Understanding your employee benefits can go a long way in ensuring that you’re able to make quite the saving. This is especially the case when it comes to your medical expenses and possible investment saving opportunities.
In this part of our Covid-19 Content series we chat to an industry expert to understand how you can make the most of your employee benefits especially during this time, and why you shouldn’t be tempted into payment holidays or potential benefit downgrades.
Tip: For more financial advice and tips by click here.
According to Nicol Mullins, chartered reward specialist and exco member of The South African Rewards Association, here are a few things to keep in mind when considering employee benefits:
Pension regulations: Considering a potential payment break could be a short-term gain to boost cash flow for employees, and could be significant as many employers/employees contribute in excess of 10% of their remuneration into a retirement savings vehicle.
But Mullins says it could hurt your overall financial health:
“The potential decision to take a payment holiday on such a contribution does come with a long-term trade-off. Pension savings benefit from regular contributions and compound interest. If you neglect saving towards your pension now you may regret doing it later and may find it difficult to catch up then.”
Risk insurance: You may also be considering ceasing your group life and disability benefit. However, this is not advisable as no premium received would result in no cover in the event of a claim.
“The bottom line is that the quantum of this saving is unlikely to be more than 1-3% of your remuneration. The risk to cease contributing to risk insurance is just too high,” says Mullins.
Medical aid plans: Where employees are on such plans, there could be an opportunity for significant savings. While completely opting out of medical aid is advised against, it may be that you are over insured. In this case, experts can help you find a more appropriate plan for your needs.
“Depending on the family size, hundreds if not thousands of rand in savings can be realised. Any potential downgrade in the plan can be supplemented by one of the gap cover insurance products,” Mullins advises.
Medical savings: Where medical savings accounts exist with medical aids, the medical aid might allow utilisation of a positive personal savings account balance to fund the risk portion of future premiums until your balance has run out.
“It would be advisable for employees to explore this option with their service providers,” Mullins says.
However, investing for the future or the next rainy day is always a good practice. As the saying goes: “When is the best day to plant a tree? Ideally 40 years ago, otherwise today.”
“It would only make sense for employees to access such a benefit if the interest rate they would earn through the employer is better than what could be earned in their personal capacity, and the costs associated with such a service should be carefully considered,” explains Mullins.
What companies can do
On the part of the employer all benefits should be scrutinised to identify which may potentially not be fully utilised. This may present a potential cost saving that could be re-directed to offering other benefits to staff members.
“Make sure economics of scale are exercised wherever possible. On the group risk insurance side, many companies don’t offer a group scheme, therefore leaving staff to purchase these benefits individually in the retail space. The price difference between group rates and individual rates is significant and employers could certainly assist by creating a group scheme thus allowing staff to cancel more expensive individual cover options,” Mullins adds.
Other opportunities that could be explored are:
- The employer could make the contribution to an employee’s retirement annuity off payroll, thus allowing the staff members to get the tax deduction monthly as opposed to claiming it back when doing their tax returns.
- For those employees who are working from the office and have the benefit of a company canteen, employers could also consider extending canteen benefits to include a take-home meal. Companies may also want to consider providing staff with food vouchers or offer to pay for electricity at home. This will all come down to the capacity to administer additional benefits and affordability of the benefit in question.
- Where staff can work from home, there is a direct transport saving. Where this is not possible, organisations may want to subsidise travel to and from work for some employees.
- To further alleviate the financial pressure on those that can work from home, employees could consider providing a certain amount of internet connectivity, airtime, and data to stay connected.
- Employers could also consider introducing an Employee Assistance Program (EAP) which allows staff to access psycho-social and debt management counselling that may be required. To find out more about debt management options available to you, click here.
- In some instances companies may have a leave liability on their balance sheet. “On a voluntary basis staff may want to donate their available leave balance (or part thereof) to other employees who have exhausted their leave balances. Such an approach allows for a win-win situation to be created for both employees and employers,” Mullins says.
It’s also vital to ensure that companies are clear in all communications with staff.
“Make sure they know what is expected from them. It’s an opportunity for employees and employers to explore new ways of working. Make sure staff are also aware of any EAP or other company-funded assistance programs. Very often employees are not aware of such benefits/programs/assistance available to them.
“Empathy. Respect. Compassion. A little of this may go a long way for an individual. We’re going to emerge from this pandemic facing a different reality.
“Being kind and empathetic to one another will not change what we are going through, but may assist us in getting to where we’re going in a more humane and dignified manner. Now more than ever relationships are vital. If you’re in a position to help, help,” Mullins concludes.
To access other parts in our Covid-19 Content series, click here.