Opinion: Strategic, budget-friendly ways to reward key employees

Stephanie Staggs

In manufacturing, your people are your greatest asset. Machinery may power the process, but it’s your team – especially your key employees – who keep things moving, solving problems and ensuring your operation stays on track. Our team specializes in serving business owners, many manufacturers, and we’ve seen firsthand how competitive the talent market has become. One of the challenges in southwest Missouri is many welders, fabricators, soldering, etc. seem to flit from plant to plant. Not only does that hurt your culture, but it also hurts your profit and causes you to waste time hiring and training new employees. For all of us business owners, it can be tough to prioritize long-term gains over immediate deadlines. However, we argue that retaining your best people is not just a human resources concern – it’s a strategic advantage.

So, how do you reward key employees in a way that’s meaningful, tax-efficient and doesn’t stretch your budget? One often-overlooked solution: deferred compensation plans.

What is deferred compensation?
Deferred compensation is a promise to pay a portion of an employee’s earnings at a later date, usually upon retirement or after a certain number of years with the company. These plans can be highly customizable, making them an attractive tool for employers who want to offer more than a paycheck but aren’t ready to roll out an expensive bonus or stock program.

The 2024 U.S. Executive Compensation and Benefits Trends Report shows “87% of survey respondents say they cannot afford to lose key executives.” according to the findings.

High employee turnover, especially of your key employees, is a threat to your company’s financial success. There are creative, budget family ways to navigate the changing threat environment, build internal alliances, and enhance existing strategic plans to mitigate risk and maintain financial security.

Why manufacturers should pay attention
For many manufacturers, especially closely held or family-run businesses, finding ways to retain skilled supervisors, engineers or plant managers is critical. These are often the people who understand your systems, culture and client expectations. Losing them means not just replacing a position, but rebuilding trust, training and continuity.

And the cost of turnover is higher than many realize. According to the Society for Human Resource Management, replacing a salaried employee can cost six to nine months of that employee’s salary. For key roles, that number can be significantly higher when you factor in lost productivity, retraining, and cultural disruption.

A 2023 study by The Manufacturing Institute found that 80% of manufacturers report difficulty finding skilled talent – and once they do, retaining that talent is even harder in such a competitive landscape.

That’s why deferred comp plans matter. They can:

• Encourage loyalty by tying rewards to long-term employment.
• Delay taxation for employees until they receive the income.
• Avoid the high upfront cost of traditional bonuses or raises.
• Create a golden handcuff, a reason for key talent to stick around.

Smart and strategic
You don’t have to be a Fortune 500 company to implement smart compensation tools. Many manufacturers are surprised at how flexible and affordable these strategies can be with the right guidance. Plans can be structured to vest over time, reward performance milestones, or align with retirement timelines.

The best part? Employees feel seen. Valued. Like they have a future with your business, not just a job.

Consider this: According to a Willis Towers Watson survey, 61% of employers cite retention of top talent as their primary reason for offering deferred compensation. It’s not just about compensation – it’s about commitment.

At the end of the day, compensation is about more than numbers. It’s about showing your top people that their contributions matter – and that you’re invested in their success just as much as they’re invested in yours.

As a working mom of two littles and a business owner, I understand the importance of planning for the future, whether that’s for your family or your company. If you’re curious about how deferred compensation or other strategies could work in your business, our team and I are happy to have a conversation.

Let’s build the future together.

Stephanie Staggs is the owner of Staggs Financial Services LLC and previously was the Springfield region executive for the Better Business Bureau. She can be reached at stephanie_staggs@glic.com.