Companies struggling with labor shortages resulting from the pandemic may be able to help resolve this struggle by offering benefits that consider the future, including pension plans.
“In this market, you’re really going to have to think directly about your benefits, beyond what’s traditionally served with healthcare,” says Jessica Baehr, group retirement manager at Equitable. “It’s a way for [plan sponsors] stand out in the market, beyond salaries alone.
With unemployment falling and job growth increasing, 67% of small business owners are currently experiencing a staff shortage, according to a March 2022 survey of the National Federation of Independent Businesses. Additionally, Lincoln Financial Group Survey of small business owners shows that 80% of small business owners see benefits as a top priority due to the effects of the pandemic, 93% have reassessed their strategy and action plan due to COVID-19, and 28% of owners have strengthened benefits to attract and retain Talent. According to the survey, 30% of small businesses add life insurance and 27% add a retirement matching contribution, financial wellness program and/or retirement account. Other additions being considered include accident, critical illness, vision, dental and other insurance.
As labor markets have undergone heartbreaking changes resulting from the pandemic, some employers have raised wages, but businesses are also facing the challenges of rising inflation and supply chain disruptions.
This comes as workers focus more on securing retirement benefits and financial wellness resources.
“People struggle with the worry that they won’t have the resources they need to live the life they envision for themselves. [in retirement]says Baehr. “This is where we can not only offer competitive offers [retirement benefits]but also coming to the table with other ways in which small businesses can demonstrate that they are investing in their employees, is a key differentiator for truly attracting talent.
Working with a pension plan advisor, pension consultant or accountant can help the plan sponsor understand which retirement benefit arrangement is best for employees, owners and company bottom lines, says -she.
“Working with an advisor can really help them understand what their options are and what makes the most sense,” Baehr says.
Small businesses often don’t offer retirement benefits because of the cost and administrative burden, according to Baehr. She advises small businesses to look at all available options and says some can provide the flexibility to offer a retirement plan without passing costs onto customers or reducing headcount.
According to the Lincoln survey, 51% of small businesses say they consider the costs and benefits a plan would provide a primary consideration, while 28% cite administrative concerns. Baehr notes that the administrative costs of pension plans have, however, fallen thanks to new entrants into the provider market. The survey also found that 72% of respondents said multi-employer plans, including group employer plans, are attractive.
Plan sponsors can purchase many options, including SIMPLE 401(k) plans, Simplified Individual Retirement Accounts for employees, and profit-sharing plans, Baehr says. They should start by looking at the needs of the company’s employees and the resources that could be brought to bear, which is a challenge for small businesses as many don’t have a dedicated or significant internal HR department, he explains. she.
With many types of retirement offerings available, there’s a match for almost any plan sponsor’s needs that will satisfy employees’ desire for a plan, according to Baehr.
She also says that profit-sharing agreements offer greater flexibility and may be preferable for some small businesses because they are based on company performance.
“An annual profit sharing gives some flexibility, but it also allows [plan sponsors] to reward employees when things are going well,” says Baehr. “Another opportunity is that you can save costs by offering a match that doesn’t get acquired for a few years, [which is] another way to not only invest in the long-term financial security of employees, but also to create retention opportunities.