Good workplace retirement plans create value for employers
Retirement benefits are often looked at through the lens of the individual. But what happens when you turn it around and look at the value of retirement benefits to employers?
We explore this, and more, in the new HOOPP commissioned report by Common Wealth, The Value of a Good Pension: The business case for good workplace retirement plans.
The research shows that good workplace retirement plans create value for employers, including offering a range of benefits that strengthen an employer's bottom line.
Let's take a closer look at what these benefits are:
Enhanced talent attraction and retention
Good workplace retirement plans give employers a competitive advantage, differentiating them as an employer of choice and positively impacting talent attraction and retention.
Studies have found an association between improved talent attraction and retention rates when workplace retirement plans are offered. For example, as noted in the 2021 Canadian Employer Pension Survey,
and varying according to the type of retirement plan, between 77% and 87% of employers who currently offer the benefit said a workplace retirement plan was extremely important or very important for recruitment. Furthermore, a study from Manulife
found that 86% of employees who belong to a workplace group retirement plan agreed these benefits increase retention, with 82% of the same employees agreeing they increased their loyalty to their respective employers.
According to Eleanor Marshall, Bell Canada’s Vice President of Pension & Benefits, one of the primary reasons the company has offered and continues to offer retirement benefits, which they’ve been doing since the 1920s,
is to help attract, retain and motivate its employees. |
Greater employee productivity through reduced financial stress
Offering workplace retirement savings can help employees feel more secure monetarily, reducing financial stress. This further reduces rates of absenteeism and presenteeism (physically present at work but not fully functioning), improves productivity
and strengthens company performance.
A 2017 Pricewaterhouse Coopers report revealed that some financially-stressed employees can hurt company performance; almost half of distracted employees reported spending three work hours or more per week on financial issues. Additionally, according
to the Canadian Payroll Association, financial stress is costing Canadian employers approximately $16 billion annually due to lost productivity. Some behavioural scientists have also shown a causal relationship between financial scarcity and
mental function. They have demonstrated that preoccupation with financial concerns leaves fewer cognitive resources available to guide choice and action.
“Employers investing in retirement plans are investing in the performance of employees while they’re working for their companies.” – Katie Bach, Managing Director of the Good Jobs
Institute and expert on job creation, access and quality |
Improved compensation efficiency
The amount of financial value a certain compensation package produces for an employee under various retirement benefits scenarios differs. Known as compensation efficiency, this improves when employers offer retirement benefits. While compensation
efficiency directly benefits the employee, it also boosts employers’ recruitment, retention and productivity in a competitive job market. Improved compensation efficiency consequently makes the most financial sense for everyone.
In our earlier research; The Value of a Good Pension: How to improve the efficiency of retirement savings in Canada, we
identified five value drivers that determine the value for money in a retirement arrangement: saving, fees and costs, investment discipline, fiduciary governance and risk pooling. For employers seeking to maximize lifetime financial value
for its employees, the more of these value drivers are included in their retirement plan, the more compensation efficiency they will offer.
When an employer offers a Canada-model pension plan rather than no pension plan at all, a representative worker could increase their pay available for other uses (i.e., not retirement) by an average of 69%, or about $26,600 per year.
Workers in high-quality plans can thus take home more in pay each year without sacrificing their retirement security. |
So what can employers do?
To support their employees’ retirement security while reinforcing their bottom line, here are some considerations for employers:
Focus on value for money
|
Employers seeking to increase value for money from their workplace retirement plans should consider how to: encourage automatic saving behaviour, lower fees and costs, help members avoid common investment mistakes, etc.
|
Consider a “retirement first” approach to employee benefits |
Evidence suggests, employers tend to rate a retirement plan more highly than benefits like health and dental when it comes to attraction, retention and financial stress. This suggests employers looking to provide benefits to their employees
should consider a retirement plan first.
|
Tailor your plan to your workforce |
Customization can offer a further opportunity to increase value for money, and therefore compensation efficiency, over and above the five value drivers. Tailoring workplace retirement offerings will ensure plans offer both greater financial
value to employees and are perceived by employees as offering that value.
|
This research can spark a conversation among employers and other stakeholders about how Canadian businesses can offer and enhance workplace retirement plans to create business value, while strengthening retirement security for workers.
So what can employers do?
To support their employees’ retirement security while reinforcing their bottom line, here are some considerations for employers:
Focus on value for money
Employers seeking to increase value for money from their workplace retirement plans should consider how to: encourage automatic saving behaviour, lower fees and costs, help members avoid common investment mistakes, etc.
Consider a “retirement first” approach to employee benefits
Evidence suggests, employers tend to rate a retirement plan more highly than benefits like health and dental when it comes to attraction, retention and financial stress. This suggests employers looking to provide benefits to their employees should
consider a retirement plan first.
Tailor your plan to your workforce
Customization can offer a further opportunity to increase value for money, and therefore compensation efficiency, over and above the five value drivers. Tailoring workplace retirement offerings will ensure plans offer both greater financial value
to employees and are perceived by employees as offering that value.
This research can spark a conversation among employers and other stakeholders about how Canadian businesses can offer and enhance workplace retirement plans to create business value, while strengthening retirement security for workers.
Watch the webcast:
Boosting the bottom line through workplace retirement plans
This document provides a simplified overview of HOOPP's benefits based on the terms of the HOOPP Plan Text at the time of publication. From time to time, HOOPP may amend the HOOPP Plan Text. In cases where the information provided in this document differs from that contained in the HOOPP Plan Text, the HOOPP Plan Text will govern. More details, including the full HOOPP Plan Text and a complete description of the Plan and its benefits, can be found on hoopp.com.
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