Unit Benefit Formula
Candlefocus EditorThe Unit Benefit Formula is expressed as a percentage of the employee’s salary determined by the employer. Typical contribution rates are in the range of 1.25% to 2.5% of the employee’s salary.
One attractive feature of a retirement plan that utilizes the Unit Benefit Formula is that employees are rewarded the longer they remain with an employer. Therefore, it is to their benefit to stay loyal and receive this extra compensation for their years of service.
The Unit Benefit Formula is a great way to encourage and retain employees, as older employees are typically much more experienced, and more valuable to the company. This formula provides them the security of having a consistent retirement income. It also encourages boss-employee relations as the boss is seen as one who looks after the welfare of his employees.
For employers, the Unit Benefit Formula is also a great way to keep employee salaries competitive and lower overall costs of labor. An employer can decide to pay an employee a lower salary in exchange for increased contribution toward their retirement plan. Alternatively, an employer can offer a higher contribution for an average or lower-than-average salary in order to be competitive.
Employers and employees alike should be aware of all the terms and conditions involved in the Unit Benefit Formula before signing on to an agreement. It is best to ensure that both employer and employee understand their respective rights and obligations, so that both can benefit from the agreement in the long term.