Small businesses look to funeral cover as first step in looking after staff

Small and Medium Enterprises (SME's) account for about 50% of private sector employment in South Africa and 80% of formal sector job growth in recent years according to some studies. But while SME's are an important source of employment for South Africans, very few offer staff any form of employee benefits other than straight wages or salaries.

That is according to Nathan Adriaanse, Marketing Manager of Lion of Africa Life Assurance. "Most small business owners are thinking purely about the essential items like salaries, wages and utility bills. While this is understandable, they are missing out on tax effective ways to improve the financial situation of their workers and make the firm a more attractive prospect for potential employees.   
Adriaanse says part of the reason for this is that small business owners are daunted by the huge array of employee benefit options available in the market, as well as the costs involved to provide these benefits. "Many new business owners are simply not in a financial position to start offering pension fund contributions, death and disability benefits or medical aid to staff members, which can cost hundreds or even thousands of Rands per individual.

Adriaanse says a solution for employers who want to offer some form of employee benefits is to start small. "A good place to start is by offering funeral cover to staff, which is cheap and easy to manage.  For example, there are products aimed at small and medium sized businesses. Employers take this type of product out for the entire staff compliment. Not only does the employer receive cover for the staff but often also for the entire family."

He says this kind of benefit allows the employer to invest in staff indirectly and it shows that the business owner is addressing the needs of entire family circle, thereby ensuring that the employees view the actions of the business owner in a positive light.

"This type of product is seen as the stepping stone to implement the traditional employee benefits offering such as pension or provident funds, which the business would only be in a position to afford at a later stage.

According to Adriaanse, there are generally two options available to clients either on a compulsory basis where the employer pays the premium or on a voluntary option where the employer contributes 50% towards the total premium with the balance paid by the employee.

He says the cost of this type of cover is extremely low. "For example, through the new Lion of Africa Twilight Family Funeral Fund, funeral cover of R5 000 can be bought for as little as R18,50 per staff member, with personal accident cover of R5000 applicable to the main member and spouse. For R30, R10 000 cover can be bought." He adds that the added benefit of funeral cover is the speed with which the money can be accessed when it is needed.
 
"While savings accounts, life insurance policies and pension funds are all good ways of ensuring that those who are left behind are financially secure, there can be delays in accessing the money in these vehicles."
 
He says this can be a problem when it comes to paying for the funeral as most funeral directors require payment upfront. "One of the best ways to ensure there is cash available for the funeral is through a funeral policy, which ensures an immediate cash payout on the death of the policyholder."