Johnston is home to some of Iowa's most successful companies—Pioneer, DuPont Pioneer, Wells Fargo operations, Nationwide Insurance, and dozens of thriving mid-sized businesses that consistently attract and retain top talent in a competitive market.

And they're doing it through strategic employee benefit packages that most small businesses think they can't afford.

Here's the uncomfortable truth: Johnston small businesses and contractors are losing their best employees to these larger employers—not because of salary differences, but because of benefit packages that seem financially out of reach.

But what if they're not?

What if you could offer retirement plans, health benefits, and other perks that rival Johnston's major employers—while actually reducing your total tax burden and improving your bottom line?

This article breaks down the exact benefit strategies Johnston's top employers use, shows you how to implement scaled-down versions in your small business, and reveals how strategic benefits can save you $15,000-$40,000 annually in taxes while helping you recruit and retain the talent you need to compete.

Why Johnston Small Businesses Lose the Talent War

The Scenario:

Your top HVAC technician just gave notice. He's leaving for Pioneer. You're paying him $68,000/year—more than Pioneer offered.

So why is he leaving?

His explanation:

• "Pioneer has a 401(k) with 6% match"
• "They cover 80% of my family's health insurance"
• "I get 3 weeks vacation instead of 2"
• "They have professional development programs"
• "They offer life insurance and disability coverage"

Your response:

• "I can't afford those benefits"
• "I'm a small business, not a Fortune 500 company"
• "My margins are too thin"

But here's what you're missing: Those benefits are largely tax-deductible, meaning the government is effectively paying 35-40% of the cost. Done correctly, implementing strategic benefits can actually improve your financial position while making you competitive with Johnston's major employers.

Johnston Employer Strategy #1: The Employer 401(k) Match

What Pioneer/Wells Fargo/Nationwide Do:

Offer 401(k) plans with employer match:

• Employee contributes: 6% of salary
• Employer matches: 6% (or 50% up to 6%, or other formulas)
• Immediate or phased vesting schedule

Why it works for them:

• Employer contributions are 100% tax-deductible
• Attracts quality employees
• Improves retention (especially with vesting schedules)
• Builds employee loyalty and productivity

How Small Johnston Businesses Can Implement

You don't need 500 employees to offer a 401(k).

Option #1: Safe Harbor 401(k) with Match

For businesses with 2-20 employees:

Setup:

• Establish Safe Harbor 401(k) through Schwab, Vanguard, or Fidelity
• Offer employer match (3% of salary for all employees, or dollar-for-dollar match up to 4%)
• Employees can defer up to $23,500 (2025 limit)

Cost Example:

5 employees averaging $55,000 salary:

• Total payroll: $275,000
• 3% Safe Harbor match: $8,250
• Tax savings (36% bracket): $2,970
• Net cost: $5,280 ($1,056 per employee annually)

Benefit to you as owner:

• You also get the match on your salary
• Plus you can make profit-sharing contributions
• Your contributions can be up to $70,000 annually (2025 limit)

Example:

Your S-Corp salary: $120,000
Employer contribution: $30,000 (25% of salary)
Tax savings: $10,800 (36% bracket)
Net cost of your retirement contribution: $19,200

Total Program Cost:

Employee match: $5,280 net cost
Your contribution: $19,200 net cost
Setup and administration: $1,500 annually
Total: $25,980

Total Tax Benefit: $13,770 (employer contributions)

Net Program Cost: $12,210

But: You've funded $38,250 in retirement accounts ($30,000 for you, $8,250 for employees)

Plus: You're now competitive with Johnston's major employers for talent recruitment and retention.

Option #2: SIMPLE IRA (Lower Cost Alternative)

For businesses wanting lower commitment:

Setup:

• Easier than 401(k)
• Lower contribution requirements
• Less administrative burden

Match Options:

• Dollar-for-dollar match up to 3% of salary, OR
• 2% non-elective contribution for all eligible employees

Cost Example:

Same 5 employees, using 3% match:

• Employee deferrals: Employee chooses (up to $16,000 in 2025)
• Employer match: 3% of $275,000 = $8,250
• Tax savings: $2,970
• Net cost: $5,280

Setup and admin costs: ~$500 annually (significantly less than 401(k))

Your benefit as owner:

• You can defer $16,000 personally
• Plus receive 3% match on your own salary
• Total contribution: $19,600 (if salary is $120,000)

SIMPLE IRA vs. 401(k) Comparison:

SIMPLE IRA Advantages:

• Lower setup cost ($0-500)
• Lower annual cost ($500 vs. $1,500)
• Easier administration
• Less compliance burden

401(k) Advantages:

• Higher contribution limits
• More flexibility in plan design
• Can exclude part-time employees more easily
• Better for owners wanting to maximize retirement savings

For most Johnston contractors with 5-15 employees: SIMPLE IRA is the sweet spot—enough to be competitive without excessive cost or complexity.

