Who needs ABC? Use EB instead
Employee benefits can be a beneficial tool for attracting and retaining staff. They're therefore commonplace in the corporate world, but small and medium-sized enterprise (SME) owners often feel that these products are unaffordable, complicated, and a luxury rather than a necessity – especially when considered in the context of human resource costs and managing cash flow.
Understandably, incorporating these products into their businesses is often not top of mind for SME owners and HR managers. However, we cannot ignore the needs of lower income earners.
Providing security
The fact of the matter is that the need to provide financial security to employees, for whom providing their family with a sustainable income is of utmost importance, is no different based on the size of the organisation.
In this regard, the adviser can play an important role in helping SME owners understand that their employees are working for a pay cheque to meet this need, and that they won't see the long-term benefit associated with the ultimate success of the business.
Employee benefit schemes are therefore a way in which employees can derive meaningful value from their jobs, which is why they should never be considered a luxury for SMEs. In the lives of staff, they are necessities in the modern era.
A buffet of choice
To this end, financial service providers have created products that cater to the specific needs and circumstances of the SME. This is because the economies of scale achieved by organisations with thousands of employees enable them to adopt standalone employee benefit funds as the associated costs and fees are cross-subsidised.
However, SMEs lack the volume needed to make standalone funds a viable option, which is why umbrella funds were created and offer a suitable alternative.
There are already a number of specialised providers that focus on this market segment, with sufficient volume to sustain this business and a large untapped segment of the market to support further growth. Intermediaries need to help increase awareness about these solutions and help improve the SME owner's understanding of them.
Through the fully managed umbrella fund structure, insurers can offer SME owners different categories of standardised cover to meet the basic financial needs of their employees. The ability to offer some degree of flexibility, customisation and choice also exists.
Customising contentment
From the employer's perspective, benefit structures can be customised to include all of the basic elements the owner wants, while excluding the elements that do not offer additional tangible benefits, but will increase costs. This flexibility also gives smaller businesses the option of adopting a piecemeal approach; one where they can start small with something like a funeral plan and, over a period, add benefits to better compete with those offered by larger organisations.
In addition, employees can choose to increase the extent of their cover. This aspect is what could be considered the luxury element of employee benefits – the degree of cover – but the cover itself is an absolute necessity.
A helping hand
The role of the financial adviser and broker would be to help structure the most suitable solution based on affordability, and to continue to advise on how that should change over time based on the changing requirements of the business and its staff.
This approach also gives advisers an opportunity to address the growing need to assist employees in saving for their retirement. The local SME sector supports a large proportion of the workforce, the majority of whom are not saving adequately towards retirement, if at all.
By offering a platform to force contributions towards a retirement fund, advisers can assist SME owners in understanding the importance of providing an opportunity for employees to invest for retirement and then help staff secure their financial future through dedicated contributions through an umbrella fund structure.
