Roughly nine in ten employees view a 401(k) as an important benefit, according to a survey by Transamerica. But only 14 percent of small businesses, including many restaurants, offer one.
This is primarily because restaurant and other small business owners view 401(k) plans as too complex and expensive. Fortunately, technology is making retirement plans more affordable and accessible for restaurant owners, giving them an opportunity to hold onto good employees in a competitive labor market.
Offering a 401(k) plan to your employees may sound daunting, but they’re not the only ones that would gain from it. Here are three benefits to you as a restaurant owner.
More than half of workers joined their company largely because it offered a retirement plan, according to a survey by Willis Towers Watson. Since providing a 401(k) plan in the restaurant industry isn’t common, it could give you a leg up when trying to recruit the best talent.
The restaurant industry is plagued with high turnover, with a current rate of 73%, according to the Bureau of Labor Statistics.
Let’s say you have 30 employees. At that rate, you’d need to replace 22 of them each year. With an average cost of replacing a hospitality employee at $5,864, you would incur $129,008 per year in turnover costs. A 401(k) typically costs a few thousand dollars a year – it would pay for itself even if it helped retain only one or two employees.
By offering a 401(k) plan, you could reduce your turnover rate by giving employees a benefit they might not get at a competing restaurant. In fact, the Willis Tower Watson survey showed that 75% of new hires at a company offering a 401(k) say the retirement plan provides a compelling reason to stay.
The federal government wants to help workers save, and offers a couple of tax breaks to employers and employees to financially incentivize them to set up and use their 401(k)s.
For starters, your business may qualify for a credit of 50% of eligible start-up costs up to $500 total for the first three years you offer the plan. Also, the company can deduct ongoing feesand contributions you make to employee 401(k) accounts as business expenses, and employees can deduct their 401(k) contributions from their personal taxes.
How the Modern 401(k) can be a Better Fit for Your Restaurant
In the past, 401(k) plans haven’t been very business owner-friendly. But over the past five to 10 years, that has changed, making it easier and cheaper to set up a 401(k) than ever before. Here’s how the modern 401(k) can make your life easier.
Four in 10 small businesses that don’t offer a 401(k) cite concerns about cost as one of their reasons, according to the Transamerica survey. But improved technology has leveled the playing field for 401(k) plan providers, helping drive down costs for everyone involved. Newer providers are able to provide a 401(k) plan to small companies for lessthan what you’d pay for one employee’s health insurance.
They Take the Administrative Work off Your Plate
Running a restaurant business is a lot of work, and you likely have neither the time nor the expertise to get into the weeds with a 401(k) plan and its connection to your payroll system. Fortunately, 401(k) providers these days are more than happy to take on that work on your behalf. That way, you can save time and stick to what you know best.
They Help with Compliance Management
Running a 401(k) plan requires a lot of paperwork and ongoing IRS compliance work to make sure everything is kosher. Historically, your human resources team would be tasked with this job. But again, high turnover rates likely keeps them busy enough as it is. With a modern 401(k), you can outsource some or all of this work so that you can focus on the needs of your business instead.
They Allow for More Customization
In the past, 401(k) plans have been fairly uniform, which didn’t allow small business owners to get the best fit for their company and employees. Modern 401(k)s have better plan designs that enable you to customize your plan to your restaurant’s budget and your employees’ needs.
The Bottom Line
Employee turnover is a big expense for restaurant owners, and a 401(k) plan can help reduce those costs. While 401(k)s have been expensive and complicated in the past, that’s no longer the case.
Today’s 401(k) plan is not only more affordable but also easier to manage. Many 401(k) plan providers now offer to do much of the legwork for you, allowing you to spend more time on growing your business.