Free «Advantages of Installing a Retirement Plan for the Employer» Essay Sample

The ‘4Rs’- recruit, retain, reward and retire are critical components of life cycle of any organization. The process of ‘4Rs’ helps HR to better deal with challenges and complex nature of employee management. Hunt (2014) argues that the 4Rs play a critical role in ensuring sustainability of an organization in a competitive business environment. A good retirement plan can help retain employees and reduce costs associated with recruitment and training. Setting up retirement plans is beneficial for employers, business and employees. Retirement plan has tax advantages and other incentives for employees. Benefits for employer relate to cost reduction while benefits for employees are gains in income and future financial security (Lusardi & Mitchell, 2011). It is evident that 4Rs are interrelated and contributes to organizational success. The purpose of this report is to evaluate the 4Rs and retirement plan from the perspective of employees. It also identifies the benefits of setting up a retirement plan to the employer and its influence on the process of 4Rs.

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The 4Rs of Human Resources Management

Company executives should be well versed in talent management or simply in the basics of human resource. These include recruitment, retention, reward and retirement. Improving their knowledge and skills in 4Rs can help reduce business inefficiencies (Hunt, 2014). Managing human resources follows a certain cycle or process, namely the talent identification and recruitment, reward, retain and retirement. Because of the complex nature of human resource management, good skills are required to effectively manage employees in the organization.

The 1st ‘R’ – Recruitment

Recruitment is the process of acquiring human talents to execute business strategies and tasks. Senior HR manager must constantly monitor organization to ensure the right and adequate workforce for the available tasks. New talents are recruited to replace employees that leave the organization or that are not right for the available tasks. By and large, the process of recruitment involves a number of business processes outlined in the HR strategic plan. Critical analysis of corporate strategy, goals and objectives as well as current talents is known to prompt recruitment process. According to Armstrong and Taylor (2014), evaluating present and future internal and external demographic trends is also an essential factor in recruitment. This process involves six main steps. It begins from scanning the environment to review the organization’s strategic plan. This includes identifying factors in internal (financial position) and external (legal factors) business environment that influence business performance. Next step is to determine talents that are needed to accomplish organizational tasks. Understanding the competition of the required talent in the labor market is the third step, while assessing existing talents is the fourth step. Fifth step entails making a decision with regard to filling the identified talent gap and, finally, implementing the action plan through the acquisition of new talents or training and developing of existing talents.

The 2nd R – Reward

In the context of human resource management, the term rewards is widely known to entail monetary compensation. The term is directly linked to increasing the performance of employees through motivation. However, financial reward is not always the best motivator to boost employee performance. Whereas the focus has been on extrinsic reward system as best motivator, the trends are changing towards intrinsic rewards. Expectancy theory of motivation helps to unravel an effective rewards system for motivating employees. This theory can be universally applied in all organizations, regardless of their geographic location, size and industry. Chiang and Jang (2008) states that the fundamental elements of this theory – attractiveness of the tasks, performance-outcome expectancy and effort-performance expectancy, can assist HR managers in understanding factors that make the rewards effective and ways they can be changed to fit different employees.

In respect to rewards and improved performance, motivation is optimized when employees believe that their efforts to produce certain beneficial outcomes are effective and that performance can be improved to the desired level. In spite of this revelation, it is essential to compensate employees for their performance and provide additional rewards for putting extra effort to avoid demotivation. Secondly, using monetary rewards alone is not effective or sufficient to guarantee improved performance of some employees. Finally, any rewards are useless unless they are based on vision. This means employees will always fight to realize what is expected of them irrespective of the reward.

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The 3rd ‘R’ – Retention

Retaining employees is important for every organization, since it reduces the costs and hustle associated with recruiting and retraining new talents. It does not improve the situation if resources are allocated for identifying, recruiting and training employees and not for retaining them in the organization. While there are justifiable departures due to health complications and poor performance, losing highly talented and skilled employees to competitors perplexes the management. Armstrong and Taylor (2014) identified the main reasons why employees leave the company, such as little coaching and feedback, loss of trust in management and failure to recognize and value employees. It is vital to identify these cases and try to address them to avoid loss of talents.

The 4th‘R’ – Retirement

In general, to retire means to withdraw from service. Retirement is a key constituent of talent management. However, retirement of talents is not necessarily related to age. Retirement is critical in HR management for a simple reason: Nothing lasts forever. This calls for the structured plan to deal with the ultimate withdrawal of talents or employees due to incapacity and age. For effective retirement, Bratton and Gold (2012) argue that applicable employment laws and regulations need to be observed.

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Discussion of Findings

Benefits of Retirement Plan with Employer

Retirement plan enables both the employer and employees to save and invest in their future financial security. The first benefit for employer is tax advantages for the company. This policy was intended to encourage business to provide employees with retirement benefits. In this regard, any contributions by the employer towards a retirement plan are tax deductible, which lightens the tax burden of an employer. Therefore, investing in a retirement plan reduces their tax bill while increasing their future security and net worth. The employer can customize the plan precisely to match the needs of employees. It may involve setting up a retirement plan that meets IRS requirement and then channeling tax-deductible contributions that will continue to grow until the day of withdrawal (Lusardi & Mitchell, 2011).