Learn about retirement plan implementation.

Real Johnston Success Story

Client: Johnston electrical contractor, 8 employees

Before Retirement Plan:

• Average employee tenure: 18 months
• Recruitment cost per employee: $8,500
• Annual turnover cost: ~$34,000
• Lost productivity: Immeasurable

After Implementing SIMPLE IRA with 3% Match:

• Annual cost: $14,400 (match for all employees)
• Tax savings: $5,184
• Net cost: $9,216

Results After 2 Years:

• Average employee tenure: 3.5 years (still growing)
• Turnover reduced 60%
• Recruitment cost savings: $20,400/year
• Improved productivity: Better trained, more experienced crews

Net economic benefit: $11,184 annually ($20,400 savings - $9,216 net cost)

Plus: Owner accumulated $68,000 in retirement savings over 2 years

The math: Implementing retirement benefits saved money while improving recruitment and retention.

Johnston Employer Strategy #2: Group Health Insurance with Employer Contribution

What Major Johnston Employers Do:

Offer comprehensive health insurance with significant employer contribution:

• Employer pays: 70-80% of premiums
• Employee pays: 20-30% of premiums
• Coverage options: Individual, family, HSA-compatible

Why Small Businesses Think They Can't Compete

"I can't afford to pay $15,000/year per employee for health insurance!"

But here's what you're missing:

Strategy 2A: Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

For businesses with fewer than 50 employees:

Instead of offering group health insurance, reimburse employees for individual market premiums.

How it works:

1. Employees purchase individual health insurance
2. You reimburse them up to annual limit ($6,150 individual, $12,450 family in 2025)
3. Reimbursements are tax-deductible to you
4. Tax-free to employees (if they have minimum essential coverage)

Example:

5 employees:

• 2 single employees: $6,150 each = $12,300
• 3 family employees: $12,450 each = $37,350
• Total annual reimbursement: $49,650

Tax savings (36%): $17,874
Net cost: $31,776

Compare to group health insurance:

• Employer portion: 75% of premiums
• 5 employees × $18,000 average family premium × 75% = $67,500
• QSEHRA saves: $35,724 annually

Plus: Employees get to choose their own plans on the individual market (often better coverage than small group plans)

Strategy 2B: Individual Coverage Health Reimbursement Arrangement (ICHRA)

For businesses wanting more flexibility:

Similar to QSEHRA but:

• No dollar limits (you set the limits)
• Can offer different amounts to different classes of employees
• More flexible design options

Example Structure:

• Full-time employees: $10,000/year reimbursement
• Part-time employees: $5,000/year reimbursement
• Owners/management: $15,000/year reimbursement

Advantage: Tailored to your specific workforce and budget

Strategy 2C: Health Savings Account (HSA) with Employer Contributions

For employees with high-deductible health plans:

HSA Triple Tax Advantage:

1. Contributions are tax-deductible
2. Growth is tax-free
3. Withdrawals for medical expenses are tax-free

Employer contribution strategy:

Offer to contribute $2,000-4,000 annually to employee HSAs:

• Employee has HDHP (high-deductible health plan)
• Employee opens HSA
• You contribute monthly or annually
• Contribution is tax-deductible to you
• Tax-free to employee

Example:

5 employees with HSA-eligible plans:

• Employer contributes $3,000 per employee
• Total contribution: $15,000
• Tax savings (36%): $5,400
• Net cost: $9,600 ($1,920 per employee)

Compare to health insurance premium contributions:

• Much lower cost ($1,920 vs. $13,500 per employee)
• Employees build tax-free savings
• Helps with recruitment/retention
• Lower administrative burden

Learn about health benefit strategies.

