Maclean’s asked Canadians how they felt about their retirement prospects. Only 62% of respondents felt very confident or somewhat confident that they could retire at 65. That leaves a lot of people unprepared or prudently tempering their optimism.
Many Canadians won’t get the corporate pensions their parents likely had. They may have to continue working because they can’t afford to retire.
A strong retirement package is a strong incentive to attract the best employees. It is also a measure that keeps employees at their desks year after year.
Read on to understand why retirement plans are important for every organization.
Employees Expect Retirement Packages
Freedom 55 is a slogan dreamed up by The London Life Insurance Company of Canada for its retirement savings products. This phrase set expectations of early retirement for an entire generation.
While these days employees are not necessarily planning to say goodbye to their cubicle on their 55th birthday, they do expect to leave with something in their pockets.
The Canadian Pension Plan will provide employees with a pension after age 65. They can take the funds earlier, with a reduced payout of 7.2% per year.
The CPP’s goal is to replace up to 25% of a person’s full-time income upon retirement. However, it is taxable income. 25% is just half of what someone needs to retire.
Retirement Packages Cost Lest than Turnover
By this point, you might be wondering what’s in it for you as an employer besides happy employees.
Well, one reason why retirement plans are important because they make financial sense for employers. The cost of employee turnover is a heavy burden for Canadian businesses.
Businesses may pay up to 20% of low-to-mid range employees salary to replace him or her. For example, an employee making $60,000 per year can cost about $12,000 to replace.
Replacing an employee may cost up to 213% of their salary if that employee has specialized training and a large salary. So the direct cost of replacing a $100,000 per year exec is up to $213,000.
In a nutshell, retirement benefits for employees save companies the cost of hiring and training new employees.
Retirement Packages Boost Morale
Retirement benefits for employees are one way your organization shows that you care about their well-being.
It’s true that employees will accept a job at a company that doesn’t have a pension plan, but overtime employees may begin to feel that their employer does not care about their wellbeing.
If a person wants to retire but can’t because of finances, that employee will likely not be coming to work each day energized and ready to give 110%. Employees give their best efforts and go above and beyond when they feel that their employer values them and that they have a good deal.
Employees Benefit from Scale
A benefit of sponsoring a pension plan is that employees can benefit from the economies of scale that a group arrangement provides.
Fees will be much lower in a workplace plan than what an individual can expect on his or her own.
200 basis points extra per year over a whole career adds up. It would equal almost 40% extra income during retirement. Employees are more likely to take advantage of the company’s RRSP. This is especially true when it offers to match the employees’ contribution.
Retirement Benefits Equal Retention
92% of employees at small- to mid-sized businesses ranked “workplace savings and retirement plans” as a major factor in deciding whether to remain with their employer.
Interestingly, 69% of executives at those small-to-mid-sized companies ranked those same plans as only the seventh most important benefit in attracting and retaining employees. This shows that the higher-ups are underestimating why retirement plans are important.
Almost half of employees said they would consider changing jobs if they found one that offered retirement benefits for employees. In other words, benefits in retirement are a key component to employee loyalty.
Retirement Benefits as Part of Compensation
Naturally, prospective candidates pay significant attention to compensation when considering a job. As an organization, you want to attract the very best minds in the industry.
But you can’t always outbid other firms. But candidates know that compensation means so much more than salary and bonus potential. And if they don’t know, you can highlight this when you present a job offer.
Benefits are an integral part of understanding a company’s total compensation offer. Make sure your superstar candidates understand the full benefits package.
Tell them about your company’s matching program for employees who are saving for retirement for example. Even provide a benefits package for their review.
If you offer summer flex-time, investment planning, flexible hours or banked hours, make that clear.
Make sure you highlight all the non-salary perks for potential employees. It’s likely that this may be just the thing that gets them to sign on the dotted line.
Check out this benefits cost calculator for employers.
Retirement Packages as Best Practices
One of eight key things Canada’s Top 100 Employers 2017 had in common was excellent health, financial and family benefits.
For example, Agrium Inc. based in Calgary offers retirement planning assistance and phased-in work options for employees approaching retirement.
The advantages of retirement planning translate into a more engaged and collaborative workforce. This leads to higher company morale and attracting top talent while retaining their best.
Benefits, including retirement plans, can be the final nudge that attracts the top performers to one company over another. It also helps keeps employees committed, dedicated and happy.
If you don’t have a retirement package in place for employees, consider getting it going. Check out this guide to choosing the best retirement plan for your employees.