Our experts discuss a number of tax efficient staff retention strategies. With inflation driving the cost of living and the great resignation making headlines most days, it is becoming harder for businesses and organisations to retain and effectively reward staff. Businesses of all sizes are finding that their staff are systematically being drawn away.
Inflation can have a serious effect on small businesses - not only does it make it harder to turn a profit, but it also makes it more difficult to retain good staff. If your organisation is struggling to keep your employees, here are some staff retention strategies and tips which may help.
Create a Sense of belonging
Employees who feel valued are less likely to leave. Although often value is expressed in a monetary way, the real sense of belonging can't be bought. A strong employer brand can help with this, but most importantly businesses must create a safe culture in their workplaces. Employees must feel their work matters, their voices are heard, work and private lives are balanced, and any issues are dealt with in a safe and judgement free environment.
An employee share scheme (ESS) is another way to keep staff aligned with your company's interests and values. We discussed the benefits of employee share schemes in more detail in a previous article, as they can be a great way to give employees a sense of ownership and investment in the business. ESS plans can be costly and complex to effectively implement. When considering ESS plans, speak to your advisors early to ensure all compliance requirements are met and the goals of the plan are aligned to employee interests and the commercial objectives of the business. Moore Australia advisors are experts in ESS and will be able to discuss your options with you.
Provide clear Opportunities for growth
An employee who is able to see a clear line of progression in their career is more likely to stay the course and stick around. In your business, make sure you clearly display which training opportunities are available for staff and how these support their career goals, to demonstrate you are invested in employee development. Training opportunities should include not just the technical skills required for the job, but also personal skills or soft skills, such as leadership, empathy, mental health, managing conflict and personal development opportunities. Much of this can be achieved through a well designed mentoring program, providing for both formal and informal participation.
If an employee is keen to do further studies, an employer can encourage them by either:
- Paying for the course which may not be subject to fringe benefits tax (FBT) if the costs would be otherwise deductible to the employee; or
- Alternatively, offering them salary sacrifice arrangements wherein the employee forgoes part of their salary towards these costs. Depending on the nature of the course and if structured well, these arrangements may not result in an additional tax burden for the employer.
The Government is also in the process of legislating a deduction boost for external training where certain businesses whose aggregated turnover is below $50 million can claim an extra 20% deduction on the cost of eligible external training expenditure i.e., if an employer pays $100, the tax deduction will be $120. We hope to see this legislation pass soon.
Providing employees the opportunity to improve their skillset will aid in sustaining a stronger bond between the employee and the company. A great way to do this is utilising tax driven programs and incentives.
Cost of Living v Salaries
Inflation and cost of living rises come and go with the tides and not all businesses can bear the cost of a permanent salary increase. Cash is a great motivator, and if resources allow, a bonus or other similar incentive might be a good alternative. This could be in the form of commission for sales, or even just a monthly bonus for meeting targets. Whatever form it takes, bonuses show employees that their efforts are appreciated and there is a financial reward for doing well.
Promote sustainable long-term financial planning
It is always good practice to support your employees in long-term financial planning. Salary sacrifice offers tax incentives to the employee and may present similar opportunities for your business. Some examples of exempt or concessionally taxed fringe benefits include low value benefits such as the use of work-related laptops and mobile phones but may also extend to high value benefits such as cars, relocation costs, living away from home allowances and remote area housing. Recently, the Government has introduced legislation which proposes to exempt the provision of electric vehicles to employees from FBT.
As an alternative, why not arrange a wealth manager, financial advisor or broker to come to your business for a day for one-hour, one to one sessions with your staff. Talking to a wealth manager is not just for the super-rich and anyone can benefit from their expertise. Or perhaps talk to your tax and business advisor about implementing a salary sacrifice policy, which can benefit both your employees and your organisation.
We found employees value the opportunity to take up a program or benefit even if they choose not to do so. Moore Australia advisors are able to help you determine whether this is something that would benefit you.
Financial rewards must go hand in hand with a sound work-place culture
Of course, retaining good staff is about more than just money. Financial incentives must go hand in hand with a positive workplace culture. Offering development opportunities and having a clear career path are all important factors.
Your Moore Australia advisor will be able to assist you in finding a financial reward scheme for your employees that is both relevant and tax-effective. Contact us today to find out how.