September 17, 2023
How a Well-Designed 401(k) Can Transform Your Recruitment and Retention Strategy
Key Insights
The labor crisis is accelerating: Construction needs 439,000 new workers in 2025 while 41% of the current workforce retires by 2031, creating a perfect storm where skilled workers are jumping ship to competitors in an increasingly tight market.
Tradespeople face unique retirement pressures: Construction workers retire at 61 on average due to physical demands and rely almost exclusively on wages to build wealth (unlike tech or finance workers who may see windfalls), making retirement benefits more critical for their financial security.
Competitive advantage is immediate: While most trades companies worry about complexity and costs, those implementing strategic 401(k) plans are winning the war for talent by addressing workers' financial security needs that office-based industries take for granted.
The construction industry faces a perfect storm: The Associated Builders and Contractors (ABC) predicted the industry needed 439,000 more workers in 2025 alone, while about 41% of the workforce will retire by 2031. This labor shortage is fundamentally reshaping how construction companies compete for talent.
As the competition for workers intensifies, skilled workers are jumping ship for competitors. In a competitive labor market, your retirement benefits strategy could be your most powerful weapon in this war for talent.
Construction workers face retirement planning challenges that their office counterparts don't experience. Their ability to effectively practice their trades often begins to diminish sooner than office workers, making retirement savings even more important to their family's security. Construction workers retire earlier than most occupations due to physical demands, with an average retirement age of 61. Further, unlike fields like technology, finance, and law, which offer the possibility of large windfalls, tradespeople rely almost exclusively on their wages to build retirement wealth.
This disconnect creates opportunity. Tradespeople deeply value financial security but often lack access to retirement planning tools. Companies that bridge this gap see immediate benefits in recruitment and retention.
A thoughtfully designed 401(k) plan addresses the unique financial stresses of trades workers, reduces turnover, and positions your company as an employer of choice. This guide will show you exactly how to leverage retirement benefits to build a stronger, more stable workforce while managing costs and complexity.
Why Retirement Benefits Matter in Construction & Home Services
The growing demand for skilled labor has led to a sharp increase in wages and benefits as companies compete for the limited talent available. For construction firms, this means higher project costs, tighter profit margins, and the need to reallocate budgets to cover labor expenses.
What Business Owners Really Care About
As a business owner in the trades, you're juggling multiple priorities:
Cost control: Every dollar matters when margins are tight
Workforce stability: Turnover disrupts projects and client relationships
Administrative simplicity: You need solutions that don't require a full-time HR department
Competitive advantage: Standing out in a crowded market for skilled workers
A well-designed 401(k) addresses each of these concerns, transforming a perceived cost center into a strategic asset that drives business results.
Common Barriers for Trades Companies Offering 401(k)s
Before diving into solutions, let's address the elephants in the room—the real reasons many construction companies haven't implemented retirement plans.
Operational Complexity
Today's construction companies face unique challenges when designing retirement benefits for their workforce, from managing seasonal employment patterns to accommodating workers who frequently move between projects and employers. Multiple job sites, varying work schedules, and project-based employment create administrative headaches that traditional benefit structures weren't designed to handle.
Cultural and Educational Barriers
Many trades workers come from backgrounds where retirement planning wasn't discussed at the kitchen table. Financial literacy varies widely, and skepticism about "paper benefits" runs deep in industries built on tangible, hands-on work. Workers may trust their skills more than financial markets, preferring cash in hand to deferred compensation.
Cost Concerns
Small to mid-sized contractors worry about the financial commitment of employer matches and ongoing administrative costs. With project-based revenue streams and seasonal fluctuations, committing to fixed benefit costs feels risky.
Compliance Fears
ERISA regulations, nondiscrimination testing, and fiduciary responsibilities sound intimidating—especially for companies without dedicated HR teams. The fear of making costly mistakes keeps many employers on the sidelines.
