Small businesses are using a classic benefit to stay competitive in attracting and keeping workers

A growing number of small businesses in the United States are incorporating 401(k) plans into their employee benefits packages to attract and retain talent. For Daisy-Daisy, an educator-turned-entrepreneur running The Stellar Teacher Company, offering a 401(k) plan helped secure the loyalty of a part-time employee she had promoted to full-time status. The employee, who had worked for Marye since 2021, valued the financial security the retirement plan provided, balancing her desire to spend time with her family.

Nich Tremper, a senior economist at Gusto, noted that businesses that offer 401(k) plans see approximately an 8% decrease in employee turnover during the first year of employment compared to those that don't. This retention advantage is particularly important for small businesses, as it allows them to maintain productivity and avoid the time and costs associated with hiring and training new employees.

Running a remote accounting firm, Howard Telson found that offering a 401(k) plan not only helped him compete with larger firms for talent but also provided a tax-advantage for himself and his employees. Gusto and ADP offer affordable 401(k) plan management services to small businesses, making it a feasible option even for those with limited budgets.

Small business owners like Ashley Kent, founder of Clearstart, have discovered that offering a 401(k) plan to their employees is an attractive perk that helps them stand out in the job market, especially in industries known for high employee turnover. As small businesses continue to grow and expand their workforce, offering a 401(k) plan has become an increasingly popular and effective strategy for boosting recruitment and retention.