If you spend any time in the recruiting, talent acquisition or human resources world, you understand that right now is as competitive a time as ever to lure top prospects from competing firms and retain the ones you have. The transparency of compensation among firms and the want/need of executives to have a better balance between work and personal life have companies changing up the way that they think about executive benefits. Here are a couple of the ways that we have seen innovative companies adding value for current and prospective employees.
Maxing out the 401(k): Most employers today offer a 401(k) or some other means for employees to save for their retirement. What we are starting to see more often is employers offering alternative payroll deduction methods. The most common option is allowing employees to make Roth contributions to the employer’s 401(k) plan. This is a great first step in diversifying contribution sources and giving employees with different needs another option. Some other employers have taken it one step further and are offering non-Roth after-tax contributions. This allows executives the ability to stash away up to the “all-sources” max contribution of $55,000 (or $61,000 after age 50) for 2018, instead of the typical 401(k) limit of $18,500 (or $24,500 after age 50). Executives are finding this to be an amazing way to “catch up” on their retirement savings and have been jumping at the opportunity. The tax advantages are different than your normal 401(k) contributions because of the after-tax status of the deposits, so employees will have to consider how that impacts them individually. On top of being able to defer a larger amount to their accounts, employee are also typically allowed to convert those deposits into their Roth bucket of their 401(k), essentially allowing them to contribute up to that “all-sources” max into their Roth 401(k)! What executives and employers alike need to be aware of is the possibility of a taxable event, depending on if there was a gain or a loss in the after-tax account before the conversion happened. If, for example, there was a $1,000 contribution to the after-tax bucket, and three months later the employee wants to convert to his/her Roth bucket, and in those three months the value of that $1,000 has now gone up to $1,100. In this case, the executive will have a taxable event on the $100 gain that occurred before converting. Because of these possible taxable situations, you’ll certainly want to be clear on the communications of these benefits and possibly even hold some informational meetings.
Leave the Leave: Paid time off, sick days and everything that goes along with it have been a clerical nightmare not only from the employee’s perspective but from the administrator’s as well. Well, forget about trying to track how many days you can roll over from year to year or worrying about what happens when a family emergency comes up. Employers have started offering employees of all levels unlimited paid time off. There has been some in-depth research on a few large companies that have been doing this for a couple years now. The results have been amazing. They found that not only have employees not “taken advantage” of the generosity to be able to come and go as they please, but they are actually more productive. The employees were found to take off the same or less time than they would have previously taken; they were happier at work and were more active in the culture of the employer.
When recruiting and dealing with top-level executives, showing them that you value who they are as individuals goes a long way. The old days of employment decisions coming down to how much a company is going to offer is coming to an end. Executives want to be challenged and feel good about what it is that they are working on, of course. But if you can give them the opportunity to create financial freedom by contributing more to their retirement plan than your competitors will and then also allow them the courtesy of trusting that they can go to their child’s school play or take care of a sick parent and still get work done when it needs to be done, then you will certainly have a leg up on the competition.
©2019 ThomsonReuters, Reprinted with permission.