In the modern era, employees have received more autonomy and have been given a chance to plan for their future through 401(k) plans. 401(k) plans refer to a retirement plan that allows employees to take a part of their salary or payroll and deposit it into the 401(k) plan. In some organizations, even employers can deposit a certain fixed amount into the 401(k) plan. The money is kept there safely and at the time of retirement, employees can collect this money. This provides a cushion for the employees when they enter retirement and a good opportunity for them to be more proactive and save themselves from a future liquidity crisis or period of uncertainty. A 401(k) plan is usually misunderstood as merely a savings account. However, the two concepts are very different. Money from the 401(k) cannot be withdrawn easily. Rules surrounding the use of the 401(k) are very restrictive and funds can only be withdrawn when there is a dire need.
The 401(k) management process is extremely intricate. Several calculations and data have to be taken into account to check the eligibility, amount to be deducted from the payroll, investment options the employee has, etc. In a situation like this, manual calculations become cumbersome and time-consuming. Hence, 401 (k) management specialists have to be hired and since this is a technical process, their salaries also tend to be high. A cost-effective and high-quality alternative to these specialists is payroll software. Payroll software is known for providing complete payroll solutions– ranging from simple employee data to complex payroll calculations. But how will payroll software improve the 401 (k) management process?
- Employee satisfaction and retention- The choice of a 401 (k) plan itself aids employee satisfaction since employees feel more valued in the company. However, 401(k) management using payroll software elevates this satisfaction since the process becomes more transparent. Employees can view their plans anytime, anywhere, and can play a more active role in determining investment options. The automated process is less time-consuming since deductions are automatic and accurate. So, employees and employers do not have to worry about the calculations or late deductions.
- Accuracy- This is one of the biggest benefits of using payroll software for 401 (k) management. Manual calculations, after accounting for salaries, taxes, and the numerous laws and regulations, can easily be inaccurate. Even the most qualified specialist can make calculation errors. This can cause a domino effect since errors in the calculation will reduce employee satisfaction, productivity, and business reputation. Moreover, taxes, salaries, and rules keep changing. These alterations can be easily made in payroll software. Even for employers, this is a good opportunity since this mitigates fiduciary risks and prevents them from running into trouble with the law.
- Cost benefits- Hiring and storage costs skyrocket for companies that manually process the 401 (k) plan. Since technical accounting is needed, several specialists may have to be hired to manage various employee plans. These administrative costs can be easily reduced by transitioning to payroll software. Payroll software only has a one-time purchase and installation cost. All employee 401(k) plans are stored in one place for easy access. Employers will no longer have to worry about needing extra storage space or incurring higher administrative costs.
- Flexibility- Government-issued rules and regulations keep changing. This involves calculation procedures, tax compliance, and general laws. All organizations then have to change their 401 (k) plan calculations according to these new rules. Sometimes, this can mean completely uprooting the existing system and adopting a different 401(k) management process. Using payroll software eliminates this need. Simple alterations have to be made to comply with laws but the rest is automated. So, employers no longer need to stress about government issuance of new laws!
- Go beyond the 401 (k)- Payroll software is known for providingcomplete payroll solutions. The tools on payroll software range from simple data storage to providing complex employee reports. Having software that fulfills more than one requirement is a blessing since it enables all HR processes to be integrated and streamlined. There is a greater level of uniformity and ease of management. Payroll software can use big data analysis to evaluate the 401 (k) plans, that too, at a low cost.
401(k) plan is a great initiative for companies that want to play an active role in their employees’ future. But, it’s also a huge responsibility since the plan has to be managed appropriately. Thankfully, installing payroll software helps employers carry out this responsibility effectively. After all, employee satisfaction should be a priority for all businesses!
