Top Reasons Small Business Owners Don’t Offer 401(k) Policies (And Why They Should)
Many small business owners and their employees are not invested in 401(k) plans and that means worry about financial security for retirement. When small business owners invest in a 401(k) plan for themselves and their employees, they are securing their own financial future as well as that of their employees.
With the Hawaii unemployment rate so low, employers need to offer a competitive benefits package to attract top talent. Health benefits and 401(k) plans can be a big draw; many employees say that retirement options are one of the main benefits they look for when deciding where to work.
Why do so many small business owners choose not to offer 401(k)?
Administrative roadblock: not enough time to setup and maintain a 401(k) policy
Most small business owners are stretched thin; often wearing many hats to keep the business running. It can seem like an impossible strain to take on an extra task, let alone a task like administering a 401(k) policy that can be time consuming to setup and maintain.
The good news is that there are now many businesses who are offering streamlined and automated options for 401(k) policies. Partnering with a PEO who can help with employer-related administrative functions including 401(k) policies is a great way to offer employee benefits while freeing up time to focus on other tasks.
Concerns about the cost
Many small business owners looked into offering 401(k)s to their employees but became discouraged when they saw the cost. Costs may have been prohibitive for small businesses in the past but 401(k) fees have been reduced dramatically in the last several years. Small business owners can also take advantage of special tax incentives for offering 401(k) policies, making them even more affordable.
Can’t afford an employer match contribution
Employers should not let an inability to match 100% of employee contributions stop them from offering a 401(k) plan to their employees. In fact, matching employee contributions is optional and many businesses offer a 50% match of what their employees contribute up to a certain percentage. Companies can also use a vesting schedule so that employees have to work for the company for a certain amount of time before they can take their matched contributions with them. As a bonus, employers can deduct their contributions from taxable revenue and new small businesses with at least one employee who choose to create the first 401(k) for the company get a $500 tax credit each year during the first three years of business. That means a $1,500 discount off of the investment.
A desire to focus on company growth
It’s understandable that small business owners would want to use any extra capital to grow the business. In the end though, employees who feel well taken care of are happier and more likely to be loyal to your business which means lower turnover, higher productivity and business growth. According to a recent Forbes article, having happy employees contributes to higher profits by as much as 22.2 percent!
Don’t have time to administer a 401(k) plan? That’s okay; we’ve got you covered through HR outsourcing! When you partner with Makai HR you can get on with the business you are trying to grow while we take care of your employee needs from 401(k) plans to payroll, taxes, health insurance/benefits, and worker’s compensation. You also gain peace of mind that you are in compliance with all of Hawaii’s employer laws (if you’ve ever looked you know that the list is very long). When choosing a PEO to partner with, there are many things to consider including cost, services and technology solutions.
With the cost of doing business in Hawaii at record highs, we know how important it is to keep labor costs in line with revenue. Our plans are priced competitively and include value-added services like time-in/time-out systems. Our three tiers of PEO service plans are tailored to the size of your business and specific needs. We offer a 100% paperless solution which means that your employees can manage their needs through a computer, tablet or phone. We can truly improve your employees work benefits while freeing you up to run your business.
What are you waiting for? Companies who partner with a PEO benefit from 7-9% faster growth, 10-14% lower employee turnover; and they are 50% less likely to go out of business. Contact us today to get started!