Quentin Hoffmann· Sales Compensation Manager, Aurora Hospitality
Asked in Benefits & Wellbeing ·
Regional US distributor, about 2,400 employees, a mix of warehouse, drivers and office staff. The match today is 100% of the first 4%, immediate vesting. Participation is 61% overall but only 38% among hourly warehouse staff.
The proposal is to move to 50% on the first 8%, which costs the same for someone who goes to 8% and encourages higher saving. The problem is obvious: anyone who stays at 4% loses half their match.
Finance likes it because modelled cost falls by about 15%. I think the goodwill cost is being ignored. Has anyone made a change like this and kept trust, and what did you pair it with?
1 helpful · 2 insightful · 1 agree · 5 replies · 140 views · 7 following
Accepted answer· by Vera Chen
Your real issue is the 38% in the warehouse, and a stretch match makes that worse rather than better. People on hourly pay who cannot spare 4% are not going to find 8%. What we did instead at a similar business was keep the match formula, add a 2% non-elective contribution for everyone under a pay threshold, and fund it by introducing a two-year vesting schedule on the match. Turnover in the first two years was high enough that forfeitures covered about 80% of the new cost. Participation among hourly staff went from 41% to 66% once auto-enrolment at 3% was added. Nobody saw a number go down.
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HR Business Partner, Meridian Health Systems
We did almost exactly this in 2022 and I would not do it again the same way. On paper it was neutral for anyone who increased their deferral. In practice 70% of people did not change anything, saw a smaller match on their statement, and concluded the company had cut the benefit. They were not wrong.
Compensation Consultant, Aurora Hospitality
If finance needs the saving, be honest that it is a saving. The stretch match is defensible only if you pair it with automatic escalation, so people reach the new threshold without having to act. We moved everyone below 8% up by 1% a year with an opt-out, and 84% stayed in the escalation.
Benefits Manager, Copperfield Mining
Accepted answer
Your real issue is the 38% in the warehouse, and a stretch match makes that worse rather than better. People on hourly pay who cannot spare 4% are not going to find 8%.
What we did instead at a similar business was keep the match formula, add a 2% non-elective contribution for everyone under a pay threshold, and fund it by introducing a two-year vesting schedule on the match. Turnover in the first two years was high enough that forfeitures covered about 80% of the new cost. Participation among hourly staff went from 41% to 66% once auto-enrolment at 3% was added. Nobody saw a number go down.
Director of Benefits, Orchard & Vine
A caveat on vesting schedules as the funding source: it worked for the poster above because early turnover was high. If you are also trying to fix retention you are funding the plan from the thing you want to reduce. Model it at your target turnover, not your current rate.
People Analytics Lead, Aurora Hospitality
Really useful, thank you. I took the vesting idea to finance with both turnover scenarios. Even at target turnover it covers roughly half, and they have agreed to drop the stretch match. We are going with auto-enrolment at 3%, escalation to 6%, and the match formula untouched.