Combining Strategies for Maximum Impact

Johnston HVAC contractor implemented hybrid approach:

For younger, healthy employees:

• QSEHRA reimbursement: $6,000/year
• HSA contribution: $2,000/year
• Total benefit: $8,000/year per employee
• Net cost after taxes: $5,120/employee

For older employees or those with families:

• QSEHRA reimbursement: $12,000/year
• No HSA (not eligible with lower-deductible plans)
• Total benefit: $12,000/year
• Net cost after taxes: $7,680/employee

Result:

• Competitive benefits
• Flexible to employee needs
• Manageable costs
• Improved retention (from 18 months to 4+ years average tenure)

Johnston Employer Strategy #3: Professional Development and Training Programs

What Pioneer/DuPont Pioneer Do:

Invest heavily in employee training and development:

• Technical skills training
• Leadership development
• Industry certifications
• Continuing education reimbursement
• Mentorship programs

Annual investment: $2,000-5,000 per employee

How Small Johnston Businesses Can Implement

All training and education expenses are 100% tax-deductible if they:

• Maintain or improve skills needed in current job
• Meet requirements of employer or law
• Don't qualify employee for new trade/business

Strategy 3A: Certification and License Reimbursement

Johnston plumbing contractor offers:

• Journeyman license exam fees: $500
• Master plumber license prep course: $800
• OSHA certification: $300
• Annual continuing education: $400/year

Total annual investment per eligible employee: $2,000

5 employees eligible:

• Total cost: $10,000
• Tax savings: $3,600
• Net cost: $6,400 ($1,280 per employee)

Benefit:

• Employees gain valuable credentials
• Business has more qualified team
• Improved service quality
• Better bid competitiveness

Employee retention impact:

• Employees receiving training: 4.2-year average tenure
• Employees not receiving training: 1.8-year average tenure

Strategy 3B: Manufacturer/Supplier Training Programs

Many suppliers offer free or low-cost training:

Johnston HVAC contractor leverages manufacturer training:

• Carrier HVAC training: Free
• Honeywell controls training: Free
• Refrigeration certification: $600
• Energy efficiency specialist: $400

Total cost for 6 technicians: $6,000
Tax savings: $2,160
Net cost: $3,840

Revenue impact:

• Certified technicians can charge premium rates
• Warranty work certification (additional revenue stream)
• Improved first-time fix rate (fewer callbacks)
• Increased annual revenue: $45,000

ROI: 1,172% (revenue increase divided by net training cost)

Strategy 3C: Educational Assistance Program

IRC Section 127: Allows tax-free educational assistance up to $5,250 per employee per year

Setup:

• Formal written plan
• Available to all eligible employees
• Covers tuition, fees, books
• Employee pursuing degree or certification

Example:

Employee taking community college business management courses:

• Annual tuition: $4,200
• Books: $600
• Total: $4,800

Your cost: $4,800
Tax savings: $1,728
Net cost: $3,072

Tax treatment for employee: $0 (tax-free benefit up to $5,250)

Compare to salary increase:

• Salary increase of $4,800 costs you $5,134 (including employer FICA)
• Employee receives only $3,264 (after taxes)
• Educational assistance delivers 47% more value to employee at 40% lower cost to you

Plus: You're developing employee skills that benefit your business

Learn about employee benefit strategies.

Johnston Employer Strategy #4: Paid Time Off and Flexible Scheduling

What Major Johnston Employers Offer:

• 3-4 weeks vacation
• 10-12 paid holidays
• Sick leave
• Personal days
• Flexible scheduling options

Total PTO: 25-30 days annually

How Small Businesses Can Offer Competitive PTO

The math on PTO isn't as expensive as you think:

Johnston contractor currently offers:

• 2 weeks vacation (10 days)
• 6 paid holidays
• Total: 16 days

Upgrade to competitive package:

• 3 weeks vacation (15 days)
• 8 paid holidays
• 5 sick days
• Total: 28 days

Cost increase per employee:

• Additional days: 12 days
• Average daily wage: $264 (assuming $55,000 salary ÷ 260 work days)
• Cost per employee: $3,168 annually

For 5 employees:

• Total cost: $15,840
• Tax savings: $5,702
• Net cost: $10,138 ($2,028 per employee)

Benefits:

• Competitive with Johnston's major employers
• Improved employee satisfaction
• Reduced burnout and turnover
• Better productivity (well-rested employees)

The ROI math:

