The labor shortage in the manufacturing sector has been well documented. As of October 2021, the number of workers in the industry had declined by almost 400,000 from pre-pandemic levels. According to the National Association of Manufacturers, nearly 2.1 million manufacturing jobs could be open by 2030.
Will this worker shortage adversely affect your manufacturing company, or has it already done so? You don’t have to sit idly by while the labor gap continues to grow. One way to entice more workers is by offering an impressive slate of employee benefits. Doing so can help you attract and retain top talent.
Enhance your employee benefits package
Compensation has always been vital to virtually any job offer, and that hasn’t changed. But increasingly, job candidates are focusing on employee benefits that may be available to them.
Notably, certain employee benefits are tax-exempt to participating employees, making them particularly attractive. This includes, but isn’t limited to, the following benefits that could convince an applicant to come on board:
Health insurance. The premiums paid by an employer under a health insurance plan are tax-free to employees — and deductible by the employer — if the plan is open to all eligible workers. Similarly, employer reimbursements for medical expenses generally are tax-free to employees as are contributions to Health Savings Accounts.
Qualified retirement plans. Like health insurance, this is a major employee benefit that often makes or breaks a job offer. Generally, the benefits provided under qualified plans, like a 401(k) plan, are currently exempt from tax and can grow without any tax erosion until withdrawals are made. Contributions are subject to generous annual limits, including potential matching contributions to a 401(k) plan by an employer. But strict nondiscrimination requirements must be met.
Group-term life insurance. This is a prized perk for workers in the manufacturing field even though there’s a tax price attached to “excess” coverage. Only the first $50,000 of coverage under a group-term life insurance plan is tax-free. For instance, if a worker earning $80,000 is covered at three times his or her annual pay, the employee owes tax on $190,000 of coverage ($240,000 − $50,000). The tax, which is computed using an IRS table based on the insured’s age, is generally relatively small.
Dependent care assistance plans. The first $5,000 of dependent care assistance paid by an employer under a written plan is tax-free to employees. To qualify, the dependent must be under age 13, physically or mentally unable to care for him- or herself, or a spouse who’s physically or mentally incapable of self-care. The amount of the exclusion can’t exceed the earned income of a single employee or the earned income of the lower-paid spouse if the employee is married.
Educational assistance plans. A company can provide tax-free payments of up to $5,250 annually for college or grad school tuition, books, fees, and supplies under an educational assistance plan. The courses covered under the plan don’t have to be related to the job.
Employee discounts. A manufacturing company can provide tax-free discounts to employees on its products. Note that the discount percentage can’t exceed the gross profit percentage of the price at which the product is offered to regular customers.
Build a positive corporate culture
Last, but not least, strive to create a work environment that makes a favorable first (and lasting) impression. Employees spend a lot of time on the job and you want them to feel at ease among coworkers and supervisors alike. Project a positive attitude that will carry over to others. Conversely, a toxic workplace could lead to even more turnover and early retirements.
If your manufacturing company is currently hiring, take the time to review your employee benefits package. We can help explain the tax consequences of various options if you’d like to expand your offerings.