As a business owner, you value all your employees. Truth be told, however, there are some who are more valuable than others: your “keep for lifers.” From a sales person who brings in a significant amount of revenue to an operations manager who helped design your company’s processes, these key employees bring exponential value to your business.
In a highly competitive employment landscape, opportunities are abundant for top-tier workers. And the potential for losing these highly valued employees is what keeps business owners and leadership teams up at night.
For companies and nonprofit organizations focused on retaining their best and brightest, the key is finding creative ways to supplement their compensation and give them long-term financial security. One such way to provide this security is a Restricted Bonus Plan, which allows you to reward employees for their long-term loyalty.
The talent war continues
You may have heard the phrase “war for talent,” a concept introduced by global consulting firm McKinsey & Company in the late 1990s. The concept referred to the challenges employers faced in retaining their top managers as job mobility increased and small- and mid-sized companies battled for the same talent as big brands.
Fast forward two decades: Those same challenges not only remain, but in many ways, they’ve also intensified. For many companies, the first hurdle is finding great employees. Businesses across industries report that they’re having trouble filling positions due to a skills gap and a shortage in workers. This is especially pronounced in the construction and manufacturing industries.
Companies also continue to face challenges retaining their best staff. This year, more than 2.8 million employees voluntarily left their jobs — the highest number since 2008 — and more than one in three workers reported that they had considered pursuing a better job in the previous year.
For small- to mid-market organizations, the competition for employees can feel especially fierce as you’re recruiting against big brands with household names. That’s because the latter often provides high levels of compensation, more internal workplace opportunities and various perks that are more difficult for smaller businesses to match.
The ‘everyone’s replaceable’ myth
At some point in your career, a manager or boss you’ve encountered has probably noted that “everyone’s replaceable.” Objectively, it’s true. But in reality, your best employees are costly to replace, and their absence can impact your organization’s performance, culture and bottom line.
The tangible costs of turnover can include the expense of advertising, screening and interviewing candidates as well as training your new hires. There typically is a loss in productivity and morale by other employees affected by a key employee’s departure. Some estimates report that replacing an employee costs six to nine months of that person’s salary.
In addition, your top employees are often essential to the ongoing success of your company. Depending on their role, they may maintain some of your longest client relationships or hold years of institutional knowledge about how your company works and what it values. Less tangible, but just as important: Their presence — including their mentorship, expertise and attitude — may be the reason other employees chose to join your organization. Their departure can have a negative ripple effect across an entire team or organization.
The power of Restricted Bonus PlansWith all of this in mind, business owners and leadership teams are increasingly looking for unique ways to reward their high-performing employees and encourage them to stay. Although compensation is just one factor, it can be a powerful one. Many companies are using a Restricted Bonus Plan as a tool to create long-term commitment with their key employees.
At the core of many of these plans is a specialized life insurance policy, which provides your key employees with income-tax-free cash accumulation and retirement benefits. As an employer, you can structure your annual contributions to the plan in a way that makes sense for each employee, whether it’s tying bonuses to individual or company performance or his or her length of stay with the company.
In addition, Restricted Bonus Plans:
- Can be applied to as many — or few -- employees as you choose
- Have very little administrative fees, unlike a 401(k) or other retirement plan, and can complement existing retirement savings
- Allow your key employees to access the cash balance, without penalty, after the restriction period expires
- Give control of investment decisions to plan participants
- Provide, by way of a life insurance component, a tax-free benefit and safety net for the employee’s family in the event of the employee’s death
Your employees make your business great. You want to do everything you can to keep them motivated and engaged. Restricted Bonus Plans give you a powerful tool for rewarding key employees — and make their decision to stay for the long term an easy one.