How to develop a strategy to compete effectively for key employees

Business owners and top executives are responsible for developing, nurturing and maintaining the crucial relationships, proprietary processes and valuable assets that make an organization successful and sustainable. Often these key personnel are integral to your competitive advantage. And, knowing today’s increasing competition for talent, it’s important to have the right strategy to attract, retain and engage key personnel and set your organization as a destination employer.

Rory Lough, area vice president of Executive Benefits Consulting at Gallagher, says, “It’s critical that employers evaluate their approach to executive benefits as it can lead to long-term sustainability and ensure the future of an organization.”

“Executive benefits help you invest in talent, in the hopes that talent will help grow the business and stay long term,” says Joe Roberts, area vice president of Health & Welfare Consulting and Key Accounts at Gallagher.

Smart Business spoke with Lough and Roberts about how executive benefits work.

How are executive benefits packages different than general employee benefits?

An executive benefits program is more individualized and flexible. Often, business owners like that flexibility because they can be creative, but so many options also can be a challenge. They need to find a plan that benefits the organization and speaks to the motivations of the key employees.

These plans typically aren’t publicized to the general employees. They may be in an employment negotiation contract or retention contract. Depending upon the type, IRS and Employee Retirement Income Security Act (ERISA) rules may or may not need to be followed. Non-qualified deferred compensation plans offer employers many advantages, such as the fact that the plan isn’t subject to these nondiscrimination rules and, therefore, can be customized for each participant. Employers can provide benefits in excess of the qualified retirement plan limits, create financial incentives (golden handcuffs), and supplement disability income protection and key man protection for the company and employee’s family.

What’s important to understand about developing an executive benefits plan?

It’s a good starting point to link executive benefits programs to organizational goals and objectives. It could be based upon performance, total years of service, total income, job title or even a combination.

You also need to decide which roles and employees are instrumental to the business’s growth. You don’t have to target executives alone. You can design a benefits package for top executives, and a second package for another tier of employees.

You’ll want a plan that addresses the underlying motivations. Why will they continue to work for your company? What attracts, retains and rewards one executive or key employee might differ. The art of designing executive benefit packages includes understanding and identifying those sticking points, the risk exposure, and the laws of taxation or power of tax deferral.

Each package has its tax advantages and disadvantages, so you need to understand all of the implications.
It’s a complicated arena, so make sure you work with a team that specializes in executive benefits strategy. There’s no right answer or perfect puzzle piece. That’s why an expert team can help you identity what will work best for your organization.

How often does a plan need to be adjusted?

Typically, when you implement a plan to make sure you’re accomplishing a certain goal, if that goal changes, then the plan needs to be adjusted. If there are tax changes, the plan needs to be adjusted. Every year, your employee benefits adviser will review the plan. The key is to continually keep this topic in mind when evaluating your overall approach to benefits and reward planning.

Insights Employee Benefits is brought to you by Gallagher

This material was created to provide accurate and reliable information on the subjects covered, but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.
Gallagher Benefit Services, Inc., a subsidiary of Arthur J. Gallagher & Co., (Gallagher) is a non-investment firm that provides employee benefit and retirement plan consulting services to employers. Securities may be offered through Kestra Investment Services, LLC, (Kestra IS), member FINRA/SIPC. Investment advisory services may be offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Certain appropriately licensed individuals of Gallagher are registered to offer securities through Kestra IS or investment advisory services through Kestra AS. Neither Kestra IS nor Kestra AS are affiliated with Gallagher. Neither Kestra IS, Kestra AS, Gallagher, their affiliates nor representatives provide accounting, legal or tax advice.