Many employees rely on their employers for information and help understanding important rules and regulations surrounding their employment, pay, benefits and retirement options. Employers can play a key roll in how informed they are by sharing vital information.
A few common areas employers can provide some clarity are right to work laws, direct deposit advantages, managing/saving money, and Social Security benefits. Employees typically think about their work life in three stages: getting the job, working and retirement. All of these aim at the same goal: making money. We are going to focus on how employers can help during the working years to provide knowledge and pathways to encourage successful use of their employees’ paychecks to prepare for retirement.
Let’s face it, it’s hard to get a paycheck without a job. Right to Work laws protect employees from being hired/fired based on their membership or non-membership in a union. Each employee has his own decision to make when it comes to unions, but many are incredibly uninformed. Right to work laws vary by state, and it should be explained to employees that joining a union is never a requirement for working for a business. However, in certain states, employees, whether members of a union or not, may still be subject to union fees.
Not being a member of a union also does not give an employer the right to pay an employee less, as they are still covered under the collective bargaining agreement between the employer and the union. Pay decisions should be made based on merit, not union membership.
It is also important to note that not all workers in America have the right to work. The Immigration Reform and Control Act of 1986 limits the ability of employers to hire or employee unauthorized immigrants. Each employer must receive form I-9, employment verification, from each employee hired. This form must include documentation proving the employee is legal to be employed in America. Make sure to receive this documentation, and explain fully the consequences for providing false information to each employee you hire. Not requiring this information or not keeping it on file for the greater of either three years of employment or one year after termination could result in steep penalties and fees for employers.
Once employed, there are typically many options available to employees that can both help their current financial situation, as well as help them prepare for retirement in the future. Many employees do not understand the options they have regarding direct deposit, savings, retirement plan contributions and social security benefits. Employers who use dedicated HR management services are typically kept up to date with policy changes and implementation requirements. The easiest way to relay information to employees is to outline your policies, pay options and retirement plan overviews in an employee handbook. This also limits your chances of showing costly favoritism towards certain employees.
Providing an option to use direct deposit is incredibly beneficial to both employees and employers. For the employee, they know when their funds will be in their account. They will be paid regardless of whether they are out sick or on vacation, and they no longer have to travel to their bank and stand in line to cash or deposit their funds. For the employer, it reduces risk of lost and stolen checks. It also reduces the cost of printing or paying to have checks printed and mailed to employees. Direct deposit can also be used as a way to manage an employee’s money. Employers can encourage employees to deposit parts of their paychecks into a savings/retirement account directly to curve the chances of overspending and under-saving.
Employers who offer retirement savings can not only benefit from tax incentives on matched funds, but also enjoy the benefit of happier, more fulfilled employees. Employer-sponsored plans, especially those with employer matches, can really encourage employees to save money for retirement. Talk to your employees, keep them up to date on new retirement plan laws and encourage them to participate.
Another big piece of retirement savings accrued through working is Social Security benefits. It is important to explain that the “Social Security Tax” is really a benefit to the employees. This benefit comes in the form of a “match” made by you, the employer, on each dollar made by the employees up to their yearly contribution limit. To receive Social Security benefits later in life, and employee must accrue 40 credits. A credit is essentially a quarter (three months) of work. Meaning, after 10 years of work, a person becomes eligible for Social Security benefits. Many times, employees can begin drawing Social Security early, although it will result in a penalty and decrease the amount of income they receive. Even at retirement age, employees can still both work and receive their benefits, although they will be reduced more for each dollar employees make over the current years limits.
Employers can make a huge impact on the day-to-day decisions their employees make simply by keeping them informed. The more your employees know, the more informed decisions they can make about savings and retirement. In the long run, you will have happier, more satisfied employees, which ultimately leads to a better workforce for your business.