Best retirement benefits for a small, blue collar business to offer EEs?

March 08, 2023

by a searcher from University of Virginia in VA-20, Charlottesville, VA, USA

We purchased a roll-off dumpster business last summer, which has less than 10 employees. We'd like to offer a retirement savings option for EEs as a new benefit, both for retention purposes and to incentivize EEs to put money away for retirement. That said, we're mindful of the paycheck-to-paycheck mentality of many blue collar workers, as well as the likelihood of EE turnover over time.

Has anyone solved this problem in terms of a plan that is utilized (and valued) by EEs, but that doesn't create a nightmare to administer for a small business owner? 401k plan with a match? Profit sharing plan? And was the juice worth the squeeze?

And finally, for all the transaction experts on here, while we're not planning on selling anytime soon, how should we be thinking about the financial implications of offering such a benefit - i.e. the pros of EE retention vs the cons of ongoing funding liabilities to potential acquirers down the road?

Reply by a searcher
in Toronto, ON, Canada

From an accounting and valuation perspective the 401k match is an expense, simply an added cost of wages, and does not create long-term future liabilities.
You could consider working with a reputable financial services firm to educate your employees on the value and importance of their 401k contributions, setup the plans / regular payroll contributions, and work with employees to determine their individual investment strategies.

I typically see anywhere from a 2-5% match. Ultimately you would be adding approximately that match % to your wage expenses.

Reply by a professional
from Villanova University in West Chester, PA, USA

Profit sharing plans are often times much more simple to administer and cost less. They are a contract that can have parameters that are more easily customizable, so you can align it with your exit strategy so that it doesn't impact your marketability. There's also phantom equity plans, but that's typically for investors more so than employees. However, it may be of interest depending on the situation. I'd be happy to discuss this further. I'll send you a DM.

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