With employee retention rates at near-record lows, offering benefits that will attract and keep top talent is more critical than ever. Deferred compensation plans can be the key to doing so.
A deferred compensation plan allows an employee to delay income until a future date. It is typically deposited into a retirement account or other investment option where it can grow tax-deferred.
Boosting Employee Morale
Employee morale is one of the most critical workplace metrics, and it’s no secret that happy employees are more productive. However, it would be best to learn that boosting employee morale can help your business grow its bottom line. High employee morale reduces absenteeism and turnover, significantly lowering your business costs. Moreover, happy employees are more likely to work harder and more efficiently than their disgruntled counterparts, which can dramatically improve productivity. In addition, reducing turnover can also reduce the stress and costs associated with onboarding new hires.
Keeping employee morale high requires the right combination of incentives and perks. Incentives like beer carts and casual Fridays are great ways to motivate your team. Still, there are other non-monetary ways that you can boost morale, such as implementing a deferred compensation plan.
A deferred compensation plan allows your employees to take an active role in their financial future and can provide a sense of security for the long term. It can also reinforce a positive company culture, and it’s essential to communicate these benefits clearly with your employees.
Boosting Your Company’s Reputation
Boosting your bottom line may sound like something only finance departments care about, but it’s a key component to the health of every business. It is the difference between your profit and loss statement and your overhead, and it affects everyone at your company, from the sales team to your accounting department.
To improve your bottom line, create an improvement program and then diligently implement it over time. A strong reputation is essential to attract new customers and retain current ones. To build your reputation, cite positive reviews and testimonials throughout your website, social media channels, and email marketing efforts. Create a separate page on your website that showcases these reviews. This will give your prospects an easy way to find the proof they need to trust your business.
Boosting Your Bottom Line
A business’s bottom line is the number that shows how profitable a company was during an accounting period. It’s calculated by subtracting expenses from gross sales or revenues. Companies try to increase their bottom lines in many different ways. Some ways include cutting costs, finding cheaper materials, and reducing employee wages. Rising prices is another way to increase the bottom line, but this can be risky because consumers may be reluctant to buy your products or services.
The most effective ways to boost your bottom line are increasing productivity, decreasing overhead, and ensuring you receive customer payments promptly. These improvements are easy to implement and cost-effective. If you want to improve your bottom line, start by identifying areas for improvement and gradually work on them one at a time.
A deferred compensation plan is an excellent tool for reducing your tax liability. Instead of paying taxes on your income immediately, you can choose to have it delivered in installments throughout 10, 15, or more years. The money you receive at the end of your deferred period will depend on how long you choose to wait and your current and expected future tax rates. This strategy can benefit executives by allowing them to lower their tax rate today and defer income into the future when they are in a lower tax bracket.
Retaining Top Talent
The cost of employee turnover is a significant and ever-increasing issue for businesses. When key employees leave for a competitor, they take valuable knowledge and experience that can immediately impact the quality of your products and services. The process of hiring and training a replacement can be time-consuming and expensive, too. And a company’s overall productivity can drop as new team members get up to speed.
Top performers have nuanced motivations and seek fulfillment that goes beyond paychecks. They want to know that their work is meaningful, their contributions are recognized and respected, and their careers align with the company’s growth path. They may look for opportunities elsewhere if they need more alignment.
A deferred compensation plan can be a powerful recruiting and retention tool for high-achieving executives. Unlike qualified plans like 401(k), these non-qualified deferred compensation (NQDC) plans allow executives to invest money on their terms, making them a more compelling incentive for those considering a move.
However, NQDC plans come with essential risks and should be carefully considered by your organization. Consulting with a financial advisor can help you weigh your options and determine whether or not this type of plan is right for your business. Learn more about attracting, rewarding, and retaining your executive leadership team.
