Don't make the common mistake of building a long vesting schedule into your company's retirement plan in hopes of discouraging employee turnover. You just may be successful -- giving unmotivated employees a reason to hang on when they should be replaced.
One company that has avoided this pitfall is Sonalysts Inc., an operations-research firm in Waterford, Conn. Shortly after the company was founded in 1973, the company instituted a pension plan with an exceptionally short vesting period -- 25% a year, up to 100% in four years. Thereafter, employees could take the money and run. Most haven't. "Our turnover is very low for our business," says Muriel Hinkle, president of the 300-employee firm. The program has helped the company attract top employees, she adds, and they stay because they like their work, not because they're waiting to collect their retirement benefits.
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