Employers that install profit-based retirement benefits have motivated employees and hence higher productivity. This is because the contribution of the employer towards retirement plan is tied to the profit generated by the company. This motivates employees to perform better to generate higher profits and benefits, which lead to higher contributions to the plan. It is also argued that a retirement plan attracts qualified candidates and retains talented employees (Lusardi & Mitchell, 2011). This gives the firm a recruiting advantage over other firms.

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For businesses with little cash on hand and high start-up costs, income from their retirement plan can be used to supplement compensation package for employees. Employers with a retirement plan can use it for their own savings instead of looking for a different plan. Small employers who set up a retirement plan for their employees are entitled to tax credit for the cost they incurred when establishing the plan.

Discussion of Survey Findings

Clarity of Jobs and Responsibilities

The study was conducted to gather information on perception of employees towards retirement plan offered by their organization. Employees are expected to have a clear knowledge and understanding of what management expects of them. From the survey findings, most respondents acknowledged that expectations of the company are clear and have an influence on their job performance. From the table in Appendix, it is evident that 236 out of 531 and 239 out of 531 respondents agreed with the fact. Similarly, 184respondents out of 530 and 323 out of 531 indicated that clarity of what is expected is very important to their work performance.

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Provision of Equipment and Materials

While most respondents (63.4 – extremely important and 33.6 – very important) acknowledged the importance of providing necessary materials and equipment to employees (Fig 1b), most employees in the organization were not provided with essential tools and resources to perform their duties. Accordingly, only 38.4% of employees are offered necessary materials and equipment in their organizations (Fig 1a: Appendix).

Provision of Information on Pension Benefits

The results show that provision of information on changes and development of pension benefits is important. According to fig 2b, most employees in the survey (both permanent and casual) supported these facts, but a substantial number such employees indicated that provision of such information is moderately important. However, the employer is not providing employees with information regarding development and changes in pension benefits (Fig 2a: Appendix).

Recognition for Work Well Done

The importance of recognizing employees for their hard work cannot be underestimated. This was confirmed by the survey results with over 70% of participants thinking it is important (34.7% – very important and 35.3% – very important) (Table 3b: Appendix). However, recognition of employee performance is not used properly by the organization, what demotivates employees to perform. Accordingly, 27.4% are moderately recognized, 16.6% are recognized to a slight extent and 21.5% are not recognized at all (Table 2a: Appendix).

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Encouraging Employees to Develop

Employee development and training is a critical element in HR management. The survey has confirmed the importance of employee development with a high mean of 3.37 and standard deviation of (Table 4: appendix). However, it is clear from the survey results that employees at the company are not encouraged by their senior to develop at work as shown by the mean of 2.84.

Participation of Employees in Decision Making

It is evident from results that employees are involved in decision making as their opinions count in the organization as shown by a mean of 3.25 and standard deviation of 1.044. Participation in decision-making is very important and motivates employees as shown by a mean of 4.03 and standard deviation of .946 (Table 4: Appendix).

Does the Organization Make You Feel that Your Job Is Important?

It is evident that making employees feel that their contribution is important plays an important role in the workplace. Most respondents confirmed the facet (Mean = 3.82 and SD = 0.999). Moreover, the organization makes more than half of employees feel that their jobs are important (Mean = 2.97, SD = 1.154) (Table 4: Appendix).

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Commitment to doing quality work

It is evident that most employees at the company feel their colleagues are dedicated to doing quality work as shown by a mean of 4.43 and standard deviation of 0.674. Similarly, the employees acknowledge the importance of this fact (Mean = 4.09, SD = 0.812).

Assessed or Discussed Performance in the Last Six Months

The results show that the regular assessment of employees is essential for their performance and hence organizational performance (Mean = 3.9, SD =1.052). This is done regularly in the company as acknowledged by most respondents (Mean = 3.06, SD = 1.430).

Opportunity over the Last Year to Improve Skills

According to survey results, it is very important for employees to improve their skills in order to perform at a higher level. Most employees at the company have had the opportunity to improve their skills within the past year (Mean = 3.39, SD = 1.136). The importance of improving skills was acknowledged by most employees in the survey (Mean = 4.27).

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Correlation Analysis between Two Variable

Pearson correlation analysis between recognition of employees by the organization for good performance and commitment of colleagues to do quality work was computed. The correlation coefficient between the two variables is 0.213, meaning that there is a weak positive linear relationship between employee recognition for their good work and commitment of employees to do quality work.


It is apparent from the discussion of results that installing a retirement plan has a number of benefits to employers, including tax advantages, customization of plan IRS requirements, motivation of employees to perform, supplementation of compensation package and recruitment advantage over other firms. According to survey results, clarity of job requirements and expectations as well as the provision of necessary tools and materials for workers is critical to their work performance. In addition, employees should be recognized for their good work, encouraged to develop, participate in the decision making process and be provided with information on any changes in their pension benefits. Regular assessment of employee performance and improvement of their skills is highly recommended to improve the effectiveness of workforce.

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