By Claudine Kapel
When it comes to total rewards, what gives your organization a competitive edge?
It’s an important question as it is central to how organizations attract and retain talent. A good retirement savings plan can represent a point of distinction when it comes to attracting and retaining talent. And continuing economic uncertainty may make these types of plans all the more important to employees.
This may be one reason some Canadian organizations are hanging on to defined benefit pension plans.
A recent pension study by Aon Hewitt found that Canadian employers are less willing to close defined benefit pension (DB) plans than organizations in the United States and the United Kingdom.
The 2011 Global Pension Risk Survey found 39 per cent of Canadian respondents had closed their DB plans for existing members. But that figure was closer to 80 per cent in the U.S. and the U.K.
The Canadian respondents cited three reasons why they continue to offer defined benefit plans:
- Alignment with their total rewards philosophy (26 per cent);
- Union pressures (21 per cent); and
- Competitive issues (15 per cent).
Although defined benefit plans come with funding and investment challenges, employees generally prize them because they deliver a guaranteed level of retirement income. So having these plans can represent a powerful employee retention tool for those organizations that still have active plans.
No one is expecting defined benefit plans to regain popularity, but there are other vehicles that can be used to help employees save for their retirement. According to Statistics Canada, membership in defined contribution pension plans (where the employee assumes the investment risk) has been on the rise and as of January 2010, represented 16 per cent of all registered pension plan membership.
And outside of the registered pension plan arena, employers can also create group registered retirement savings plans.
When contemplating your organization’s total rewards offering, it may be valuable to consider the costs, risks and benefits of providing some form of retirement savings plan. Questions to consider include:
- To what extent are employees concerned about saving for retirement?
- To what extent would they value a company-sponsored retirement savings vehicle?
- How common is it for organizations in your sector or industry to offer some form of retirement savings plan?
- Would maintaining or offering a plan contribute to the market competitiveness of your total rewards package?
- Do employees fully understand and value whatever retirement savings support they currently receive from your organization?
An aging population and continuing economic uncertainty have both fuelled a rise in employee attention to retirement savings considerations. For some employers, this can translate into an opportunity to bolster the value of their total rewards offerings.
Claudine Kapel is principal of Kapel and Associates Inc., a Toronto-based human resources and communications consulting firm specializing in the design and implementation of compensation and total rewards programs. For more information, visit www.kapelandassociates.com.