Here's the truth: each of these barriers has proven solutions. Modern 401(k) plans designed specifically for the trades address these challenges through innovative plan design, technology, and support structures.
Plan Design Levers That Move the Needle on Hiring & Retention
The secret to 401(k) success in the trades lies in customization. Cookie-cutter plans fail because they don't account for how construction workers actually live and work. Here are the design elements that drive real results:
Auto-Enrollment
Automatic enrollment removes the biggest barrier to participation—inertia. Set your plan to automatically enroll new hires at 3-6% of pay, with the option to opt out. Studies show this single feature can boost participation rates from under 50% to over 90%.
Strategic Vesting Schedules
Vesting schedules create golden handcuffs that reduce turnover. While immediate vesting attracts workers in a tight labor market, graduated vesting (like 20% per year over 5 years) incentivizes long-term employment. Choose based on your retention goals and competitive landscape.
Flexibility Features Workers Need
Roth and Traditional Options: Let workers choose based on their tax situation
Loan Provisions: Critical for workers who may need emergency access to funds
Hardship Withdrawals: Provides a safety net that makes workers comfortable contributing
Catch-up Contributions: Allows older workers to accelerate savings
Increased investing power: Improve workers' retirement readiness through solutions that give them greater market participation earlier in their careers.
Administrative and Vendor Considerations
The right administrative setup makes or breaks your 401(k) program. Here's what to prioritize:
Non-Negotiable Features
Payroll Integration: Seamless connection with your existing payroll system
Multi-Location Support: Handle workers across job sites and states
Mobile Access: Full functionality on smartphones and tablets
Automated Compliance: Built-in testing and correction procedures
Open Architecture: The ability to select investment options that your employees understand and trust
Business Case & ROI: Calculate the Value of a 401(k) for Retention
Offering a 401(k) plan pays for itself through improved retention when you calculate the true cost of turnover. In skilled trades, replacing employees costs between 15-25% of their annual wages in direct recruitment expenses, plus 1-2 months of lost productivity during transitions, project delays, and client dissatisfaction.
For a $60,000 skilled electrician, turnover generates $15,000-$20,000 in direct replacement costs plus 2-3 months of reduced crew productivity. When factoring in recruitment, productivity loss, and operational disruption, the total impact ranges from $16,000 to $30,000 per departure.
A 401(k) plan with 3% employer matching costs approximately $1,800 annually for that same $60,000 employee, plus $100-150 in administrative expenses. This $2,000 annual investment can potentially save $14,000-$28,000 in turnover-related costs while building workforce stability.
The True Cost of Turnover
Scenario | Annual Cost Impact | Key Components |
Without 401(k) | $16,000 - $30,000 | Recruitment ($9,000-$15,000), lost productivity ($5,000-$10,000), project delays ($2,000-$5,000) |
With 401(k) | $1,900 - $1,950 | Employer match ($1,800), administrative costs ($100-$150) |
Net Savings | $14,000 - $28,000 | Avoided turnover costs through improved retention |
Conclusion: Your Workers Expect Retirement Benefits - Here's How to Deliver
The construction industry's labor crisis isn't ending soon. A strategically designed 401(k) plan transforms your company from just another employer to a career destination that invests in workers' futures.
Reducing turnover, attracting better talent, and building crews that stick together creates a compelling business case, but the human impact is even greater. In an industry built on craftsmanship and pride, what could be more fitting than helping workers build their own futures?
The question isn't whether you can afford to offer a 401(k)—it's whether you can afford not to. Your competitors are already moving. Your workers are already looking. The time to act is now.
Casey Timorasen, Head of Recruiting at Service Professionals, told us, “When we recruit senior hires, we’re often up against steep competition. The Basic Capital 401(k) helps us stand out."
Ready to build a stronger workforce and a stronger business? Schedule a 15-minute consultation with Basic Capital's Employer Strategy team to see how innovative plan design and financing options can transform your recruitment and retention results.
