Employee Benefits: From 401(k)'s to Profit Sharing
When I was a poor college student, I worked for the survey center at my university for extra money. Timberland, the New Hampshire-based outdoor shoe and clothing company, had contracted my employer to process their annual employee surveys. As I manually entered the responses into the computer, I was struck by the amount of benefit programs the company offered and the level of satisfaction their employees felt. Timberland is a company that goes above and beyond the standard benefits package. The company offers tuition assistance and a flexible schedule. Employees at their headquarters have access to a fitness center, on-site daycare, dry cleaning services, the company store, and a subsidized cafeteria. No wonder their employees were happy!
Employee benefit packages are vital to attracting and retaining quality, long-term employees. Most benefit packages make up 30 to 40 percent of the employee’s total compensation for their position. When the economy is good, employers scramble to offer their employees a range of benefits to keep them from straying elsewhere. However, as we’ve seen during the current economic meltdown, some companies have been reducing the amount of benefits offered to their employees in an effort to save money, keeping only those benefits that are required by law, including overtime pay, worker’s compensation, unemployment insurance, etc.
Most companies offer their full-time staff the standard benefits, including health, dental and vision insurance, sick and vacation days, and life insurance. Others go above and beyond and offer paternity leave, discounted gym memberships, a flexible work week and a company car. These benefits help promote company loyalty in employees apt to take advantage of them. However, for many employees, the biggest motivator is money, especially in the form of a 401K, profit-sharing or regular salary raises.
The 401(k) has become a staple of employee benefits at most companies, with the employer matching contributions up to 6 percent. While the economic recession may have caused employers to temporarily stop matching their employees’ contributions, it hasn’t stopped people from investing a pre-tax percentage of their earnings with this retirement fund. However, many people choose to stay with companies that match a certain percentage of their investment contributions, even though they can take their money with them in the event of voluntary or involuntary termination.
Profit sharing is an incentive program in which the employee receives a percentage of the revenue, often in the form of a cash bonus, a contribution to a retirement plan, or company stock. The percentage that the employee receives is defined even before the profit is made. Often, the percentage an employee is entitled to depends on how long they have been with the company, meaning employees who have been with the company more than ten years receive a higher percentage than those who have been there five years or less. With profit sharing, employees are motivated to work harder and stay with the company longer in order to reap the financial benefits over the long run. If an employee knows that if they stay with the company for ten years, they will be entitled to a nice sum of money, they may remain with the company instead of being wooed away to the competition.
It may seem obvious, but the best way to retain employees is through regular salary raises. Salary raises reward employees for working hard to achieve the goals of the company. While some companies base the criteria for a salary raise on an individual’s length of employment with a company, others base an increase in pay on merit. In either situation, employees will often remain with a company when they have the monetary incentive to do so.
Some employees cannot be bought, no matter how much money is waved at them. For these people, quality of life is worth more than a bonus or an investment plan. Similarly, some employees have unique family or life situations that require flexibility in the workplace. To recruit and retain these employees, businesses offer a variety of nonmonetary incentives including the option to telecommute, a flexible four day/forty hour work week, job sharing or a generous paid time off schedule. These options allow the employee to reconcile their home and work commitments, a convenience that may instill company loyalty.
An attractive financial benefits package will recruit and retain qualified employees for long-term employment. Invest in your employees and your return on investment will be a happy, dedicated workforce.
Dell to sell cloud-based iPaaS Boomi in US$4bn deal
Global investment firm Francisco Partners and private equity platform TPG Capital have entered into an agreement with Dell Technologies to acquire cloud-based integration platform as a service provider Boomi in a cash deal valued at US$4bn. The deal is expected to complete this year.
“Boomi has flourished as part of Dell Technologies, growing exponentially since we acquired them in 2010. This proposed transaction positions Boomi for its next phase of growth and is the right move for both companies, our shared customers and partners,” said Jeff Clarke, vice chairman and chief operating officer of Dell Technologies.
“For us, we're focused on fuelling growth by continuing to modernise our core infrastructure and PC businesses and expanding in high-priority areas including hybrid and private cloud, edge, telecom and APEX. All designed to help organisations thrive in the do-from-anywhere economy.”
Dell’s Boomi sell-off follows VMware spin-off
This announcement comes just two weeks after Dell said it would spin-off its 81% equity ownership of VMware to form two standalone companies. This would result in an expected US$9.3bn cash dividend payment to Dell, which says it will use those funds to pay down debt.
When Dell acquired Boomi in 2010 for an undisclosed fee, Boomi offered the industry’s only pure SaaS application integration platform, powered by its revolutionary AtomSphere technology. Dell saw Boomi as addressing one of the top barriers to cloud adoption at that time, which was managing and integrating cloud-based applications with existing applications and databases.
Now, Boomi has more than 15,000 customers globally and is still seen as a leader when it comes to organisations connecting applications, processes and people across a range of locations and devices – a process that can take weeks rather than months.
“I am incredibly proud that through innovation, passion and relentless execution, the Boomi team has created a unified platform for the modern-day hybrid IT landscape that thousands of customers worldwide depend on to digitally transform their business,” said Chris McNabb, chief executive officer of Boomi.
“By partnering with two tier-one investment firms like Francisco Partners and TPG, we can accelerate our ability for our customers to use data to drive competitive advantage. In this next phase of growth, Boomi will be in a position of strength to further advance our innovation and market trajectory while delivering even more value to our customers.”
Francisco Partners has invested in more than 300 technology companies since its launch 20 years ago and has more than US$25bn in assets under management.
“The ability to integrate and connect data and workflows across any combination of applications or domains is a critical business capability, and we strongly believe that Boomi is well positioned to help companies of all sizes turn data into their most valuable asset,” said Dipanjan Deb, co-founder and chief executive officer, and Brian Decker, partner, at Francisco Partners
Nehal Raj, partner, and Art Heidrich, principal, at TPG Capital added: “The need for automation and data integration across applications has never been greater. Boomi's cloud-native platform enables enterprises to streamline business processes and is essential for driving digital transformation.”