Retirement Variation by Industry: What It Means for You
There's clearly retirement variation by industry, especially when it comes to benefits and its related trends. But one thing that is not variable is the importance of those benefits to both employers and employees alike. ADP Research Institute's® Retirement Savings Trends quotes the 15th Annual Transamerica Retirement Survey, which indicates that 89 percent of employers who offer employees a 401(k) or other deferred-compensation plan say it's "important" for attracting and retaining talent. Meanwhile, the 2015 Bank of America Merrill Lynch Workplace Benefit Report states that "nearly 80 percent of employees view benefits like a retirement plan as a key consideration in accepting a new position."
So there's no doubt that retirement benefits matter. Not just for recruiting and hiring, but for keeping employees focused on the task of helping your organization grow.
Variation by Industry
The ADP Research Institute's Retirement Savings Trends white paper points to wide variations among industries in the percentage of employers who offer retirement benefits. Overall, just half of all companies offer retirement benefits, but some industries are significantly above and below that 50 percent benchmark.
In the manufacturing sector, for example, 67.1 percent of employers offer benefits. In the information (IT) sector, 63 percent of employers do. On the lower side, only 23.3 percent of employers in leisure and hospitality offer any type of retirement plan, while just 40 percent of organizations in the construction sector do.
ADP's white paper reasons that the variances by industry likely reflect a number of complex factors. For instance, the higher rate of retirement benefits in manufacturing "could reflect the prevalence of unions" in that sector where some benefits might be mandated in a collective bargaining agreement. As for the lower rate in leisure and hospitality, it may be related to the amount of employees who are seasonal, part-time or temporary workers.
Employee Savings Patterns
As a general rule, and regardless of industry, the study shows a clear correlation between employee age, participation rates and savings rates. Perhaps unsurprisingly, as employees age, they have a higher tendency to participate in retirement savings plans. For instance, only 41.1 percent of employees between 20 and 24 years old save, while 65.6 percent of employees over 55 years old save. In addition, the 20-to-24 age group saves at a rate of 4.6 percent of their earnings, whereas the 55+ age group saves 8.5 percent. Older employees experience more financial stress as their retirement approaches, and they save accordingly.
The savings rate for all sectors varies by the size of the organization, but there seems to be an inverse correlation between the size of the organization and the employee savings rate, regardless of industry. For example, employees at construction firms with over 5,000 employees save at a 4.6 percent rate while their peers at smaller (less than 20 employees) construction firms save at 7.1 percent.
Questions HR Leaders Should Ask While Considering Retirement Benefits?
1. How financially stressed are my employees about retirement savings?
Considering that "61% of HR professionals find that employees' financial stress impacts their work performance," according to 2012 research published by the Society for Human Resources Management, adding retirement benefits can serve as a stress reducer for your employees. This will in turn free up employees to keep their focus on working better because you have removed such a major financial stressor.
2. Is there an opportunity to stand out from the crowd by offering retirement benefits?
If few employers in your sector offer retirement benefits (such as the aforementioned leisure and hospitality), you could make a huge differentiation by offering a retirement savings plan. Additionally, considering "52 percent of employees see retirement benefits as driving company loyalty," according to a 2012 MetLife report, these benefits can be a major component of cost-reducing retention plans.
According to ADP, "companies of all sizes are increasingly able to include retirement plans among their benefit offerings, thanks to technology that helps reduce administrative burdens, compliance risks and overall costs for plan sponsors." So no matter the industry standard, if you want to stay ahead of your competition, offering top-of-the-line retirement benefits is a smart and economically sensible place to start.
For more information on retirement variation by industry, download the report: Retirement Savings Trends: How Employers Can Extend Coverage and Simplify the Retirement Readiness Process.
