What does a 401(k) have to do with hiring cooks? Well, in a nutshell, a restaurant-friendly 401(k) is a broad-based benefit that appeals to restaurant staff, and can help restaurant employers hire and retain valuable workers – while meeting IRS nondiscrimination testing requirements. These new 401(k)s use advanced technology to create a more engaging, user-friendly, smartphone-based platform for restaurant staff, and other hard-to-reach employee groups.
A crucial ingredient in your hiring and retention recipe
The restaurant industry is booming. Unfortunately for restaurants, the increased demand for restaurant staff comes in the midst of the tightest labor market since 2008, and restaurants are feeling it. A recent New York Times article reports on what this situation is doing to hiring. “At conferences, over beers and on social media, chefs and restaurateurs are openly worrying (not to say complaining) about a crisis-level shortage of cooks.”
This is where restaurant-friendly 401(k)s come in. In a world where it’s hard to find suitable, let alone talented, staff, a restaurant-friendly 401(k) is a great low-cost benefit and a cost-effective form of compensation – and together they can help attract and keep talented people.
And, while there is no requirement to offer a 401(k) match, if the business can afford to make some matching contributions, the match can be designed with a vesting schedule to encourage employees to work at the restaurant for a longer period of time in order to take advantage of gradually vesting matching contributions.
Happier employees equal happier customers
There’s more. A2015 Bank of America study revealed that financial stress is cited by employees as their #1 concern (5x greater than their personal health). A similarPrudential study cites 7 out of 10 HR managers revealing that personal financial issues have a large impact on employee performance. So, the more you can do to alleviate your staff’s financial stress, the higher the chances that they can focus on their work and move your restaurant’s goals forward.
What makes them restaurant-friendly?
Two things. First, restaurant-friendly 401(k)s are designed to accommodate the unique nature of the work done by restaurant staff, both front and back of the house. This work is a spectrum of frenetic tasks, prepping, cooking, busing, hosting, and serving customers. Which is quite different from the work done by employees who sit at desks in front of computer screens.
Second, they’re designed to accommodate employees who are scattered around the landscape at multiple locations, which traditionally has made it very tough for centralized HR to connect and communicate with them.
How do they work?
With the new mobile platforms, direct involvement from HR staff is not required. Video and “dynamic personalization” applied to 401(k) enrollment can guide people through the setup process and get them rolling with their retirement savings program – all by themselves – in a few short minutes.
The process starts by engaging employees with emails and texts (because restaurants don’t always have every employee’s email address) via a short, interactive video – on their phone. Walking employees through the process and answering questions, in plain English and Spanish, goes a long way toward driving adoption.
Reducing employee decisions is critical, too. Dynamic personalization minimizes the information that employees need to supply, and boils their decisions down to only those that are pertinent. The result: Dramatically accelerated enrollment that can be accomplished in the span of a 5-minute coffee break.
Top it all off with autopilot 401(k) plan design that complements the technology to get employees off to a strong start. That typically includes auto-enrolling employees with a default deferral rate that automatically increases by 1% each year, and an appropriate balanced investment such as target-date funds. Plus, employees can tweak their plan parameters with the click of a button.
Our own data shows that restaurants who have taken advantage of a restaurant-friendly 401(k) have seen around 90% of their employees participate in the plan – at average savings rates above 7%. These participation and savings rates are 45% and 25%, respectively, above their averages for the wholesale and retail trade category, according to Vanguard’s “How America Saves, 2015” report.
Restaurateurs already know the power of a consumer-friendly strategy. The takeaway here is that a consumer-friendly strategy has been applied to the 401(k) itself. Because the easier it is for employees to engage with their 401(k), the more likely they are to value it and use it.
Bottom line: In today’s tight labor market, any advantage in hiring, retaining, and delighting your staff can go a long way towards supporting your restaurant’s ultimate goals.