A higher share of US job postings mentioned 401(k) plans than several years ago.Daisy-Daisy/Getty ImagesSmall businesses can attract and retain staff with 401(k) plans.Business owners can offer it in lieu of more costly benefits that they can't yet afford.It can help reduce first-year quits, a Gusto analysis found.Sara Marye wanted to get more serious about the benefits she offered.Several months after promoting a part-time employee to full-time status at her school-curriculum small business in 2024, she wanted to ensure it remains an attractive place to work."If I want to keep her, I need to give her reasons to stay," said Marye, an educator turned entrepreneur in 2015 when she started The Stellar Teacher Company. The employee had been working there since 2021.Marye thought about what she could afford that she could add on top of the existing flexible perks. Offering a 401(k) plan was the answer, a perk that would also benefit Marye herself and help with retention beyond the full-time worker.Most of her four part-time workers are former teachers who still want to be involved in education while staying home as parents."The fact that they are able to have a part-time job with a 401(k), I think, gives them just a lot more comfort in the fact that they aren't having to sacrifice their future financial security for the time that they want to spend raising their family now," said Marye, who has been offering the 401(k) plan since 2025.When small businesses are starting out, they have to figure out how to get off the ground, market their work, and manage their expenses. As businesses make a name for themselves, grow their profits, and staff up, they need to figure out how to attract and retain employees. Having a 401(k) plan — the kind of benefit that's typically more often offered by larger employers — can help, especially if they can't yet afford more costly benefits, like healthcare. It can also be a financial perk for business owners on payroll.Maintaining staffA Gusto analysis of its internal small-business data shows that offering a 401(k) to workers translates to roughly 8% fewer quits in the first year of employment compared to those that don't offer one.Nich Tremper, a senior economist at Gusto, said these employers don't have to face a gap in work coverage until they can backfill a position, which can affect productivity, or waste time and money looking for and training a new hire. Tremper said employers face the greatest risk of an employee quitting in their first year, so they can try to reduce that risk by offering retirement plans, even if employees can't enroll right away."We see 401(k)s having the highest ROI on retention," Tremper said, adding, "because it's a benefit that tells your employees that you are invested in their long-term financial future."Howard Telson has been running the remote accounting firm Scale CPA since 2022. He started offering a 401(k) plan about a year and a half ago.He likes it as a recruiting tool, since his firm hires pretty consistently, and to keep his current staff, many of whom come from larger companies where they're accustomed to this perk."We're often competing against bigger companies or bigger firms that do offer these types of benefits," he said. "It's been important to be competitive in the marketplace."Telson works with small businesses at his firm, where he discusses tax-optimization strategies, such as retirement plans."It's kind of a multi-tier benefit that we'll recommend, a 401(k) plan or another type of retirement plan to clients, one, to allow them to basically have some tax deferral and save on their personal taxes, two, to attract talent, and three, it also offers some tax credits as well for the first three years when you set up the program," he said.Affording retirement plansMarye worried about whether she would be able to afford having a retirement plan as a small-business owner, and setting it up seemed daunting. However, she said it wasn't complicated and wasn't as big an expense as she thought it would be.Payroll platforms like Gusto and ADP offer 401(k) plan management services at relatively low costs for small businesses, charging a modest base fee and then single-digit monthly fees per participant. Retirement offerings also tend to be less expensive for small business owners than healthcare benefits; Bureau of Labor Statistics data showed the average employer contribution for family medical care coverage at businesses with fewer than 50 workers has surpassed $1,000 per employee since 2021.Ashley Kent also offers 401(k) benefits to her workers and herself. Kent, who has been in business since 2018, said she can't justify offering healthcare just yet since the cost is too much for the business's size."It allowed me to then offer this to employees and was something that was very attractive to new employees coming in here," said Kent, founder and CEO of Clearstart, a marketing brand and growth consultancy for healthcare organizations.Kent has 1
Don't miss out on breaking stories and in-depth articles.
