Profit sharing and/or matching into your 401(k) plan can be a great way to help improve loyalty and reward employees for a job well done. Some companies give matching contributions that vest over a one- to four-year period as an additional incentive to stay while boosting employee engagement in their jobs. That can mean more productivity for your business too.
The Real Cost of Employee Turnover
This might be a surprise, but the overall U.S. voluntary employee turnover was 27.9% in 2019.1 That’s basically one in four employees each year choosing to quit and/or switch companies. Offering important benefits like a 401(k) may help reduce that turnover.
It's Likely Much Costlier to Replace One Employee Than Offering a 401(k) Plan
When you really factor in core costs to replace an employee, it adds up quickly:
- It costs 29% to 46% of an employee’s annual salary to replace them (non-management vs. management drives the range)2
- So, replacing a $50,000 per year employee may cost you $14,500 on the low end
Those figures include things like interviewing time by management, productivity lost due to the vacant position, training the new employee, and any advertising or other associated expenses. But it doesn’t include variable costs, such as customers who might leave, or the knowledge lost with a resignation.
401(k) benefits can help retain your top talent and they are typically a lot less expensive than needing to replace an employee. Research indicates that 61% of employees would leave their current employer3 for a similar job if it offered better retirement benefits. Whether you're recruiting or seeking to keep your current employees, a 401(k) can be a terrific incentive.
Strengthen Loyalty with Profit Sharing and Vesting
- 1 U.S. Department of Labor, Bureau of Labor Statistics, Job Opening and Labor Turnover–March, 2020
- 2 "Retaining Talent: A Benchmark Study," DDI, Paul R. Bernthal, Ph.D & Richard S. Wellins Ph.D
- 3 Employee Retirement Study conducted by Wakefield Research for ShareBuilder 401k, August 2018