- Cost control and stability
- Workforce transition
Of course there are many more, but I have some thoughts that link all four of these together. In 2019, that's not always easy as there are constant pushes in Congress to tell employers how much they must pay, which benefits they must provide, and at what costs. How then does one company differentiate itself from another?
To the extent possible, every employer today seems to offer teleworking, flexible work hours, and paid time off banks. While they once were, those are no longer differentiators. After the Affordable Care Act took effect, the health plans at Company X started to look a lot like the health plans at Company Y.
I have a different idea and while I am probably biased by my consulting focus, I am also biased by research that I read. Employees are worried about retiring someday. They are worried about whether they will have enough money or even if they have any way of knowing if they will have enough money. They are worried about outliving their wealth (or lack thereof). They are worried about having the means to support their health in retirement.
I know -- you think I have veered horribly from my original thesis. We're coming back.
Today, most good-sized companies have 401(k) plans and in an awful lot of those cases, they are safe harbor plans. They are an expectation, so having one does not help you the employer in recruiting. While once they had pizzazz, today they are routine.
Cost stability seems a given, but it's not. Common benchmarks for the success of a 401(k) plan including the percentage of employees that participate at various levels. You score better if your employees do participate and at higher levels. But, that costs more money.
If there's nothing about that program that sets you apart, it doesn't help you to retain your employees. And, as we all have learned, the cost of unwanted turnover is massive often exceeding a year's salary. In other words, if you lose a desirable employee earning $100,000 per year, it is estimated that the total true cost of replacing her is about $100,000. That would have paid for a lot of years of retirement plan costs for her.
There will come a time, however, that our desirable employee thinks it's time to retire. But, she's not certain if she is able. And, even if she works out that she is able, retirement is so sudden. One day, she's getting up and working all nine to five and the next, she has to fill that void. Wouldn't it be great to be able to transition her into retirement gradually while she transitions her skills and knowledge to her replacement?
You need a differentiator. You need something different, exciting, and better. You need to be the kid on the block that everyone else envies.
You would be the envy of all the others if you won at recruiting, kept your costs level (as a percentage of payroll) and on budget, retained key employees, and had a vehicle that allows for that smooth transition.
I had a conversation with a key hiring executive earlier this month. He said he cannot get mid-career people to come to his organization from [and he mentioned another peer organization]. He was exasperated. He said, "We're better and everyone knows it, but their best people won't come over." I asked him why. He said, "It's that pension and I can't get one put in here." I asked him to tell me more and he explained it as one of those new-fangled cash balance plans with guaranteed return of principal -- i.e., no investment risk for participants, professionally managed assets, the ability to receive 401(k) rollovers, and the option to take a lump sum or various annuity options at retirement. He said that it's the "talk of the town over there" and that even though it seems mundane when you first hear about it, it's their differentiator and it wins for them.
We talked for a while. He wants one. He wants one for himself and he wants one to be as special as his competitor. He wants to be envied too. We talked more.
Stay tuned for their new market-based cash balance plan ... maybe. He and I hope that maybe becomes reality.