3 Ways Business Owners Can Recruit and Retain Top Talent
Savvy business owners realize that recruiting and retaining top talent is a key ingredient in the success of their businesses. While talented employees might be a successful business’s most important asset, losing them could also be its biggest liability. But attracting and retaining talented employees isn’t always easy.
A 2015 survey conducted by Payscale shows that 63 percent of businesses report “employee retention as their No. 1 concern … a massive (125 percent) increase in concern since 2009.”
Looking for an original way to persuade key contributors to stay or to attract new superstar employees? Nonqualified benefit plans allow employers to reward the commitment of their most valuable employees with supplemental retirement benefits at a future date. Unlike qualified plans such as a 401(k), which must be made available to all employees, employers can select which employees will receive these benefits and determine the types of benefits provided. Consider the most common nonqualified benefits:
- Supplemental Executive Retirement Plan: An SERP is a type of deferred compensation that is funded by the employer. With an SERP, the employer agrees to pay supplemental compensation in the future, usually at retirement, to select employees – in addition to their current salary and benefits. Employers can contribute to these plans in a variety of ways. Life insurance is a popular method for informally financing an SERP because it provides multiple benefits to the employee. As a benefit to the employer, the business owner maintains ownership of the SERP funds – and can tap into these resources if needed – until time of payout. The trade-off for many employers is that they don’t get an immediate tax deduction on contributions made to an SERP as they would with pretax contributions to an employee’s 401(k). Overall, an SERP provides key employees an additional financial perk, letting them know their company has an interest in their future while allowing employers to retain control of the plan payout.
- Elective Deferred Compensation Plan: Unlike an SERP, an EDC is funded from the employee’s salary or bonus and it allows key employees to defer a portion of their income until a later date, which is usually retirement. These plans provide a sound option for employees who want to set aside pretax money for retirement, beyond the maximum contributions they can make to their qualified plans. An even greater benefit to the employee is that employers may choose to match the employee’s deferral up to certain limits, similar to a 401(k) plan.
- Bonus Plan: A bonus plan allows an employer to provide added compensation to their key employees. The bonus can be used to purchase insurance or investment products or to help with long-term care planning. To streamline the process, employers can pay premiums or make deposits directly to the insurance or investment company. With this kind of non-qualified plan, employers are able to take tax deductions on the paid compensation, while the bonus amount is taxable to the employee. As employers sit down with a prospective new employee or strive to retain their top performers, these incentives can be used to sweeten the pot. If you’re an employer considering non-qualified plans, make sure to talk with a financial professional who can help you create a plan that’s right for your business, for your key employees and for the personal goals you’ve set for your family.