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Do employees truly understand their employee benefits?

03 May 2023 Darshana Kooverjee, Technical Marketing Actuary at Liberty Corporate

Many employers in South Africa are committed to providing their employees with a comprehensive employee benefits package to take care of their employees and to help retain them.

However, this may be ineffective if employees are unaware of or do not truly understand their benefits. The Sanlam Benchmark 2022 survey reveals that 33% of surveyed individuals were not aware of some
or all of their employee benefits, including their retirement and medical aid benefits.1

Other research done within the employee benefits industry in South Africa has shown that approximately 52% of individuals who participated in this research had no understanding of the terms that are widely used in the employee benefits industry 2 - terms that are key to them understanding the benefits available to them.

One of the consequences of employees not being aware of or fully understanding their benefits may be that they miss out on utilising these benefits. In 2021, South Africa had R47 billion in unclaimed pensions 3. The reasons contributing to the significant size of this amount include members not knowing to update their beneficiary information completely or accurately, or not knowing that their nominated beneficiaries are entitled to benefits should they pass away (and thus not timeously
informing them while still alive).

This raises a need to strive towards greater employee education. The Sanlam Benchmark 2022 survey reveals that 72% of respondents received regular communication on their employee benefits, including retirement and medical aid benefits 4, which implies that there is still some room for improvement in terms of communicating relevant information to employees. Direct member communications, presentations and member tools that aim to educate them about their benefits can assist them with making better decisions for their future. Interactive webinars, newsletters and videos may also assist employees in optimally understanding their benefits. For employee benefits to be effective, employers should, in addition to providing these benefits, help ensure that adequate and easily accessible education, information and support platforms and processes are in place to assist employees in understanding and utilising these benefits.

Costs associated with employee benefits are also important for employees to understand. Employee benefit providers make certain reports available to help assist with this. For example, an Effective

Annual Cost (EAC) report aims to help improve employees' awareness and understanding of the costs associated with their retirement fund. An EAC report uses a standard method within the financial industry to compare charges on investment savings products, with the aim to help employees make better and more informed decisions. EAC reports are available to employees upon request.

Many employees may indeed be aware that they are entitled to benefits and services through their employer, but their understanding of the specific details of these may be limited. It is in the best interests of both the employer and the employees for employees to fully understand the products and services available to them and included as part of their package. Employees may be referred to the Human Resources department or their Financial Adviser to obtain more information on their
employee benefits.

1 https://www.sanlam.co.za/corporate/retirement/benchmarksurvey/Pages/default.aspx
2 https://www.momentumpartnershipconnect.co.za/the-need-for-member-education-in-the-employee-benefits-environment/
3 https://businesstech.co.za/news/finance/574804/south-africa-is-sitting-with-r47-billion-in-unclaimed-pensions-heres-how-to-see-if-youcan-claim/
4 https://www.sanlam.co.za/corporate/retirement/benchmarksurvey/Pages/default.aspx

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