If you’re an employee working in a small to medium-size business, you may look at your peers in larger corporations with envy when it comes to all the benefits and perks their employers provide. It’s true. Those organizations may be in a better position to offer appealing benefits, given their larger budgets.
However, smaller businesses, thanks to their size and ability to be nimble, can also provide great benefits that suit their employees. Maybe your company doesn’t currently offer a 401(k) plan at all—or they do, but there’s no match. Below are some concrete steps to encourage your employer to administer benefits programs that meet your needs as an employee, while also helping them meet their business goals. We’ll focus mainly on how to ask for a new 401(k), but many of the recommended steps also apply to asking for a match or a better 401(k) provider (skip to the last section if that’s what you’re most interested in).
Check-in with your co-workers
Are you the only one in your company who wants a 401(k)? If so, your chances aren’t great. Make sure other employees understand the benefits of a 401(k) and that they’d be on board with you asking about it as a new offering. It’s much more convincing to be able to say, “5 out of 6 people on our sales team say they’d definitely contribute to a 401(k)” or “our head of marketing mentioned that it’s been difficult to hire without a 401(k)” as opposed to “I wish our company had a 401(k)”.
Need help convincing your co-workers? Here’s some recommended reading to pass along:
Talk to the right person
It’s probably best to start the discussion about a 401(k) plan or a 401(k) employer match with your direct manager. They may have insight about upcoming changes to benefits plans that you may not be aware of, and they are the ones who represent employee interests to the company owner or senior leadership. If they’re also involved in hiring, you may also want to ask them how a lack of a 401(k) affects the effectiveness of their recruiting.
If your manager doesn’t respond or isn’t willing to bring your ideas to leadership meetings, make time to connect with the HR manager in your company, the person who handles the administrative side of the business (COO, general manager, or accountant), or the business owner (CEO or founder), preferably in that order. Be sure to work your way up and not jump right away to the business owner, as to not take anyone by surprise or put anyone in an awkward position.
Express your gratitude
When you broach the topic of offering a 401(k) or adding an employer match as part of the benefit, start out on a positive note: express your gratitude for the benefits that are already in place. Offer some personal insight as to how the healthcare coverage, transportation program, or childcare subsidy has helped improve your experience as an employee.
From the standpoint of an employer, benefits plans have an impact on the bottom line, both in terms of employee retention and hiring new employees. If you’re talking with your company founder, manager, or another representative, they want to know that their effort to deliver positive programs for employees hasn’t gone unnoticed.
Provide data
If you want your request to be taken seriously, do your research. Don’t show up at a meeting or start a conversation about adding a 401(k) plan or increasing the employer match without having some data to back you up. What kind of data should you gather?
Competitor data: Do some research about companies of a similar size in your industry—what are they offering their employees for retirement benefits? What are typical 401(k) plans in your geographic location? (Check out Glassdoor.com for reviews, or look up benefits offerings on competitor websites.) According to survey data referenced by the Society for Human Resource Management (SHRM), when it comes to employer 401(k) match, “the most common match today is dollar-for-dollar on the first 6 percent of employee deferrals.”
Employee surveys: Has your company conducted a company-wide employee survey related to benefits? Check the results and highlight any ways in which a 401(k) might improve those results, or might address issues that came out of the survey. No recent surveys? You might consider suggesting that your company conduct a survey—here’s a free benefits survey template.
Retention rates: Have people left your company in pursuit of other jobs that offered a 401(k) plan? Maybe some potential hires didn’t join the organization because there wasn’t a retirement plan in place. You may not be privy to this information, but if you are, be sure to mention it as an illustration of how not having a 401(k) could be impacting the talent pool your company can attract and retain.
Responses to common objections: Not enough time? Not enough money? Here are some hard facts to help explain why it’s easier than expected to get a 401(k) even as a small business and why a 401(k) match is worth it.
Legal requirements: Will your state soon be legally required to offer a 401(k)? Learn more about that here.
Offer to help
If your manager or leadership team expresses interest in your idea about a 401(k) plan or the suggestion to add an employer match, offer to research what options exist:
Conduct research on your own by talking with other small businesses to see what 401(k) providers they use; then schedule time to meet with those providers
Create a team of people to help tackle the research; divide up the inquiries, meet regularly and work together to draft a summary of your findings
At slightly larger companies, there’s often a 401(k) or employee benefits committee that does vendor research and regularly evaluates offerings on behalf of all employees so that these decisions aren’t exclusively made by HR . You’ll want to look for a 401(k) provider that makes administration easy and affordable for small to medium-size businesses. As this investment review site explains, it’s also important to find a company like Human Interest that is transparent about their fee structure.
The financial benefits of a(n increased) 401(k) match
If your company already has a 401(k), and your request is that they also offer a match or increase the current match, start by reading this article and pass it along to your HR manager: Small Business 401(k) Match: Why It’s Worth It. It explains that the key benefit of a good 401(k) match is the tax savings. Both employers and employees receive tax benefits with a matched 401(k) plan. Employees can save for retirement tax-free, and the money a company contributes to employees’ 401(k) plans is tax deductible, which provides an ongoing tax benefit to employers. Other benefits include easier compliance testing, which the article explains as well.
How does this compare to a bonus or a raise? With a typical bonus or raise, employees pay income and employment taxes on money they receive. And employers pay Social Security, Medicare, unemployment and other significant payroll taxes when they offer an employee a raise or a bonus. If you and your employer do the math, you’ll see that the money in a match can have more financial impact than a one-time bonus or salary increase. As part of your discussion, share information with decision-makers about baseline numbers when it comes to the most common 401(k) employer match contributions. According to Benchmark Your 401(k) Plan, the average company contributions are as follows:
Forty (40) percent of plans match $.50 per $1.00, up to a specified percentage of pay (commonly 6%)
Thirty-eight (38) percent of all plans match $1.00 per $1.00 up to a specified percentage of pay
Forty-three (43) percent of employees said “the company match was the primary reason they participate in the plan.”
Finally, kudos to you for initiating these discussions. Planning and saving for your retirement is something to start doing sooner rather than later. Part of driving a business forward includes meeting employees needs and incentivizing them to deliver results. And often, you can help them understand how offering a retirement savings plan is a powerful tool. If you want to set up or switch to an a 401(k) that’s great for employees and employers, let your company know about Human Interest.
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The Human Interest TeamWe believe that everyone deserves access to a secure financial future, which is why we make it easy to provide a 401(k) to your employees. Human Interest offers a low-cost 401(k) with automated administration, built-in investment education, and integration with leading payroll providers.
