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Still many good reasons for businesses to offer attractive employee benefits

08 December 2011 Andy Clark, Head of Benefit Consulting at Liberty Corporate Consultants and Actuaries

The fact that South Africa is moving, albeit slowly, towards the implementation of a National Social Savings Scheme (NSSS), should not be seen by businesses in South Africa as a reason not to introduce their own employee benefits offerings for their employees, or keep on enhancing any such employee benefits they already offer.

That’s according to Andy Clark, Head of Benefit Consulting at Liberty Corporate Consultants and Actuaries, who explains that while it is now more a case of ‘when’ the NSSS and associated Retirement Reforms will be implemented rather than ‘if’ they will, businesses should not lose sight of the many benefits that a comprehensive, privately structured employee benefits scheme has to offer - both to employees and to the business itself.

“Apart from the obvious moral and social obligation that businesses have to present their employees with every opportunity to ensure their current and future financial security, a well constructed and administered employee benefits offering is a highly tax efficient means of reducing the reliance of South Africans on state support down the line,” Clark points out, “not to mention the fact that such an attractive employee benefits scheme can also be a significant boost to any organisation’s competitiveness by ensuring it is able to attract and retain the best talent.”

However, Clark points out that merely offering employee benefits is no longer enough to secure such a competitive advantage in the market; the way in which these employee benefits are structured to meet the diverse needs of employees has become vitally important.

“The combination of a fast-changing regulatory environment, the developing financial awareness of employees, and the growing long-term financial challenges facing most individuals makes it imperative that any employee benefits scheme is carefully aligned with the specific needs and knowledge sets of the employees who are supposed to benefit from it,” he emphasises, “which means that, as a minimum, it needs to offer a sensible investment strategy, a meaningful contribution and benefit structure, appropriate levels of member investment choice, and ease of benefit preservation when required.”

Clark is quick to admit that achieving such a well balanced and appealing employee benefits scheme is challenging in the South African context, particularly given the country’s large informal employment sector, the difficulties presented by a workforce with a high prevalence of HIV/Aids, and the need to overcome diverse views regarding who is ultimately responsible for ensuring the financial and health security of the nation’s aging population.

“Despite these challenges, it is certainly possible for any business, regardless of its size, to offer its employees a valuable and effective employee benefits solution,” Clark says, “as long as they ensure that the focus of such a scheme is on delivering meaningful benefits with flexible contribution and benefit structures, rather than simply offering a ‘blanket’ arrangement that offers expensive benefits that are of little or no value to the people for whom they are intended.”

He explains that while achieving such a well-balanced scheme in terms of costs and benefits may require some ‘shopping around’ amongst employee benefits providers and administrators, the tax deductibility of a carefully constructed scheme (up to an effective 20% in some cases), coupled with the reputational benefits and employee attractiveness it offers, makes the process of establishing a good scheme an investment of time and effort that will almost certainly deliver valuable long-term returns for the business.

“While it may be true that the finer details of the NSSS and proposed retirement reforms are something of a grey area now, businesses should not allow this uncertainty to influence their decisions regarding whether to implement or enhance their own employee benefits offering,” concludes Clark, “because by delaying or avoiding the implementation of such a scheme, those businesses will not only be hindering the financial security of their employees, they will also effectively be stunting their own sustainability and, what’s worse, impacting negatively on the development of a savings culture in South Africa, which is a vital component in the country’s continued economic development.”

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