I've been searching for a job for a while now and there's one benefit that is constantly getting overlooked and that's a 401(k). In the past setting up, managing, and running a 401k was difficult or you had to bring in some big bank to handle it for you. It was also expensive to administer the plan which made it hard for small orgs. This is no longer the case and I believe that every startup that doesn't offer a 401k is potentially missing out on a very simple and relatively cheap employee benefit that makes your org a lot more attractive to potential employees.
If you're not familiar with a 401k it's a type of investment account (take a look at Nerdwallet: https://www.nerdwallet.com/blog/investing/what-is-a-401k/ or check out Wikipedia) that allows you to invest a significant amount of money before you're taxed and at this point it's $18,500. This not only sets you up for future retirement but also reduces your tax burden so every dollar you earn is worth more. It's a significant amount of savings for most IT professionals and it makes the total compensation package of the position people are filling that much more attractive. Some companies do even better than simply offering one and they'll match a portion of your salary which let's you go above the $18,500 limit and this makes the job even more attractive!
So why doesn't every company offer a 401(k)? If it's so beneficial for employees (even without the match) then shouldn't it be front and center on every job posting? Well sadly that's not the case currently. I would say 75% of the companies I've talked to don't offer a 401(k), and if they do the recruiter has almost no details about the plan itself. I'm not sure if that's because they don't contribute to their own 401(k), or if they simply don't have all the details, but it's quite baffling.
Companies don't offer them for a variety of reasons and most aren't valid any longer. It used to be that setting up and managing the plan was too annoying, there were bad fund, or worst of all high fees associated with simply having the plan which either the employer would take on, or they would pass on to employees.
That's no longer the case and if someone uses this justification they're simply uninformed or too cheap to investigate. Companies like Guideline (https://www.guideline.com/) now offer amazing 401(k) options that are extremely cheap for both organizations and employees (For full disclosure I have a 401(k) through Guideline). They charge employers $500 to do the initial setup then $8 a month per employee to keep the plan running. This is ridiculously cheap when you consider that offering a 401(k) as a benefit to your employees can potentially save them upwards of $5000 in taxes and set them up for retirement. On top of that as a participant they don't charge me anything to use the service and all I pay are the standard fees associated with buying the funds. The offer a variety of funds including Vanguard Index funds which are basically the best of the best when it comes to low fees and excellent returns. It's a no brainer as an employee to contribute and it should be a no brainer for companies to set up with one of the companies offering 401(k)s.
So if your company still isn't offering a 401(k) it's time to talk about why and really understand if your employer is simply too cheap to set up a 401(k) or if they have other concerns that aren't being addressed. It's important that everyone looks out for their own financial future, so talk to your employer about setting up a 401(k) with a company such as Guideline. It's going to cost them less than they're going to spend on a flight and hotel for the next person they interview and it will make both existing employees as well as potential hires much more receptive to the position.
Having a 401(k) at your organization is huge, and when you're knowledgeable about what it offers, how much it costs, and how much it can improve the benefits of your organization there's no reason not to spend a bit of time looking into the options. If you really want to go above and beyond as an organization and impress potential employees even more you can offer a percentage match based on salary (and make sure that if you do this you "true up" so that more financially savvy employees who front-load their 401(k) recieve the same match instead of doing a monthly match). These types of programs are actually really cheap (a 5% match of $175,000 is only $8750) and are a huge benefit that many employees will be driven to take advantage of. Potential candidates will also find them extremely appealing.
So, let's bullet point this real quick if I haven't already sold you on one of the best benefits you can offer employees with a lower cost than printing up t-shirts, flying someone to your office, or giving everyone ridiculous swag coffee mugs they really don't want.
- A 401(k) is actually really cheap to set up now, costing as little as $500 with a monthly fee of $8 per employee, and no extra fees for employees.
- With many of the startup based orgs out there it's mostly set it and forget it for your US employees with great funds available for them.
- Employees can save a lot of cash when you offer a 401(k) both to secure their financial future and save them money on taxes which makes your job offer much more appealing.
- Offering a 401(k) isn't as common as you think and offering one is a huge benefit to many employees. Matching a salary percentage is icing on the cake and really cheap in the long run for employee retainment.
- Being familiar with what your 401(k) offers shows potential employees that you really care about their financial future and that you want everyone to take advantage of these benefits.
- Everyone who works at the company can take advantage of a 401(k) from the CEO to your support staff.
- Did I already mention how cheap it is? I've legitimately offered to pay the fee to set it up at an organization because it would save me that much money on my taxes. It's a no brainer.
Hopefully this has sparked some interest in at least a few people to take a closer look and truly recognize how cheap these 401(k) services have become in terms of what they charge. If you're reading this and you're at a company that doesn't already have a 401(k) consider talking to your HR department. If you're a CEO or other C level exec, you should probably talk to finance about setting one up immediately. Providing you company and fellow employees with details regarding how it saves everyone more money, and helps bring in talent can be a huge eye opener for many people throughout your leadership team. The worst thing they can say is no, and then when you decide to leave at some point in the future you can add "no 401(k)" when they ask why to really show just how important securing your financial future is.
This is part 1 of a 5 part series talking about building a 401(k) so good employees won't believe that it's real and employers won't believe how cheap it is to implement.