How (and Why) Employers Display Paternalism in the Workforce

Author: Mark Fissel

We have found that business owners and decision makers generally have their employees’ best interest at heart through all stages of their long term employees’ lives, including retirement. Benefits packages and the proper communication of those packages can show how much you value your employees, and that appreciation is generally returned.

Communication is easily overlooked

I have found that face to face 15-minute individual employee sessions dramatically increase participation and appreciation of 401(k) retirement plans.   Typically, employees are not opposed to saving for their retirement—their lack of participation is usually because they are often confused about the company retirement plan and its benefits. When they are explained the plan and options one-on-one, they feel more comfortable about the opportunity. While this is surprising to many business owners or HR managers; I find that about 1 out of 5 employees will not actively read the numerous notices or literature that is provided to them, and therefore will not understand the terrific benefits that are provided to them.

Employer Appreciation via Company Match Plans

One significant way that employers display that they value employees is through company matching in 401(k) plans. It’s an attractive feature to many potential employees and gives assurance that employees are being cared for by their company. According to a study conducted by WorldAtWork and the American Benefits Institute, 92% of companies surveyed provided a matching contribution for employees.  If structured as a safe harbor match, there can also be the positive benefit of reduced annual testing for employers.

Consistency Counts With Matching Plans

Another way companies value their clients is by maintaining consistency with the matching plans that are offered. While employees will feel the most comfortable when there is a guaranteed match, non-guaranteed matches that are very consistent are still good. In the survey conducted, 77% of the companies indicated that the match plans offered did not have any changes made in the past 12 months, nor were there changes being considered. By maintaining consistency in the matching plans that are offered, companies are able to deliver a sense of stability to their employees, thus increasing employee participation in the plan and overall satisfaction.

A client of mine who used to work for Hewlett-Packard was enjoying the 6% employee match when the downturn hit and, without warning, the match dropped to 4%. In addition, the match was not guaranteed. Rather, it was determined at the end of the fiscal year and was based on profits. While the company is now more consistently offering a 4% match, my client has left for an employer with a steadier and more reliable 401(k) employee match. “I consider the match part of my overall compensation package, so when HP dropped the match amount, my overall compensation went down, which isn’t a great motivation boost,” he said.

A well rounded benefits package with the proper communication of those benefits provides employees with a stable working environment and provides the company with a stable workforce.