As the world moves towards more short-term thinking, it is incredibly important to keep a long-term mindset on issues to do with financial stability.
Although it is not mandatory to provide occupational pension schemes for your employees in Kenya, there are numerous benefits to doing so that can improve the functioning of your business.
If you are a small-business owner, this article explains the benefit of supporting your employees retirement plans.
Employee Retirement Options
There are numerous ways through which your employees can save up for retirement.
A mandatory statutory deduction that you as an employer are required to make to the relevant body. Payments are made from the employee’s paycheck
A means through which an employee can voluntarily make contributions towards their own retirement. As an employer, you can make contributions to match what your employee puts in.
These are schemes formed by employers for the benefit of their employees. They are exclusive to the members of staff of a particular employer. Employees make contributions towards the scheme with the promise of benefits at the point of retirement.
As an employer, any amount you make as a contribution towards an employee’s retirement, be it in an organisational pension scheme, an individual scheme, or a provident fund, is not considered as profit for your business.
So long as you make contributions towards a scheme registered by the Retirements Benefits Authority (RBA), your contributions will count as a business expense and therefore be tax-exempt.
The Kenya Revenue Authority (KRA), allows tax relief up to a maximum of Ksh. 240,000 per year for amounts contributed by an employer towards a registered benefit scheme.
As an employer, it would be wise to take up this incentive and plan for employee retirement through pension schemes.
Attract Top Talent
As a small business, you are competing with top corporations for the creme de la creme of the workforce. This means that you have to make your offer of work enticing through employee benefits such as pension schemes.
Employees want to know that they will be well taken care of and showing interest in their future is a sure way of doing so.
You can choose to set up your own organizational scheme or offer to make contributions to their individual scheme on an agreed-upon basis and stick to your commitment.
Reduce Employee Turnover
Once you have the best talent within your company, you must do all you can to avoid them being poached by competitors. A well-structured system will not only retain your employees but also reduce costs of training newcomers which increases your productivity.
An attractive pension agreement is one way to keep your employees within your company. Taking care of your employees financially sets you apart from your competitors and motivates your employees to work harder and more efficiently. This is especially true if employer contributions increase with an increase in employee salary.
To Wrap It Up
Choose to set yourself apart from your competitors and motivate your employees by encouraging them to save up for retirement. The good news is, there are several employer benefits to doing so.