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What to look for when it comes to employee benefits

23 October 2019 GCI Wealth

While researchers and commentators cannot seem to agree on how many times the average person changes jobs, there’s no doubt that the 1950s ideal of one job for life is well and truly buried. Virtually everyone will face the challenge of changing jobs more than once, and one of the key areas to consider when doing so is the employee benefits package, says Jeremy Hawson, Employee Benefits Divisional Manager at GCI.

“The way a company approaches employee benefits can tell you a lot about how it really cares for its employees, which could be a factor in your ultimate choice between Company A and Company B,” he argues. “But more important still is to ensure that the employee benefit programme aligns with your current lifestyle requirements and your long-term retirement goals.”

Hawson says that the main components of a good employee benefit scheme would include group life, which offers cheaper life insurance than individuals can obtain, income replacement in the event of disability (lasts up until retirement age), dread disease cover, medical aid and funeral costs. All of them have a role to play, but he advises that it is advisable to look at them as a whole in order to assess how well they fit into your own long-term plan.

Key issues to watch out for:
• Income replacement is an excellent benefit but make sure it includes premium waiver on your retirement fund. The basic benefit will provide up to 75% of your current salary if you become too disabled to work, but this will not necessarily mean a reduction in your means. It will also not take into account any promotions and salary increases you might have earned during your career. Given your lower income, it is unlikely that you will be able to keep up payments into your retirement fund, thus compromising your ability to retire with any measure of financial security severely. The premium waiver would essentially mean your employer would take out a policy to cover payments into your fund if you are on income replacement.
• When it comes to disability benefits, beware of lump sum payments. These take a long time to materialise because the inability to work forever takes a while to prove – income replacement is more flexible. In any event, lump sums are seldom enough to generate the required income.
• Make sure that the medical aid is flexible enough to be adjusted to your family’s requirements, which are likely to change over time. A one-size-fits-all medical benefit can actually be a disadvantage.
• Make sure the funeral benefit is adequate – Hawson says R25 000 is the bare minimum for a funeral these days.
• Make sure that your retirement benefits are structured to provide you with the income you will need. It is more than likely your company scheme will need to be topped up – work with a retirement specialist.

In conclusion, Hawson says that a very worthwhile benefit that companies are starting to offer is access to a financial planner or coach, or some sort of financial education programme.

“If your job offer doesn’t include this benefit, it is worthwhile asking for it. A specialist can help you ensure that your benefits, including your medical aid and retirement saving, are all aligned for maximum efficiency and with your current lifestyle needs,” he says. “And if it is already offered, you can be sure that you are joining a company that takes your wellbeing seriously.”

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