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How Executive Bonus Plans Attract & Retain Top Talent In The Manufacturing Industry

August 16, 2021, by New City Insurance

close up view of office worker receiving executive bonus plansThe manufacturing industry has experienced countless changes over the last decade, including the adoption of new technologies like robotics, artificial intelligence (AI) and the Internet of Things (IoT). Unfortunately, there remains a skills gap in the industry that directly impacts the future of manufacturing work.

According to a skills gap survey conducted by Deloitte and The Manufacturing Institute, a skills gap may leave an estimated 2.4 million manufacturing positions unfilled between 2018 and 2028. Today, many employers are discovering the benefit of executive bonus plans to attract and retain top talent.

What Is An Executive Bonus Plan?

An executive bonus plan is an agreement between an executive or key employee and a business. This mutually beneficial agreement strives to motivate employees and retain top talent. Also, referred to as a Section 162 Plan, an executive bonus plan is typically business-sponsored and a nonqualified/non-ERISA arrangement. Under Section 162 of the Internal Revenue Code, employers may deduct certain expenses, such as salary, that are ordinary and necessary.

Manufacturing companies working on executive bonus plansEmployers frequently look for new incentives to motivate their executives and executive bonus plans often meet the mark. Similar to other nonqualified plans, an executive bonus plan is often used by employers to provide key executives with special treatment in return for his or her contribution to the business’s success. A life insurance policy provides the vehicle for the plan and permits executives to make additional premium contributions.

Benefits Of An Executive Bonus Plan

Executive bonus plans can be beneficial to both businesses and their executives. Businesses that offer executive bonus plans can attract new talent and help retain loyal, current employees. These plans may also increase long-term retention via annually increasing vesting. Businesses determine which employees get to participate in the plan. Additionally, they can deduct any payments made to these key employees in the year that the payments are made. No filing with the IRS is necessary when the plan is terminated.

An executive bonus plan also offers a variety of benefits to key employees, including retirement savings beyond the limits of qualified plans. Executive bonus plans allow earnings to grow tax-deferred and key employees can later receive tax-deferred income. In the event of death, an executive bonus plan allows employees to leave their beneficiaries an income tax-free benefit. Key employees also own their plan and the policy is safe from any creditor claims.

This strategy is fairly simple and requires an employer to pay policy premiums on behalf of the key employee. If the compensation is reasonable, the employer may receive an income tax deduction. The key employee then inputs the amount of the premiums paid by the employer on his or her taxes as gross income. The employee may then choose to take income tax-free withdrawals and possibly a loan from the plan’s cash surrender value. The money from the plan may then be used for retirement or another eligible expense.

Other Ways To Attract And Retain Talent

Aside from an executive bonus plan, there are other effective ways to attract and retain top talent in the manufacturing industry. Offering fair compensation is one of the best ways to draw in qualified job candidates. In a competitive industry like manufacturing, businesses must offer a competitive salary that aligns with the scope of the job. According to ZipRecruiter, the national average manufacturing salary in the U.S. is $27,246 per year or about $13 an hour.

young asian business woman receiving executive bonus plans from bossIn addition to a fair and competitive salary, employers in the manufacturing industry should devote extra time to the hiring process. The manufacturing field needs experienced and skilled candidates for a wide range of niche positions.

To find these types of candidates, employers must create job descriptions that appeal to a certain audience. Proper evaluation of candidates and a thorough hiring process can help in finding the right employee for that position.

Employee training programs can also attract and retain top talent in the manufacturing industry. Ideally, every business should have a system that enables workers to climb the career ladder as they gain new skills, knowledge and experience in the field. This allows new employees to take on beginner roles that can be enhanced through training and mentoring programs. Recruitment is also a great way to reach new audiences and attract fresh talent to the workforce.

Contact An Employee Benefits Consultant About Executive Bonus Plans

Businesses are always looking for new and effective ways to motivate their employees and to appeal to skilled job candidates. Offering an executive bonus plan can be an excellent incentive and retention strategy. To learn more about how executive bonus plans attract and retain top talent in the manufacturing industry, contact the employee benefits consultants at New City Insurance.

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Filed Under: Benefits,  Manufacturing

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Eric Calciano has been extremely helpful in finding and selecting the right insurance coverage for our company. With many options out there Eric assisted us on getting a low cost provider saving more than 20% than from our competitors and providing excellent coverage for our employees.
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Jeff Stoltey and his team provide excellent customer service. Jeff has always provided my company SFCC with straightforward options. I went to a larger insurance company only to RUN BACK to Jeff at New City Insurance. I recommend them to anyone needing insurance without hesitation.
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Quick, easy & informative. We were able to secure quality insurance for our small business on a tight deadline. Thanks for the help New City.
Theresa Ruybol
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19:30 01 Jul 21
Eric was so great with us. He was very patient and kind as we are a newer smaller organization who is growing rapidly. With that said, we had made our inquiry, he had great rapid response and mostly had to wait on me. Any request that we made and/or questions we had, he was great answering and helping us understand. Then when we were ready for all documents and to move forward, Brendan helped with getting that together and the two of them worked their magic on New City's end to notify me of what was needed, assist me in that process and confirming that all was complete and approved for the coverage. I just want to say thank you all again so much, as insurance has always been confusing to me, and you all made that process go a lot smoother.Thank you
Andrea Ordendorff
Andrea Ordendorff
21:06 07 May 21
I've been working with both Clayton and Brendan for well over a year. As the purchase of our dental practice was delayed well over 14 months they both patiently supported me and continued to make themselves available. When we were officially ready to sign up they made the whole process seamless and super easy. This team is highly knowledgeable, professional, supportive, and efficient! I can't thank them enough for everything they've done.
T W
T W
22:32 30 Aug 20
I love New City Insurance. I never had a good experience dealing with insurance brokers until I started working with Brendan. He’s awesome! He is patient with me and takes the time to answer all my questions. I’m very grateful for all his help and hard work!
Mary Jane Deyette
Mary Jane Deyette
00:57 11 May 20
Jeff Stoltey is so awesome...even thru my company had only two employees, he took the time each year to research and find the best plan for us. The only reason I am leaving New City Insurance is because we no longer have any employees. Thank you Jeff
Alma Ortiz
Alma Ortiz
22:25 23 Feb 20
Brendan was awesome! I couldn't figure out how to pick my plan and he returned my call on a weekend to help me. Outstansing service!
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Brendan was so helpful I definitely recommend him if you’re in need of good help and getting it done promptly. Thankyou so much again.
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I was very thankful I inquired about this info. with Brendan. He was very helpful so I understand the benefits available much better now. Thank you Brendan.
B Bayer
B Bayer
17:43 24 Sep 19
NCI handled almost everything from start to finish. Clayton and Brendan made the plans easy to understand and walked me through the application process. They got me my ID numbers before my cards arrived so that I could keep an appointment I had already scheduled. My last broker wouldn't have done that. 5 stars!
Jessica Lehr
Jessica Lehr
03:36 07 Jun 19
Our staff was interested in a health plan, but we didn't know how beneficial a solid employee benefits package would be for our business to expand. We'd lose prospective employees because they had more options for their medical insurance which was sometimes more valuable than more pay. The New City team was amazing and gave us as many affordable options as possible so that everyone had their needs met.
Mike McClay
Mike McClay
19:36 03 May 19
My employer uses New City as their insurance broker, and I'm always amazed when I call in for assistance by how knowledgeable and attentive their staff is with my requests. Their online benefits platform makes selecting insurance plans pretty darn easy. I would highly recommend their services.
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