Small and medium enterprises (SMEs) are the lifeblood of the South African economy, accounting for 20% of the country’s GDP and employing about 47% of South Africa’s workforce.
As SMEs employ such a sizeable portion of the workforce, it is essential that they offer their staff an opportunity for long-term financial security for themselves and their families, through employee benefits.
Not only will this go a long way to ensuring a meaningful number of South Africans have access to financial security, but it also provides the businesses with a significant competitive advantage.
Attracting and retaining quality employees is a major economic motivation for any entrepreneur. Most employees want a competitive range of employee benefits to ensure they retire with adequate savings and are able to look after their families should they become disabled, suffer from a critical illness, or die.
Ensuring your employees have access to an appropriate healthcare solution is another important component of caring for your staff.
Although more established corporates are believed to provide better benefits, higher salaries and greater career growth opportunities, SMEs can change this general perception as they can access employee benefits solutions tailored to suit their means and the needs of their staff.
Here is a range of employee benefit options available to small business owners:
Primary care is designed to cover the cost of primary healthcare. Employees have access to GP consultations, basic dentistry, basic optometry and chronic medication through designated service providers or a network of providers. As primary care is not a medical aid it does not cover planned procedures at private hospitals, but you can choose to add on products that allow members to be stabilised in a private hospital after an emergency or accident. Primary care benefits and the add on products are designed to provide basic healthcare cover, so they are generally more cost effective.
Medical aid provides financial cover for medical expenses to members who pay a monthly contribution. Contributions are paid to medical aid schemes and are pooled and safeguarded. Medical aid covers members’ healthcare costs such as hospitalisation, treatments and medicine. Costs are covered according to medical scheme’s rules and the type of medical aid. The rules ensure that members are cared for fairly.
Insurance premiums are based on potential risks that you are insuring against. When a group of people are covered under one policy, the risk is spread, allowing for lower premiums. Many service providers offer business owners affordable life, disability and funeral cover for their staff. Insurtech company, Simply, for example, focuses on providing life insurance products for market niches that are underserviced by traditional insurers. Group cover benefits may be taken together as a packaged solution or separately, depending on the business owner’s preference.
An umbrella fund is a retirement product that allows multiple employers to use a single retirement fund structure to help their staff save for retirement. The fund is managed by a professional board of trustees. Umbrella funds are about economies of scale – the more money you have invested in the funds, the better able you are to spread the costs of managing the fund among a larger number of members.
In recent years umbrella funds have evolved to offer pre-packaged entry level products, with a five to ten member minimum requirement, that cater for the SME market. The products offer retirement savings and basic risk cover that will pay benefits to staff and their families in the event of death, disability and dread disease.
As pre-packaged products, they are designed to be simple and cost effective while offering some flexibility in tailor making solutions. Large established umbrella funds administered by service providers like Alexander Forbes, Liberty, Old Mutual, Sanlam and Momentum offer these entry level pre-packaged umbrella fund products.
It can be daunting to put together an employee benefit solution as there are numerous aspects to evaluate. If you are a business owner, you probably don’t have time to talk to many different service providers.
It can be helpful to seek expert advice as SMEs are unique in their product and service offering, size and employee benefit requirements. Each business will require a tailor-made employee benefits solution to suit their staff and organisation.
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About the Author
Manie De Bod is a Divisional Executive at Liberty Corporate.
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