Why Employee Benefits are Good for Your Business
It comes as no surprise that most companies advertise their employee benefits as part of an all-round remuneration package. In the contemporary workplace, benefits that enhance quality of life are often considered to be just as important as salaries and bonuses. Companies also understand that when employees enjoy access to key employee benefits, they also experience less stress and greater productivity. This in turn underscores the role and importance of work-life balance in employee longevity. But the benefits aren’t just employee-centred. Companies offering a wider range of benefits typically tend to attract employees that are more talented, harder working, and more loyal. With the advent of more seamless technology, administering an employee benefits program is easier than it’s ever been. Employers, too, are finding it easier to incentivise and educate employees to make mutually beneficial employment benefit choices.The Components of an Employee Benefits Program
What defines a good employee benefits program? The answer to this is highly subjective, and often depends on the size of the company, socioeconomic status or role of individual employees, and company structure. The most pragmatic answers to this can be found in consultation with an expert employee benefits advisor. Broadly speaking, though, there are several commonly accepted employee benefits that are now regarded almost as a must-have for virtually every responsible business owner. These include:Retirement Fund
The provision of a retirement fund is virtually a given for most companies. It’s also a benefit that forms the basis for many others. A retirement fund can take several forms:- A pension scheme
- A provident fund
- A group retirement annuity
Group Risk Benefits
Group risk benefits are essentially insurance vehicles intended to provide cover for employees against illness, incapacity, or death during their working lifetime. These benefits vary and can include:- Group life benefits. Group life benefits are automatically applied to all employees who are members of the company’s retirement fund. The reason for this lies in the spread of risk across a greater number of individuals, and group life cover is administered on a pooled-risk principle. As a result, individual employees are not required to undergo medical underwriting in order to qualify for cover up to the predetermined free cover limit. Thanks to the pooling of risk, group life benefits often cost less than individual life assurance premiums. However, this varies according to each company’s risk profile. As an example, a company operating in the field of security or deep-sea oil drilling would carry a higher risk profile than a firm of accountants.
- Funeral cover. This is a simple but essential benefit, providing single-sum cover that is usually paid out within 24-48 hours in order to cover immediate funeral expenses.
- Medical aid. For most employees, the provision of a medical aid benefit is viewed as a highly attractive benefit. Private healthcare in South Africa is generally the preferred option, with a higher quality of care, shorter waiting times, and access to high levels of medical technology and skill. Employers commonly provide a choice of medical aid plans in order to accommodate the circumstances of each employee. It’s worth noting that medical aid tax credits reduce the amount of tax payable, which increases the affordability of a medical aid benefit.
Certain offerings (for example, those provided by the Discovery Group) also incentivise employees to engage in healthier lifestyle choices. Not only does this translate into a higher quality of life for the individual, but also means a lower rate of illness and absenteeism along with greater productivity – tangible bottom-line benefits for any employer! This also aligns with growing research that powerfully demonstrates just how employee health and productivity are connected.
- Gap cover. The addition of gap cover (or shortfall cover) means that employees can claim for the difference in cost between the stipulated medical aid rate and the higher fees often levied by private doctors, specialists, and other healthcare professionals.
- Income or capital disability benefits. The majority of companies also include disability benefits within their employee benefits offering. These benefits can be paid either in the form of a lump sum payout (also known as a capital disability benefit) or as an income continuation benefit, where the employee continues to receive an adjusted monthly salary.
There are specific reasons for potentially choosing one over the other. For example, a lump sum disability benefit enables the recipient to pay off outstanding debt or to finance necessary changes in lifestyle – such as making alterations to a home in the event of specialised care being required.
An income protection benefit is designed to pay a percentage of the employee’s monthly salary (the industry standard is 75%) until recovery, retirement, or death. In order to qualify for the lump sum disability benefit, the disability has to be deemed ‘total and permanent’. Alternatively, in the case of income continuation disability benefits, the employee must be unable to pursue their own career after a period of two years. This definition can be broadened to include ‘similar careers’ as well.
- Critical illness benefits. Critical illness can adversely affect the ability of an employee to continue earning an income, with resulting financial consequences that can be disastrous for a family. A critical illness benefit covers most severe illnesses in addition to dread diseases like cancer, heart disease, and strokes or aneurysms, among others. This benefit is most commonly structured as a multiple of salary, similar to death benefit cover. This lump sum payout is intended to help offset any shortfall on the employee’s medical aid benefit so that they can access the appropriate medical technology or cover additional expenses incurred by lifestyle changes.
Additional Benefits
As an employer, you have the option of expanding your employee benefits program in several other ways too. Two of the most common choices are:- Education benefits. An education benefit provides cover designed to pay for or assist with educational costs and living expenses for children of employees.
- Employee wellness programs. A wellness program can be tailored to provide a wide range of services and activities that enhance employee health and wellness. These often include components like:
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- Gym access, health facility memberships, and onsite or group activities like Yoga classes, self-defence workshops, and mindfulness sessions.
- Literacy and financial literacy programs.
- Counselling services.
- Legal aid services.
- Dietary and lifestyle advice or coaching.
- Onsite clinic or health professional access.