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By the Numbers

MAY 2, 2017

Offering A Retirement Plan May Help Your Small Business Attract Big Talent

Retirement plans can be powerful recruitment tools — and they might be less expensive and easier to implement than you think.

43% Percentage of small business owners who plan to hire workers in the coming year

If you’re a small business owner, are you doing enough to attract and retain employees?

A recent surge in optimism has more than 40% of small businesses planning to hire more staff in the next 12 months, a recent National Small Business Association study reports. That’s up from about one-third who said so during a survey conducted six months before .

But as small businesses increase hiring, they’re finding it harder to fill open positions amid a tight job market.

Retirement Plans Can Aid Recruitment

Offering a small business retirement plan, such as a SIMPLE IRA, SEP IRA, payroll deduction IRA, or a 401(k), is one way to differentiate yourself and make your company more inviting to potential hires.

Most small employers who offer retirement plans said their plans help them attract and retain talent, Pew Charitable Trusts found after conducting small business focus groups last year. Some also said offering retirement plans was a fundamental responsibility to workers that reflected their company’s core values.

Even so, some small business owners resist offering retirement plans because they worry about the potential cost and work involved, Pew found.

Retirement Plans for Businesses of Every Size

Small business retirement plans can be less expensive, and easier to manage, than you might think.

“There are plans for businesses of every size,” said Sunjay Kumar, senior product specialist at American Funds. “You have a range of options to help you meet your needs, as well as the needs of your employees.”

Some retirement plans don’t require annual plan filings with the IRS, for example. With other plans, you might qualify for a federal tax credit of up to $500 a year, which can help you pay for start-up costs during the first three years of the plan.

Although certain types of small business retirement plans require that employers contribute to the plans, others do not. For those that do require employer contributions, those contributions might be tax-deductible.

Pamela Newman, the owner of ISS Action, a New York-based security company, has been offering a 401(k) plan since 2012. She says providing this benefit to her 300 employees has helped keep employee turnover below 5%.

“One of the largest issues in my industry is turnover,” says Pamela, who was recently named the 2017 Small Business Person for New York State by the U.S. Small Business Administration’s (SBA) New York District Office. “The retirement plan sets us apart. It helps in our recruiting and it helps us create loyalty and longevity among our employees.”

 

Source: “National Small Business Association 2016 Year-End Economic Report,” February 2017.


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