Consulting giant KPMG announced on Monday it would beef up employee 401(k) benefits to attract and keep workers—as more employers rethink benefits amid labor shortages.
KPMG’s changes, which will affect 34,000 U.S. employees, will freeze contributions to the company’s defined pension plans and move away from its 401(k) match and replace it with a single firm-funded contribution to 401(k) plans—that has no requirement for employees to contribute their own money. KPMG will automatically contribute an amount equal to 6% to 8% of employees’ W-2 pay to their 401(k) plans, depending on tenure. Employees may contribute only if they want to. Most employers require employees to make a contribution to a 401(k) before making a matching contribution.
“We’re trying to recognize that there is a red-hot labor market and there is attrition,” said KPMG U.S. chair and CEO Paul Knopp. “It’s a different market than has existed in the past.” KPMG’s new retirement setup is more flexible and portable than the former pension plan, giving employees more control over their future and money, said Knopp.
As the Great Resignation plays out—with more than 20 million Americans leaving their jobs this past spring and summer, some employers have raised starting wages and many are also rethinking their overall benefits packages. More than two-thirds of employers plan to differentiate and customize their benefit programs over the next two years, according to a September survey by consulting firm Towers Willis Watson. That shift is driven first by diversity, equity, and inclusion concerns, followed by the tight labor market and rising benefit costs, according to the survey.
“Employers know they have to throw everything but the kitchen sink in to get people to stay,” said Daniel Zhao, senior economist at Glassdoor. In 2020, many employers cut back pay and suspended 401(k) matches amid the uncertainty of the pandemic, and they’re reinstating those perks to ensure they can compete in an employee-driven market. They’re offering mental health breaks and benefits, work-from-home options, more job flexibility, and even experimenting with employee lotteries for a free iPhone or car, said Zhao.
KPMG’s new retirement benefits come as part of a broader swath of perks to attract and keep workers. The company is seeing an uptick in consulting work for mergers and acquisition deals, cybersecurity, and taxes and is hiring at a record pace, said Knopp. The company has as many as 5,000 positions that it’s trying to fill. “We’re trying to meet the needs of our employees during a difficult time and into the future,” said Knopp.
The company will also cut its employee health care premiums by 10% in 2022 with no change in benefits. It added three weeks of additional paid leave to care for a family member—in addition to an employee’s paid time off—and the company is giving new parents 12 weeks of paid leave, no matter the primary caregiver. The previous benefit gave six weeks off to the primary caregiver, and two weeks off for the non-primary caregiver. This benefit will be in addition to disability leave provided to employees who give birth, so in total some employees may get up to 22 weeks of paid leave. The benefits should appeal to KPMG’s core demographic: At least 40% of its employees are under 30.
More must-read business news and analysis from Fortune:
- The Impact 20
- Hong Kong’s COVID policies are forcing big banks to consider shifting resources away from the city
- Hyperinflation: Why Jack Dorsey is worried
- Lucid Motor’s Air EV finally hits the roads with a range that blows Tesla away
- Chewy CEO Sumit Singh on the pet boom, the pandemic, and moving from puppyhood to profitability
Subscribe to Fortune Daily to get essential business stories straight to your inbox each morning.
