Are you getting the most out of your team? Did you know that you can use your company’s 401(k) retirement plan to help motivate your employees? While 401(k) plans are tightly regulated, employers still have significant amounts of flexibility in several critical areas, including plan eligibility and profit-sharing. With some strategic planning, your 401(k) plan can be a powerful motivational tool.
401(k) Is a Standard Part of Benefits
New employees expect employers to have a 401(k) plan. While thirty years ago, the plans were considered a fringe benefit for a handful of upper-level executives, every job candidate now expects employers to offer a 401(k). Not providing this basic retirement plan is now a competitive disadvantage. For most employees, their 401(k) is a standard part of their job. When people enter the workforce, they expect a salary, a lunch break, and a 401(k). You can use this attitude to your advantage by offering employees more than just a basic 401(k). You can provide employees with the chance to do more with their retirement plan.
The law places several restrictions on employee retirement plans. You need to have your plan professionally managed and undergo annual compliance testing. But you also have the flexibility to set a vesting schedule and to reward your employees with a profit-sharing plan.
When establishing your plan, you can create different eligibility requirements and a vesting schedule. This allows you to incentivize employees to remain with your company for longer. You can set your vesting schedule so that employees need to work for the company for several years before the employer contributions are fully vested. You can also gradually raise the amount of the employer contribution as your business grows. This helps motivate employees to stay and help the company grow instead of chasing after other opportunities.
Employee retention and employee engagement are two of the most important metrics for employers. The higher your turnover rate is, the more resources you have to spend on recruitment and training. Employees who are not engaged operate as a drag on productivity and stifle innovation. You can create a 401(k) profit-sharing plan to help improve both retention and engagement. Employees will be more motivated when they see that the success of the company is shared directly with them in the form of greater contributions to their 401(k) plans. Profit-sharing creates the right alignment between employee behavior and your corporate vision. When you combine a profit-sharing plan with a strategic vesting schedule, you motivate employees to see themselves as part of something bigger. This increased loyalty will pay off for the company with higher rates of productivity, innovation, and engagement.
Employee turnover will plummet.
As employees work for the company longer with higher rates of engagement, your company benefits from an exponential rate of growth in productivity. We all respond to incentives. The key to motivating your employees with your company’s 401(k) plan is to make sure your employees are aware of the incentives and understand how the vesting and profit-sharing rules benefit them. Instead of viewing your 401(k) plan as an essential benefit you have to offer, look at it as an untapped motivational resource. Talk to an OmniStar Advisor today about creating the best 401(k) plan for your company today.