To find the solution to the problem of talent recruitment we simply need to look at history. The greatest generation came back from World War II and they went to work and spent their entire careers at one or two companies. The reason was they wanted the lifetime pension that those companies offered, and they would stay with that company for however long it took to get it.
Back then, companies were good to their employees and protect the employee’s retirement benefits companies would promote from within. This enabled the employees to climb the ladder of success while staying at the company. Moreover, the employees were loyal to the company because they saw the company as their path to a future of financial security. It was a win-win situation for both the company and the employees.
Back then, employers enjoyed a full roster of employees with very little turnover and very little turnover costs. In most cases, once an employee was hired, the employee stayed with the company until retirement. The employees stayed with the company because they knew at retirement they would have a lifetime pension plan and together with their Social Security, their financial future looked good.
There are many recruitment and retention tools and strategies but pension plans coupled long-term vesting periods have always proven to be the most effective. Ironically, today very few employers offer pension benefits because pension plans are generally viewed as being too costly. However, when you factor in the turnover costs for highly-skilled employees, pension plans very quickly become a the most cost-effective option.
Most employers are unaware of the fact that in most cases, private pension plans can be created for a fraction of the cost of replacing highly-skilled employees. One of the cost-lowering factors is the employer has fully discretionary powers over which employees are eligible and which employees are not. The fact that the plan is fully discretionary significantly lowers the overall cost of the plan. Moreover, the employer can further limit the cost of the plan, by limiting the employer’s contribution to the plan.
The Bottom Line: Employee turnover costs are enormous and private pension plans are a very attractive and viable option.