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How should employers decide what benefits to offer their members?

08 August 2019 Shreekanth Sing, Technical Legal Adviser at PSG Wealth
Shreekanth Sing, Technical Legal Adviser at PSG Wealth

Shreekanth Sing, Technical Legal Adviser at PSG Wealth

When we think about employee benefits (EB), we tend to single out our retirement fund, but a typical EB offering is made up of much more than this. In addition to a retirement fund benefit, it may also include risk benefits like group life, capital and income disability cover. EB offerings can also have a fundamental impact on the financial security of your staff, and the quality of life that they, and their extended families, are able to achieve. While many of us take our packages as employees for granted, arriving at the right set of benefits for a company is a complex process that involves carefully weighing up a variety of factors. EB consultants, who are experts at evaluating the different product offerings and options, can offer invaluable insights to ensure that the most appropriate basket of benefits is established.

This is not as easy as it may seem
While it seems obvious that employers would aim to structure EB benefits that meet the needs of their staff, the most recent Sanlam Benchmark Survey highlighted the complexity of decisions with which trustees and employers are often faced. Employers were asked to assign a ranking to different priorities for both lower and higher-income members.

The list of priorities that resulted was radically different for higher and lower-income employees. While retirement savings are the primary concern of higher-income earners, funeral cover ranked as the most important priority for low-income earners. This divergence highlights how difficult it can be to meet the needs of a group of employees who can often be very diverse and can have different educational and income levels.

Priorities

Lower income importance

Higher income importance

Funeral cover

1st

7th

Meeting short-term debt obligations

2nd

6th

Insurance: Life and disability

3rd

2nd

Meeting long-term debt obligations

4th

5th

Retirement savings

5th

1st

Medical aid

6th

3rd

Tax-free savings

7th

4th

Loyalty/rewards programme

8th

8th

Source: Sanlam Benchmark Survey

The factors consultants consider
EB consultants are knowledgeable about the different providers and product options available in the market. They will consider how well positioned these various providers are in terms of both the unique attributes of your staff complement as well as the basket of benefits you would like to offer. They conduct an extensive initial investigation, considering a wide range of factors that could include those listed below.

For risk products:
• the average age of your employees
• industry
• risk factors specific to your environment
• male vs. female split
• average income
• number of employees
• medical claims experience
• pricing

For retirement products:
• number of members
• average number of years to retirement
• number of resignations and retirements during the previous year
• the number of claims in progress, including death claims
• default portfolio options
• fund choice/flexibility
• investment fees

For selecting administrators for your scheme:
• the benefits you want to offer
• administration capability
• employer preference
• additional benefits on offer
• service support
• servicing turn-arounds
• reporting (at both the employer and employee level)

Ultimately, it is how these factors combine, and how cost-effectively the desired offering can be provided, that will inform the final choice. Your EB consultant is also well positioned to help you evaluate the importance of managing costs versus offering more choice to your more affluent groups. Much as with a personal financial review for individuals, when it comes to EB the right answer will be highly unique and tailored to the specific needs and objectives identified.

Frequent reviews are a must, especially given ongoing innovation
Your staff members and their needs change over time, as do the products and providers in the industry. Typically, EB consultants meet with their clients twice a year, and one of these sessions will involve them presenting a full overview of your current benefits. Should discussions highlight the need for a change, they can begin the process of sourcing an appropriate solution that addresses this need.

They can also help you to evaluate the merits of adding newer product innovations to your offering. For example, primary-care insurance was introduced in the last two years and can help you meet the needs of lower-income earners. It allows employees access to GPs, medicine, basic blood tests and X-rays in the private sector, avoiding the time-consuming and inefficient clinics and state hospitals for these services. This offering limits the risk of hospitalisation and chronic disease and is therefore an excellent choice for members who would otherwise not be able to afford a medical aid.

When it comes to selecting the most appropriate basket of benefits to help you attract and retain staff, the right answer will be highly unique and tailored to the specific needs identified. The advice and guidance of a seasoned EB professional can be invaluable to ensure your EB offering does indeed stack up.

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