How to help small business owners create a compensation strategy for key employees

Recruiting, retaining, and motivating employees is particularly important for small businesses

Attracting and retaining key employees is a pressing challenge for small business owners. Small businesses are uniquely susceptible to the loss of a key employee. This has been particularly true over the past few months during the Great Resignation, as employees reevaluate their current work arrangements.

According to a recent Allianz Life Insurance Company of North America (Allianz Life) study, the majority of small business owners said they have difficulty attracting or recruiting key employees (77%) or expressed concern about the loss of a key employee (77%).

Small businesses rely heavily on their key employees to grow the business, retain important business relationships, or provide specific knowledge or skill sets. The total compensation package offered to key employees is part of the employer’s value proposition to them. As part of this, small business owners can use compensation strategies and special benefits to help recruit, retain, and motivate key employees.

A financial professional can help small business owner clients assess different forms of compensation and benefits strategies to retain, recruit, and motivate the talent they need to succeed.

To determine what type of compensation strategy will work best for a small business and its employees, owners will need to define and prioritize their goals. A business owner who wants to sell in the next few years will likely benefit from a different strategy than an owner who is looking to expand into new markets.

3 steps to effectively execute a compensation strategy for key employees

Identify which employees are truly key to the ongoing success of the enterprise.
Tailor the plan to individual employees to match their motivation with the incentives.
Communicate the compensation strategy with those key employees so they fully understand what benefits they will receive.

A financial professional can assist a business owner in selecting the appropriate key employee compensation strategy. Some common forms of potential solutions include a bonus plan, nonqualified deferred compensation, and split-dollar arrangements. Each strategy has benefits and drawbacks that a financial professional can help business owners assess.

*Allianz Life conducted an online survey, Small Business Study, in April and May 2022 with a sample of 516 small- to medium-size business owners.

IUL requires qualification through health and financial underwriting.

Allianz Life Insurance Company of North America does not provide financial planning services.

This content is for general educational purposes only. It is not intended to provide fiduciary, tax, or legal advice and cannot be used to avoid tax penalties; nor is it intended to market, promote, or recommend any tax plan or arrangement. Allianz Life Insurance Company of North America, its affiliates, and their employees and representatives do not give legal or tax advice. Customers are encouraged to consult with their own legal, tax, and financial professionals for specific advice or product recommendations.

For financial professional use only – not for use with the public.

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Products are issued by Allianz Life Insurance Company of North America, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297. 800.950.1962