As the unemployment rate creeps lower, attracting and retaining employees can become more difficult because of the increased competition for workers. Practices need to find ways to appeal to potential employees while keeping existing talent happy, and offering competitive retirement benefits is a critical way to do so, ranking second only to healthcare benefits in importance to employees, according to the Society for Human Resource Management.
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George G. Ellis, Jr., MD, a Youngstown, Ohio-based internist and chief medical adviser for Medical Economics, recently implemented a 401(k) plan at his practice. “It’s a retention tool,” Ellis says. “I looked at what the local hospital systems were offering and wanted something that would help me retain my employees.”
While small practices may not be able to offer the same level of benefits as a hospital system or larger physician groups, it’s important to know what competitors offer their employees, says Kirsten Curry, JD, president of Leading Retirement Solutions, a Seattle-based retirement plan provider that works with clients nationwide.
“Having a retirement plan is one way to attract and retain employees, and understanding what others are doing is important so what you are doing is competitive. A retirement plan that meets the savings goals of employees engenders a loyalty to the practice that [can] increase the production and stability of the practice,” she says.
If lack of a retirement plan costs a practice a low-skilled employee, it can be expensive to replace that person. The average replacement cost for a low-skilled worker is between 16% and 20% of the employee’s annual salary, while a highly-educated employee might cost more than 200% to replace,
according to a study from the Center for American Progress.
Sorting through all the retirement benefit options can be daunting, but experts say that by starting with a clear goal, doctors and practice administrators can find a plan that fits their budget and keep employees happy.
Know the goals—and the advisers
While employee attraction and retention are the obvious goals for offering a retirement benefit, physician practice owners can benefit, too.
“As a practice grows, the priorities generally shift and focus more around what changes need to be made to the retirement plan to maximize the benefits to the doctor-owners, not only from a retirement standpoint, but a tax-reduction strategy,” says Curry.
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She recommends writing down all the priorities and rank them. Employee retention may start as the primary goal, but over time, a successful physician may be more concerned with creating a tax shelter, for example.
Or, Curry says, an expanding practice may be more focused on maximizing profitability to fund growth, meaning there is little or nothing to contribute to employee retirement. These goals will determine which plan type is the best fit for the practice.
Once the goals are known and ranked, the next step is to find an adviser who can help set up the plan, says Ken Hertz, FACMPE, a principal with the Medical Group Management Association’s Healthcare Consulting Group. “As physicians look to bring in advisers, it’s important to understand how a financial adviser is compensated,” says Hertz.