In the service industry, employee-related expenses account for 50 to 70 percent of total expenses, which makes it critical to bring in the right people and ensure your investment is a good one.
“The cost to hire people is significant, from advertising to interviewing to the onboarding process,” says John Harabedian, Managing Director of the Retirement Plan Services division at Tegrit Group. “If you are only retaining 50 percent of the people you recruit, that’s a huge cost to the company that needs to be reduced.”
The benefits of recruiting and retention strategies aren’t just cost-related.
“If you’re growing and you’ve got a strong culture, you’ll be known as a good place to work, which enhances the company’s reputation and image in the community,” he says.
Smart Business spoke with Harabedian about recruiting and retention practices.
Why does a business need recruiting and retention strategies?
Not having a recruiting strategy often leads to reactive hiring. If someone terminates employment, a manager who hasn’t thought about a replacement strategy might make a quick decision to hire someone who seems qualified but isn’t.
You always want to look for loyalty in your employees, that is the key to customer retention as well as cost savings. Customers value continuity; if you have the same person on the account for a long time he or she will know the client well and the chances of the client having a great experience are significantly enhanced.
What are some best practices for recruiting?
Your human resources department should have an active ongoing recruiting process for key positions, even if those positions aren’t open. You interview people as resumes come in, for future position openings. Then if you have to replace someone you already have two or three people in mind — you know what their situation is, if they need to move and their salary requirements for example. This makes positions easier to fill, especially for specialized, technical jobs, and ensures your company does a better job of finding the right people.
You need to define your corporate culture and find people who fit into it. A strong work culture engages employees and provides them with opportunities, which is crucial to keeping them satisfied.
In addition, good employees typically surround themselves with similar-type people, so employee recommendations can be a critical source for hires with the same work ethic and values. You can incentivize your staff with a cash bonus for recommending someone who gets hired.
An internship program is another excellent recruiting tool where both the intern and employer can evaluate each other before making a long-term commitment. You can start an internship program using younger employees who recently graduated with connections to local universities. Then in the second year, once you hire interns permanently, you can use them as spokespeople for the next graduating class. However, a successful internship program is predicated on interns having real work to do. You need to make interns feel like full-time employees by letting them have one-on-one time with managers, attend meetings and do client-based work.
Once you’ve recruited the right employees, what can you do to ensure they stay?
The defection of good employees is all tied to the culture. You need to put people where they have a passion. You don’t want to leave people in jobs they may have entered into if that is not what they want to do long-term. If you can get a person excited about what they do — if they can contribute and have some creativity in their role — they are much more likely to stay with the company.
A growing organization has to recognize you are always looking five to ten years down the road. Not only who are my managers today, but also which employees can become directors or fill other senior level positions? Internal mentorship programs identify key performers with significant potential. And you don’t have to be shy about who is in a mentoring program and who isn’t as it might motivate others.
Keep in mind what influences employees today. Younger employees put an emphasis on family and outside activities that you wouldn’t have found 20 years ago. You may need to be more creative in allowing staff to work remotely or have flexible schedules. You also might have to help older managers adjust to the mindset and values of younger staff.
How do you evaluate your recruiting and retention strategies?
Your HR department should always be looking for feedback from staff as well as evaluating the job application website you use to see if they are the most appropriate.
You can also rate your employees to find out how your retention strategies are working. For example, you can rate staff as (1) key performer, don’t lose; (2) good performer; and (3) average or acceptable, and any employee who is rated below three you would want to actively manage out. Then evaluate which employees are leaving — how many were ones, twos and threes?
Although the recession has created a double-effect that works for the employer — the talent pool is deeper with more people out of work and with fewer jobs more people are staying put — this kind of situation is only short-term. You need to invest in your employees and ensure the company has a wonderful culture in which they can grow and eventually take on more responsibility.
John Harabedian is the Managing Director of the Retirement Plan Services division, for Tegrit Group. Reach him at 330.983.0520 or email@example.com.
