legal counsel prior to acting or relying on these materials.
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EVP, Employee Benefits – Concord, CA