To compete with larger rivals that offer higher salaries, explore offering the chance to work directly with top management from Day One, and opt-in retirement plans
I'm missing out on the top graduates in my industry because they are getting hired by my larger competitors. How can I attract better talent when I can't afford benefits such as a retirement plan?
Higher salaries and more extensive benefits are tough to beat, but small companies can compete with larger corporations on some intangibles that may be particularly attractive to younger workers.
For instance, a dynamic, growing firm is an appealing choice for graduates interested in being on the cutting edge of a particular industry. In a small firm, they'll be working directly with you and your top management team and they'll be privy to strategy, sales, new product development, and brainstorming. Most likely at a larger firm, they'll only hear about such decision-making from afar, and after the fact (see BusinessWeek.com, 8/14/06, "Small-Business Secrets to Hiring").
There is tremendous upside potential in a small firm as well, both in terms of ambitious young individuals who want to move up the ladder quickly—as opposed to crawling up laboriously over many years in a corporate setting—and in terms of sharing in the financial proceeds of later success. Although you may not be able to offer the larger salaries and more generous benefit packages of your competitors, look into profit-sharing, stock options, and performance bonuses for your employees for down the road. While you may not be able to promise such goodies immediately, you can let potential hires know that they are distinct possibilities eventually for employees who come on board now, while the company is still small.
Low-Cost Retirement Plans
A cooperative, family atmosphere is another intangible perquisite of working at a privately owned firm. Meet with potential hires at your offices and talk about cooperation and how every employee counts and every job is appreciated. Make yours a fun, informal workplace and it will be particularly appealing to young adults perhaps more concerned about life in the moment than about retirement many decades away.
In terms of pension plans specifically, you may indeed be able to afford one. There are simple, low-cost ways for you to help your employees save for retirement from their own salaries, while you make only a small employer match annually. The SIMPLE IRA is the least cumbersome in terms of administrative costs and reporting requirements, says Jean Setzfand, director of financial security at AARP. "The SEP-IRA also has very low documentation requirements and flexibility in that both the employer and the employee can choose to skip annual contributions if they want to," she explains.
You'd be smart to start investigating retirement plans now, because there is legislation pending that would mandate an "automatic IRA" for all established companies (those that have been in existence for two or more years) with 10 employees or more. "There are about 75 million employees nationwide who don't have access to an employer-sponsored retirement plan. This legislation would cover 40 million of those," Setzfand says. The legislation proposes that all employees be automatically enrolled in the plan, which has rules identical to the personal IRA, unless they opt out. Employers get temporary tax credits for participating.
Easy to Administer
"You can offer this kind of plan right now, even without the legislation mandating it, and just make it an opt-in program," Setzfand says. "Any of the big brokerage houses or banks will help you set up the plan, and the costs are not overbearing because these plans are so easy to administer. There are also regional administrators and benefits consultants that specialize in working with smaller firms, and they will help you package your retirement plan."
For more information on your various retirement plan options, see the Internal Revenue Service Web site. Here are some specific rules about SIMPLE IRAs and SEP-IRAs.