Two Recruiting and Retention Advantages Small Businesses Have Over Big Businesses

Two Recruiting and Retention Advantages Small Businesses Have Over Big Businesses

Last updated on February 20th, 2024

Small businesses have two major advantages over large corporations when it comes to pay and benefits. That’s right – advantages!

First, you likely operate out of one location, which makes it easier to be well-versed on local economic conditions so you have deeper insight into what may be impacting your employees and how. Second, with fewer employees, it’s easier for you to find out what can make the biggest impact on retention and loyalty.

Let’s start with geography… It’s no secret New York is in one of the most expensive regions of the country and it’s a tough place to save money. According to the Federal Reserve Bank of New York, household debt is on the rise, especially when it comes to mortgages, credit cards, student loans and auto loans. Except for student loans, delinquency rates are increasing.  As a result, anything you can do to help employees build savings and lower debt will undoubtedly be appreciated.

Next, consider how your employees’ demographics may impact pay and benefit needs. For example, a high school graduate may be mostly concerned about saving to move into his/her own place. A college graduate may be mostly concerned about student loans. New parents may be wondering where they’re going to come up with the estimated $25,000 needed for their newborn’s first two years. Middle aged adults may be more concerned about a mortgage or paying for college. Those approaching retirement may be preoccupied with wellness and whether they have enough retirement savings.

Based on what you know about your employees’ needs (or what you find out via a survey or focus groups), you’ll be in a better position to invest in rewards that help strengthen recruitment and retention. In addition, your business may be eligible for tax deductions and credits for offering certain perks. Consider:

  • Health care coverage If eligible, there’s a Small Business Healthcare Tax Credit worth up to 50% of the cost of employee premiums.
  • Retirement savings plans With SECURE 2.0, costs for starting certain plans may be covered 100%. What’s more, eligible employers can receive an annual credit up to $1,000/employee for contributions. Plus, small businesses can receive a $500 tax credit for automatically enrolling employees in its 401(k).
  • Paid time off For Paid Family Leave coverage, consider sharing the cost or paying the full cost of coverage, so employees keep more of their pay and have peace of mind that they’ll have an income and job protection should they have to take a family leave.
  • Early wage access or on-demand pay Allow employees to access earnings before payday, so they can avoid penalties for late payments due to cash flow issues, reduce the need to use high interest credit cards, and more.
  • Emergency savings accounts Help employees prepare for an emergency with an account set up at a local bank or credit union. Starting in 2024, under SECURE 2.0, add an emergency savings account to your 401(k) plan or allow for hardship withdrawals via self-certification.
  • Groceries How much would a membership at a local discount store mean to your employees? How about a meal allowance or food stipend?
  • 529 College Savings Plan Help employees save for school for themselves or dependents. You can contribute and earn a tax credit. Savings can be used to pay for school or educational loans.
  • Tuition reimbursement or education assistance program In addition to helping pay for school, a program can also be used to help pay back student loans.
  • Child and elder care Depending on the type of benefit offered (i.e., onsite childcare versus paying for an offsite provider), your business may be eligible for tax credits or deductions.
  • Discounts programs or memberships Help employees leverage group buying power to save on everything from pet, car and home insurance to everyday purchases, appliances, and more.

Please note: The preceding are very brief summaries; a lot of conditions and requirements typically apply. To fully understand potential tax benefits of adopting certain benefits, it’s always best to consult  a tax advisor. Also, before offering a benefit, it’s a good idea to run it by your employees to make sure it’s something they’ll value and use.

One benefit that may add value to all employees is financial education or advisory services. Whether you purchase classes online, hire a professional from a neighborhood bank to host classes, or take advantage of free online tools, helping your employees evaluate their financial situation, develop a savings plan, and reach goals is a valuable benefit given today’s economic environment. You help relieve the financial stress your employees may be under and build loyalty. (Avoid giving direct financial advice yourself, as it can backfire and lead to legal issues.)

Finally, if you’re struggling to retain employees there’s a good chance neighboring businesses are as well. Team up to see if you can offer discounts to each others’ employees – it can be a win-win for employees and businesses. (Your local Chamber of Commerce may be able to help.)