Jeff Kempker, CEBS, CRC
Governments face many tough decisions when determining how to make the best use of taxpayer dollars. Citizens demand a certain level of service from public entities for protection, infrastructure, health, education, and more. Of course, in order to provide these services, governments need to be able to attract and retain qualified workers. The better the public workers you have working in your community, the better services you will enjoy as a taxpayer.
It can be a real challenge for governments to hire and keep good people. More and more public human resources professionals are citing recruiting as their #1 priority in the coming years because of the of the aging workforce. There are many workplace advantages that can help attract good people. Culture, flexible work schedules, and job security are all reasons why someone might choose to work at one place over another. But recruiting really comes down to the compensation package being offered. And while an employer could certainly adopt a high-pay, low (or no) benefits compensation strategy, there are distinct advantages for an employer that offers a good retirement plan.
Workers Place High Value on Retirement Benefits
According to a recent survey by the Transamerica Center for Retirement Studies, workers across all age groups highly value retirement benefits with almost nine in ten workers (88%) saying a retirement plan is an important benefit and four in five saying retirement benefits would be a major factor in deciding whether or not to take a job. Perhaps the biggest surprise is that 70% of Millennials (those ages 18 – 38) said they would likely take a similar job with a different employer if better retirement benefits were offered. A similar study by theTIAA Institute and the Center for State & Local Government Excellence found that public workers rate retirement benefits as the second most important job feature after health insurance. Police officers and firefighters rated retirement benefits as the most important. This is good news for employers that provide quality retirement benefits as they will be in a better position to recruit and keep good people.
Reducing the Cost of Delayed Retirements
There are real costs to an employer every year an older employee decides to stay on the job longer than he should. While older workers may provide valuable experience and institutional knowledge, the trade-off is higher workforce costs and possibly lower morale among younger workers. A recent report by Prudential Financial found the additional cost to an employer for each worker delaying retirement is $50,000 per year. The Prudential report states that employers offering defined benefit pension plans are in a better position to see people retire on time than employers offering 401(k)-type plans where employees retire two years later, on average than those with a defined benefit pension plan.
Improving Employee Morale
Employee morale can suffer when workers continue to delay their retirement. According to a Towers Watson survey, 40% of respondents with a defined benefit pension said they were satisfied with their overall financial situation. Only 27% of those with a 401(k)-type plan said they were satisfied. Older workers who are unable to retire may become complacent and simply “retire on the job.” Productivity can also suffer because of the decline in mental and/or physical capabilities. For younger workers who wish to rise through the ranks, the lack of retirements can lead to them feeling like they are stuck in their current positions, causing them to search for other opportunities. Pensions that offer a dignified exit from the workforce provide some predictability, natural workforce movement, infusion of new ideas, and a boost to employee morale.
Providing a pension to public workers benefits taxpayers by improving the government’s ability to attract and keep good workers to serve the community, reduce costs associated with delayed retirement, and ensure efficiency in the workforce.
Learn more about the positive impact of public pensions here.
