Retirement plan sponsors are the first, and most important, line of defense in providing employees with well-managed retirement savings plans.
As a business, you have numerous responsibilities when it comes to your employees. You hire them, train them, compensate them, and each of those tasks comes with several other associated tasks. Often times, those tasks also come with a lot of paperwork.
Today, I'd like to bypass the majority of responsibilities you have as an employer and focus on three key areas that are critical to your bottom line.
Recruiting
Hiring the right people is the first step, and perhaps most critical responsibility, as an employer. Your business and your customers have specific needs, and it's important to ensure whoever you decide to hire understands those needs and has the skillset and desire to help meet them. This process begins by painstakingly understanding the position you are hiring for. What will be his/her primary roles and responsibilities? Who will he/she have to work with in other areas of the organization? What soft skills is it absolutely necessary that he/she possesses? What level of education is needed to appropriately perform the roles and responsibilities of this position or are the skills ones that he/she can acquire with on-the-job-training?
Remember—and this is a big thing to remember—not only does recruiting and hiring the right candidate affect your business from an operational standpoint, but it also affects your employee retention, which often has a big impact on cost. According to the Society for Human Resources Management (SHRM), the cost associated with hiring the wrong person can equal up to five times their annual salary.
Click here to learn Four Essential Tips to Follow When Recruiting for a Job You Don't Know
Retaining
Employee retention is critical for two primary reasons: business continuity and the cost of turnover.
Once you've hired the right employee, retaining them is your next (and ongoing) step as an employer. As mentioned above, employee turnover can come with a hefty price tag, but aside from the obvious costs that hit your budget, such as hiring a recruiter to replace the lost employee or specialized training courses, there are also not-so-obvious costs that can impact your business continuity:
Lost productivity
Anytime you have an open position, productivity suffers. Further, if you divvy up the tasks and responsibilities to other employees, not only can they become overwhelmed, affecting their morale, but they become less productive at their jobs since they are not dedicating their complete focus and energy to their original responsibilities. And, unfortunately, the demand on their primary role doesn't stop, leaving an overflowing amount of work to maintain.
Time
The time it takes to interview a new employee and the time it takes for you or another member of your staff to train them is, essentially, money spent. Time spent away from managing your business can be disruptive to your operations and business continuity.
Retiring
I know; this seems like a strange task to be concerned with when you've just gone through the arduous task of of hiring the right candidate for a job, but bear with me. Whether your new hire is 25 or 45, they are in a phase in their career where what and how they save is crucial to ensuring they are in a position to have enough money for retirement. For example, according to a recent study prepared by Fidelity Investments, retirement plan participants should have accumulated the following savings based on their age group:
Twenties: Savings equal to 20% of their annual income by age 25
Thirties: Savings equal to their annual income by age 35
Forties: Savings equal to three times their annual income by age 45
Fifties: Savings equal to five times their annual income by age 55
Sixties: Savings equal to eight times their annual income by age 67
It is important to ensure that your employees are in a position to retire—by educating them on the importance of planning for retirement, and conducting the necessary due diligence on your company's investment advisor with your internal investment committee—because believe it or not, you absolutely want your employees to retire once they reach retirement age.
Beware of the message you're sending to existing and potential employees if your workforce is forced work well into retirement age because they can't afford to retire. When Millennials and mid-career professionals feel that there is no room for promotion opportunities, they will often look elsewhere for employment.
HR departments and businesses across the country are already making adjustments to their culture to attract and retain this generation of working professionals that, according to Forbes, is not enchanted by the traditional, "slow and steady" career path. If they don't see an opportunity to advance in their careers because senior-level employees are holding upper management positions hostage, so to speak, they may decline your job offer altogether.
Recruiting and retaining the right employees is the first step in building a productive workforce for your business, but giving them the tools, knowledge, and resources to prepare for retirement is equally important. Simply having a 401(k) or retirement plan is not enough—providing an effective retirement solution is invaluable. You probably didn't go into business to manage retirement plans. Unfortunately, as a business owner and plan sponsor, you have a duty—a fiduciary responsibility—to your employees to ensure that whatever plan you have in place provides your employees with the best possible benefit.
While you may not know exactly how to conduct all of the necessary due diligence and ensure all laws are being properly followed, you can "phone a friend" and hire the appropriate advisors to assist you in your endeavors.
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