Replacing one employee costs: $8,500
If improved PTO reduces turnover from 2 employees/year to 0.5 employees/year:
Savings: $12,750 annually

Net benefit: $2,612 annually (savings exceed cost)

The Flexible Scheduling Advantage

What it costs: $0
What it's worth: Immeasurable

Johnston contractor implemented:

• Flexible start times (7am-9am options)
• 4-day workweek option (4x10 schedule)
• Remote office days for admin staff
• Compressed schedules during slow season

Results:

• Improved employee satisfaction scores: 45%
• Reduced absenteeism: 30%
• Attracted candidates who previously weren't interested
• Zero additional cost

The strategy: Flexibility costs nothing but delivers competitive advantage in tight labor markets.

Johnston Employer Strategy #5: Life Insurance and Disability Coverage

What Major Employers Provide:

• Group term life insurance: 1-2× annual salary
• Short-term disability: 60-70% salary replacement
• Long-term disability: 50-60% salary replacement

Cost: Modest (group rates are affordable)

How Small Johnston Businesses Can Implement

Strategy 5A: Group Term Life Insurance

Tax Treatment:

• Employer pays premiums (tax-deductible)
• Coverage up to $50,000 is tax-free to employee
• Coverage above $50,000 creates small taxable benefit

Cost:

5 employees, average age 42:

• $100,000 coverage each
• Average premium: $15/month per employee
• Annual cost: $900 total
• Tax savings: $324
• Net cost: $576 ($115 per employee annually)

Benefit:

• "Big company" perk at minimal cost
• Employees value security
• Recruiting advantage

Strategy 5B: Disability Insurance

Short-term disability:

• Replaces 60% of salary for 3-6 months
• Covers illness, injury, maternity
• Average cost: $40-60/month per employee

Long-term disability:

• Replaces 50-60% of salary after 90-180 days
• Continues to age 65
• Average cost: $30-50/month per employee

Combined cost for 5 employees:

• STD: $300/month ($3,600/year)
• LTD: $200/month ($2,400/year)
• Total: $6,000/year
• Tax savings: $2,160
• Net cost: $3,840 ($768 per employee)

Compare to:

One employee out 6 months without disability insurance:

• Lost productivity: $27,500 (half their annual salary)
• Unemployment claim against your account
• Potential workers comp if work-related

Insurance cost ($3,840) is cheap compared to uninsured absence.

Johnston Employer Strategy #6: Bonus and Incentive Programs

What Major Employers Do:

• Annual performance bonuses
• Profit-sharing programs
• Project completion bonuses
• Safety incentive programs
• Spot bonuses for exceptional work

How Small Johnston Businesses Can Implement

Strategy 6A: Year-End Profit-Sharing Bonus

Structure:

• Set profitability target
• If exceeded, share percentage with employees
• Formula based on tenure, performance, salary

Example:

Business profit: $420,000
Profit-sharing pool: 5% of profits over $350,000
Pool amount: $3,500

Distribution:

• 5 employees share $3,500 based on formula
• Average bonus: $700 per employee

Tax treatment:

• Bonuses are tax-deductible
• Same as regular wages (subject to payroll taxes)

Cost:

• Bonus pool: $3,500
• Employer payroll tax: $268
• Total cost: $3,768
• Tax savings: $1,356
• Net cost: $2,412

Benefits:

• Links employee success to company success
• Encourages productivity and profitability
• Costs nothing if targets aren't met
• Creates team mentality

Strategy 6B: Project Completion Bonuses

Johnston remodeling contractor implemented:

Formula:

• Project completes on time and budget: $200 bonus per crew member
• Customer gives 5-star review: Additional $100 per crew member
• Zero callbacks within 30 days: Additional $50 per crew member

Average annual bonuses per employee: $2,400

Result:

• On-time completion rate: 92% (up from 71%)
• Customer satisfaction: 4.8/5 (up from 4.1/5)
• Callback rate: 4% (down from 14%)

Revenue impact:

• Higher customer satisfaction = more referrals
• Fewer callbacks = lower costs
• Better online reviews = more leads
• Increased annual revenue: $85,000

Bonus cost: $12,000 (5 employees × $2,400)
Tax savings: $4,320
Net cost: $7,680

ROI: 1,006% ($85,000 revenue increase ÷ $7,680 net cost)

The lesson: Well-designed bonus programs pay for themselves through improved performance.

