INCENTIVE

Strong retirement package critical to retaining great employees

Employee retention is an outcome and not a strategy.

In Summary
  • Employees can be a company’s most valuable asset and it is important that organisations maximise the value of their investment in these employees.
  • One of the advantages of having a pension plan from the employers’ point of view is to motivate the best employees to work for them longer.

That employees are an organisation’s greatest asset is no secret. Retaining them through the strategic use of long-term asset allocation can offer much more than the value of the underlying asset. Research has shown that it might indeed be less expensive to incur some deductible expenses in providing pension benefits in return for employee loyalty than to lose a key employee, with the cost of replacement and effect on productivity being key factors.

Employee retention is an outcome of human resource strategies aimed at keeping the best talent in the workforce. Employee retention is, thus, an outcome and not a strategy. To this end, pension plans are not just good for employees – they are also extremely valuable to employers who have specific goals for their most important resource, the workforce.

Retirement benefits are a form of deferred compensation; that is, unlike wages and other benefits, retirement benefits are not enjoyed until after the employee has stopped working. Owing to their deferred nature, retirement benefits encourage employees to stay with an employer. In a traditional, final pay-based pension plans where workers earn benefits more rapidly the longer they stay on the job, this may lead to higher rates of retention.

One of the advantages of having a pension plan from the employers’ point of view is to motivate the best employees to work for them longer. Pension plans demonstrate the value a company places on the service of its employees and a willingness to ensure adequate retirement income for its workforce, even after their active years.

The labour market views the way a company treats its retired workers and draws conclusions as to the way other employees will be treated during and on leaving the company. Employees who have a good retirement package will proudly speak of their former employers, creating a good public image for the organisation. Retirement benefits are, therefore, one way an organisation can show it cares about its employees’ well-being.

Additionally, much like health insurance, improving retirement benefits has a positive impact on improving employee satisfaction. As much as this may not be a strong point in developing countries where the labour market is flooded with talent due to dwindling economies, it is still a very valid point.

As times change and economies turn round and become robust, employers with the best-managed pension plans will retain the best talents while those that have never taken this benefit seriously will be on the losing end.

 

Skillful employees, at times, get more than one job offer and what usually tips the scales is good retirement benefits. A potential employee will pick an employer with good health benefits, a good work culture and great retirement benefits. In markets where top employees have job options, pay and benefits are ways that employers can stand apart.

In 2016, for instance, the Society for Human Resources Management issued a research report entitled ‘Employee Job Satisfaction and Engagement’. Among its findings are 63 per cent of employees view compensation and pay as very important to their job satisfaction, but only 23 per cent report being very satisfied with their current pay.

In addition, 60 per cent of employees view their overall benefits package as very important, but only 27 per cent are very satisfied with the benefits that they have. The report found that high-performing employees view changes in healthcare and retirement savings as more important considerations in retention than changes in compensation.

Although hardly anyone would turn down a raise, employers can use healthcare and retirement benefits to gain more leverage when looking to retain high performers. Moreover, a pension plan gives a potential employee confidence in a particular employer. As times change and economies turn round and become robust, employers with the best-managed pension plans will retain the best talents while those that have never taken this benefit seriously will be on the losing end.

Employees can be a company’s most valuable asset and it is important that organisations maximise the value of their investment in these employees. If adopted, a supplemental, hybrid or defined contribution arrangement is not only a low-cost employee retention strategy but one that will yield higher long-term returns for organisations as well as their employees.

Director of operations and marketing, CPF Group