KPMG, one of the Big Four accounting firms, is changing the benefits and compensation for its employees in a move the chief executive characterized as a way to “make the complicated simple” and give its workers “the flexibility they need.”
The announcement comes as businesses grapple with a worker shortage and Americans are quitting their jobs at record levels in a phenomenon dubbed “The Great Resignation.” Employers are working to attract and retain employees with generous benefits and enhanced flexibility.
“I believe part of my job is to build support systems that help our people when they need it most,” KPMG Chairman and CEO Paul Knopp said in a statement highlighting the changes.
The company announced it was moving away from its current retirement-savings structure, which included a 401(k) matching program and pension, to a 401(k) system that would incorporate automatic employer contributions, whether the employee contributes to the plan as well or not. The employer contribution will be between 6-8% of “eligible W-2 pay (not just base salary),” the company said in a statement.
Read: Are you ready to be part of the ‘Great Resignation’?
“Consolidating these programs into one convenient place makes it easier for employees to invest their savings the way they want, gives them more flexibility within the retirement plan and provides increased freedom in deploying their cash,” the company said. Employer contributions will vest after three years of service, which means an employee must work at the company during that timeframe to receive the full amount they company has provided.
This change is one of many the company is implementing in light of the effects of the pandemic, which also includes giving parents 12 weeks of paid parental leave (six more than under the former program for primary caregivers) and giving all workers nine consecutive days off twice a year. The company is also reducing employee health care premiums by 10% next year with no change in benefit levels.
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As many workers struggle to save for retirement, automatic 401(k) contributions like the ones KPMG is offering can help workers get started saving immediately so they can capitalize on time and the power of compounding.
Matching programs in 401(k) plans vary in what they offer employees, but one typical option is one that provides a 50% match on 6% of employee salaries (so for example, someone with a $100,000 salary who contributes $6,000 to her 401(k) would get an employer match of $3,000). KPMG’s newest structure would surpass that employer match, while still allowing employees to contribute up to their own limits, up to $19,500 in 2021 for those under age 50.
The pandemic has shaken up retirement benefits — months after it began, some employers had to suspend their 401(k) match. Many are beginning to restore their programs.