Insights Retirement Plan Services is brought to you by Tegrit Group
Adding a retirement benefits plan for employees is an exciting milestone in a company’s growth cycle. The advantages of offering a plan include employee retention, satisfaction, substantial tax savings, and meeting financial goals for the owners, staff and the company.
However, before your organization implements a new retirement plan, all stakeholders should be aware of the costs, liabilities and workload associated with managing it. Retirement plans today are subject to numerous compliance concerns, so employers must take even more precautions to keep up with the latest industry regulations.
“Increased government scrutiny of benefit plan accounts has emerged over the last several years, but it’s yet to be determined what effect it will have on the popularity of retirement plans,” says Mike Spickard, CEO and Chief Actuary of Tegrit Group.
Smart Business spoke with Spickard about when to consider adding a retirement benefits plan for your business and how to choose the best plan.
What are the advantages of implementing a retirement plan for employees?
Providing a retirement plan can help you attract and retain valued employees, assist in the deferral of taxes, and help employees better prepare for retirement. Despite the market volatility, retirement plans are a very popular employee benefit because everyone wants to avoid paying taxes. Employees like to see their retirement accounts grow.
When should companies consider adding a plan?
Your company is ready when either you or your employees are concerned about reducing taxes or saving for retirement, and you have cash available to fund a plan. When your company is new and it’s all about survival and growing into viability, a retirement plan won’t likely be high on your priority list.
When you reach the point where the company, owners and employees are starting to take home more taxable income, you may not need to pour money back into the business to survive. At this point, it is a good time to start thinking about an efficient vehicle to reduce your tax burden.
Once you have decided to add a plan, what are the first steps in the process?
The first step is to develop a budget and determine how much you can afford to spend on administrative costs and employer contributions. If you set up a plan and you are unable to fund it, or you are not able to cover the costs to administer and maintain an attractive benefits plan, then it does not make sense to sponsor a plan yet. We’ve seen cases where companies adopted a retirement plan too early.
The next step is to engage a small cross section of employees to see what type of plan is most useful for them within the budgeted constraints. The last ‘first step’ is to talk to a trusted adviser, including a CPA, financial adviser or attorney who can help you find a qualified TPA (third party administrator).
What plans are popular in today’s business climate?
The most popular plan type today by far is a 401(k) plan with a matching contribution. More than 500,000 businesses in the United States sponsor this type of plan, which involves tax-deferred contributions by employees and usually some form of employer contribution — either a contribution that matches some or all of the employee’s contribution, and/or a discretionary ‘profit sharing’ contribution.
The fastest-growing plan type is a cash balance plan, which allows for much annual larger tax-deductible contributions. It is a more complex plan type, but the larger tax benefits have made it quite popular in a lot of small business circles right now.
Does every employee need to be included in the plan?
Retirement plans offer a lot of flexibility when determining who is eligible to participate. For example, you can set a minimum threshold of hours worked so that employees would have to work at least 1,000 hours in their first year in order to participate. You can go even further and exclude or include certain classes of employees. For instance, a law firm could exclude associates, or a grocery store could exclude baggers.
A retirement plan is less ideal for very low-margin businesses and those that hire transient workers because the tax benefits won’t be as great and the administrative costs will be higher when processing small payments for these types of workers.
What are some tips to maximize a new retirement plan?
Properly design a plan that reaches your present goals and communicate it well and often to your employees. The engagement of qualified, experienced retirement plan professionals is almost always required to get the most bang for your buck in terms of plan design and communication.
Because of their significant tax benefits, retirement plans are heavily regulated. Staying in compliance can be a difficult task, and that is where the engagement of retirement plan professionals and consultants can be very useful.
If you select a less complex plan, it will be easier to administer, and thus, you may not need to engage a retirement plan expert or pension plan actuary. But if you want simplicity, you’re going to have to live with a lower value benefit.
The more complex your plan is, the more capability you will have to take full advantage of the laws, regulations and tax deduction benefits.
Mike Spickard is the CEO and Chief Actuary for Tegrit Group (formerly Summit Retirement Plan Services, Inc.). Reach him at (330) 644-2044 or firstname.lastname@example.org.
Insights Retirement Plan Services is brought to you by Tegrit Group