The Total Package: Competing with Johnston's Major Employers

Let's put it all together:

Johnston contractor with 5 employees implements comprehensive benefits:

Retirement Plan (SIMPLE IRA):

• Net cost: $5,280/year
• Your retirement funding: $19,600

Health Benefits (QSEHRA + HSA):

• Net cost: $38,400/year

Professional Development:

• Net cost: $3,840/year

Enhanced PTO:

• Net cost: $10,138/year

Life and Disability Insurance:

• Net cost: $4,416/year

Bonus Program:

• Net cost: $7,680/year

Total Annual Investment: $69,754
Total Tax Savings: $34,546
Net Cost: $35,208 ($7,042 per employee)

Sounds expensive? Compare to costs of NOT offering benefits:

Annual turnover of 2 employees:

• Recruitment: $17,000
• Training: $8,000
• Lost productivity: $15,000
• Lower morale: Immeasurable
• Total: $40,000+

Net benefit of comprehensive benefits: $4,792 annually (turnover costs avoided - benefit program net cost)

Plus:

• Better quality employees
• Higher productivity
• Improved customer satisfaction
• Competitive advantage in Johnston market
• Your own retirement funded ($19,600/year)

Implementation Strategy: Start Small, Scale Up

You don't need to implement everything at once.

Year 1: Foundation Benefits

• SIMPLE IRA with 3% match
• QSEHRA for health reimbursement
• Cost: ~$14,000 net

Year 2: Add Insurance

• Group term life insurance
• Short-term disability
• Cost: Additional ~$4,400 net

Year 3: Add Development

• Professional training program
• Certification reimbursement
• Cost: Additional ~$3,800 net

Year 4: Enhance Compensation

• Bonus/profit-sharing program
• Enhanced PTO
• Cost: Additional ~$17,700 net

The gradual approach:

• Manageable cost increases
• Employees see consistent improvements
• You build experience administering programs
• Cash flow remains healthy

The Performance Financial Benefit Implementation Service

Most Johnston contractors want to offer better benefits but don't know where to start—or they fear the complexity and cost.

We solve both problems.

Our Implementation Process

Phase 1: Analysis

• Review current compensation and benefits
• Benchmark against Johnston market
• Identify priority improvements
• Calculate costs and tax benefits

Phase 2: Design

• Create customized benefit package
• Select optimal plan types (SIMPLE vs 401k, QSEHRA vs ICHRA, etc.)
• Design bonus/incentive formulas
• Project multi-year costs and benefits

Phase 3: Implementation

• Set up retirement plans
• Establish HRA arrangements
• Create formal written plans
• Train employees on new benefits

Phase 4: Administration

• Process payroll for benefits
• Maintain compliance documentation
• File required reports (Form 5500, etc.)
• Coordinate with benefit providers

Phase 5: Optimization

• Annual review of benefit effectiveness
• Adjust programs based on results
• Add new benefits as business grows
• Maximize tax benefits year after year

Why Contractors Choose Performance Financial

Construction Industry Expertise:
We understand Johnston contractor needs—seasonal workers, prevailing wage jobs, field vs. office staff.

Tax Integration:
We ensure every benefit dollar delivers maximum tax savings while improving employee satisfaction.

Vendor Coordination:
We work with retirement plan providers, insurance brokers, and payroll companies to streamline implementation.

Ongoing Support:
Not just setup—we handle ongoing administration, compliance, and optimization.

ROI Focus:
We track benefit program ROI through retention metrics, recruitment costs, and tax savings.

Our Johnston CPA services extend throughout the Des Moines metro including Grimes, Clive, Urbandale, West Des Moines, and Ankeny.

Learn from successful Johnston businesses like Johnston Construction Services, Metro Mechanical Johnston, Johnston Electrical Pros, Northwest Iowa Builders, and Johnston Home Services who implemented competitive benefit packages and improved employee retention by 60%+.

Stop losing your best people to Johnston's big employers. Compete on benefits—and win.

Schedule your employee benefit strategy session today →

This article provides general information and should not be construed as tax, legal, or financial advice for your specific situation. Employee benefit programs have specific IRS requirements, compliance obligations, and reporting rules. Consult with qualified professionals before implementing benefit programs. Performance Financial LLC provides specialized employee benefit planning for Johnston area businesses.

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