Issue: June 2012 / August 2012
Use employee benefits to encourage savings
Hacking . . . advantages for employers,
employees and South Africa
While details around Government’s retirement reform initiative have yet to be finalised, it appears that the debate around the issue is resulting in an increased focus among employers and employees on the need to save for retirement.
At Old Mutual Corporate, we are seeing an improvement in awareness levels among companies regarding the importance of retirement savings and other employee benefits.
A key tool to increasing savings
More and more, companies are acknowledging that employee benefit programmes are a key tool to increase the savings rate of the working population.
Employee benefit programmes create the structured mechanism through which employees will save regularly for the future and thereby become more financially secure.
This renewed enthusiasm among local companies for providing employee benefits is being tempered by affordability issues in the wake of the global financial crisis and concerns around the economic outlook in South Africa.
As a result, it is crucial for employers to look at employee benefits in the context of what is ideal, but realise that they do not need to implement everything at once.
What makes an ideal employee benefits programme?
An ideal employee benefit programme could include a mixture of
The importance of these elements vary from company to company and from employee to employee.
However, when structuring an employee benefits package, it is important for companies to understand the core needs and priorities of their specific employees.
For example, younger employees who don’t yet have families may not place much value on group life cover. They are also likely to feel that their salary, not their retirement savings, is their primary wealth generator. In these instances, employers need to have a strategy in place to communicate the benefits of long-term saving and investing.
Benefits for employers and employees
Although employers have a responsibility to ensure the long-term financial wellness of their employees, there are also self-serving reasons for companies to implement an effective employee benefits scheme.
Old Mutual research has shown a direct link between people who are members of retirement funds and higher levels of confidence in their financial planning.
Simply the act of putting an employee benefit programme in place has a positive impact on the workplace. Happy employees tend to be more productive and more incentivised to work for an employer when they know that the company has benefits in place for them and their dependants.
In addition to these advantages, well-structured employee benefits can help small businesses avoid disaster in the event that one of their employees becomes disabled or dies.
Not only saving for retirement
Many small businesses insure their equipment but neglect to consider the financial consequences of a staff member becoming too ill to work or dying.
It’s important to note that the savings benefit of an employee benefit programme is not only for retirement. Employee benefit programmes create long-term wealth and financial wellbeing for employees. The savings they generate can protect them from financial shocks such as job loss and create wealth that, importantly, can be passed on to future generations.
It is crucial that South African employers get on board with this to address the savings crisis in our country.