How 401(k)s Can Help Recruit and Retain Employees

By Roger Lee

Oct. 24, 2018

Four in five employees indicate they want benefits and perks more than a pay raise, and a 401(k) ranks in the top five requested benefits, according to a recent Glassdoor survey. On top of that, when it comes to millennials, benefits are particularly appealing – 90 percent of employees 18 to 34 years old say they would prefer benefits over pay.

401(k) retain employees
Roger Lee, CEO and co-founder, Human Interest.

While offering “fun” perks such as ping pong tables, happy hours, and stocked snack corners can be gratifying in the short-term, top candidates are focused on long-term benefits. Many are evaluating a company’s 401(k) offering when choosing which companies to apply to or deciding between multiple job offers.

With a tight labor market and recent trends surrounding retirement concerns, offering a high-quality 401(k) plan is an essential tool to add to your HR toolbox.

Attracting, recruiting and retaining employees is a costly and time-consuming process. That’s why it’s imperative to bring in top candidates and hire them with the intent of keeping them at your company as long as possible.

Here are three ways a high-quality 401(k) can help your recruiting and retention efforts:

1. Attract top talent and build high-performing teams

Fifty-one percent of employees joined their current employer largely because it offered a retirement plan, according to a survey by Willis Towers Watson. Offering a 401(k) shows potential candidates that you care about your employees’ financial well-being – even into retirement.

Companies can appeal to job seekers by demonstrating they are committed for the long-term with meaningful benefits like a 401(k) plan, which enforce a level of seriousness and credibility on the part of the employer.

2. Tip the balance in your company’s favor

Top candidates will have multiple offers with fairly equivalent salaries. A top-notch 401(k) benefit can be a “tie-breaker” for these candidates and will enforce a strong company culture around taking care of employees.

Competing on salary is a battle that is hard to win – there will always be another company that’s willing to pay more. However, thoughtful, long-term benefits that are financially beneficial, like an employer-sponsored 401(k), can really set you apart.

3. Increase employee retention

As top employees get recruited by other firms, 401(k)s are a great safeguard – if your company’s 401(k) or 401(k) match program is strong, it will be something they would lose out on if they switch jobs. In fact, 75 percent of new hires at a company offering a 401(k) say the retirement plan provides a compelling reason to stay, according to Willis Tower Watson’s survey.

While individual raises, bonuses, and promotions may benefit some, a 401(k) plan may be easier and more equitable to apply to your whole company. Employees who feel their employer is invested in them are more likely to be engaged in their workplace and stay with the company longer, reducing the high cost of employee turnover.

Top 401(k)s for Top Talent: How to Ensure You’re Providing the Best 401(k)

retain talent with 401(k)
Fifty-one percent of employees joined their current employer largely because it offered a retirement plan. To attract and retain employees, think about offering a high-quality 401(k) plan.

Not all 401(k) plans are created equally, and plans can vary drastically. To help you find the best 401(k) plan for candidates and current employees, these are the options your 401(k) plan should offer:

  • Immediate eligibility: With immediate eligibility, employees have the option to sign up and contribute to their account right away. This is extremely important for employees, since they’ll be receiving the full value of their benefit right away, as opposed to waiting a set amount of time. It can also improve participation, since employees are more likely to sign up when they first join the company and are onboarding.
  • Low-cost index funds: By offering low-fee options, employees can keep more of their earnings and not have fees eat away at their retirement savings. To put it into perspective, even a 1% difference in fees can add up to hundreds of thousands of dollars in lost retirement savings.
  • Employer match or contribution. By offering a generous employer match or contribution, you will most likely boost employee participation and increase your employees’ retirement savings, giving your plan an even more competitive edge. 401(k) matches are essentially financial compensation – with the added benefit of being tax-deferred – and many employees would consider this similar to a salary bump or bonus.

What is considered a good 401(k) match? According to the National Compensation Survey, 41 percent of employers match a percentage of employee contributions between 0 to 6 percent, while 10 percent match a percentage of employee contributions at 6 percent or more. According to the Bureau of Labor Statistics, the average 401(k) match is 3.5 percent of compensation.

The bottom line is that your company’s success is tied directly to the quality of its workforce. Giving your employees top-notch, thoughtful benefits, like a 401(k), is a great way to ensure they’re happy, remain loyal to your company, and are engaged in the company’s success.

Now is a great time to reevaluate your 401(k) as we approach business planning and budgeting for next year. Connect with your teams and 401(k) vendor to explore improvements to your plan or start a conversation about getting a new plan launched at the beginning of the next year.


Roger Lee is the CEO of Human Interest (formerly known as Captain401), a San Francisco-based company that helps small businesses offer 401(k)s to their employees.

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