Despite an increase in market growth, the cannabis industry continues to grapple with a stagnant job market. Over the past three years, according to Green Leaf Business Solutions’ 2024 Cannabis Compensation Survey Summary Report, base pay rates have fallen short of traditional industries’ typical annual increases of 3–8 percent.
That may be one reason the industry suffers from a high turnover rate. Staffing firm Vangst found a staggering 55-percent turnover rate for budtenders in particular. Green Leaf’s survey summary report discovered turnover and talent loss can cost employers double the salary of the departing employee.
In 2025, retention strategies will be more critical than ever. The question is, what’s the best retention strategy?
A reliable 401(k) retirement option can help. Historically (and currently), cannabis operators have had to deal with federal restrictions and compliance complexities that prevent many of them from offering retirement plans to their employees. Since the plant remains federally illegal, most financial institutions hesitate to work with cannabis-related businesses (CRBs). That’s largely because financial institutions fear violating the Bank Secrecy Act, a set of laws passed by Congress in 1970 to help fight money laundering in the United States.
What does that have to do with cannabis businesses? Taking money from workers in a federally illegal business and investing it in mutual funds or stocks could be considered money laundering.
This lack of access to a retirement solution not only hinders workforce retention but also impacts the long-term financial security of employees. Employees must consider the pros and cons of working in cannabis versus a traditional industry that can offer them a surefire retirement plan. Over time, attrition will outpace hiring, leaving the industry without enough key personnel to sustain normal business.
A 401(k) solution could be a primary catalyst for companies’ growth and a healthier industry. But with all the legal and financial hurdles operators face, how can they find (and afford) retirement plans that could help foster retention?
There are more options than you may think.
• Pooled employer plans (PEPs) are fully vetted and transparent 401(k) plans designed for licensed companies. The PEP 401(k) model provides simplicity, reduced risk, and potential cost savings for operators.
• Multiple-employer 401(k) plans (MEPs) are an alternative to traditional 401(k) options. These plans require a MEP sponsor who is generally a third-party service provider like a payroll company or benefits broker. The MEP sponsor takes a fiduciary role in the plan and decides whether employers may join.
• State-run retirement savings programs allow companies to comply with local mandates requiring employers to provide retirement programs. Examples include California’s CalSavers and OregonSaves.
Great! So there are legal and effective ways for CRBs to offer 401(k) programs. But how can my business benefit from offering a plan?
For starters, providing a sufficient 401(k) program is vital to improving employee retention. According to the Pew Research Center, 43 percent of workers in any field who quit their jobs do so because of inadequate benefits. Providing a quality retirement plan gives employees an increased sense of financial security which, in turn, increases job satisfaction and loyalty. In fact, research from people-management platform Gusto found employees with an active 401(k) are 32 percent less likely to leave their job. Even more impressive, Gusto discovered offering a retirement plan can save small and medium-sized businesses as much as $100,000 annually in employee turnover costs.
Also consider the cannabis industry is becoming more saturated every year. One way a business can stand out and attract top-tier talent in a competitive job market is to offer employees a robust benefits package including a 401(k) program.
In addition, providing 401(k) options increases the legitimacy of the industry as a whole. According to financial news outlet Benzinga, “Every 401(k) plan offered in the cannabis industry is a step toward normalizing and legitimizing the cannabis workforce, giving employees access to benefits typically associated with more established industries.”
By investing in their workforce today, licensed operators can ensure a thriving, more professionalized industry tomorrow—one where employees aren’t just part of the movement but are set up to grow and thrive alongside it. The time to take action on providing better benefits for employees is now.
As chief revenue officer for Green Leaf Payroll and Business Solutions, Tyler Priest boasts adiverse background including roles at Thomson Reuters and Paychex. He is a popular speaker at industry events, helping audiences understand the complex relationships between human capital, payroll, and retirement planning.
High turnover is a major challenge in the cannabis industry, but offering 401(k) plans can improve retention and workforce stability. Discover how cannabis businesses can overcome legal hurdles to provide retirement benefits and compete with traditional industries. Read More
