Innovative employee benefits – a competitive advantage for SMEs

Samantha Jagdessi

Small and Medium Enterprises (SMEs) continue to play an integral role in addressing South Africa’s high unemployment rate. However, recruiting and maintaining skilled talent is a task that these smaller businesses have to approach with dexterity. One way to go about this is by providing prospective employees with more than just the promise of a monthly salary; offering employee benefits that will sustain their families and themselves in the long run.

This is according to Samantha Jagdessi, Head of Benefits Consulting at Old Mutual Corporate Consultants, who says that SMEs need to leverage their unique benefits as a tool to attract and retain scarce talent. “Retaining a talented workforce is crucial for business success, as frequent staff turnover has been shown to have a negative impact on employee morale, productivity and company revenue. Studies predict that every time a business replaces a salaried employee, it can cost the company between 6 to 24 months of their salary – depending on the role.”

Although more established corporates are believed to provide better benefits, higher salaries, greater career growth opportunities, and enhanced exposure, Jagdessi says SMEs now have the opportunity to change this general perception. “While well-resourced corporates tend to traditionally hold the advantage over SMEs in terms of offering better benefits, SMEs are able to tailor their benefits package to suit their means, thereby allowing them to gain a valuable competitive advantage.”

Jagdessi says that although many SMEs acknowledge the value and the role that employee benefits can play in their business, the 2017 Old Mutual Corporate SME Employee Benefits Monitor reveals that this isn’t translating into action. “The Monitor reveals that only 41% of SME employees feel confident about their retirement plans, painting a dire picture of over 50% of SME employees who remain uncertain of life after retirement. Yet, of all the decision makers who participated in the report, only 32% have retirement funding on their agenda.”

SMEs attribute their apprehension to offering employee benefits to the perceived administrative burden and additional costs involved, which, according to the report, can be avoided. “There remains a perception that the costs and administrative burden outweigh the benefits – this is despite the vast array of workable and affordable solutions available that support businesses of all sizes, ranging from a five-man executive team to a 100+ strong employee base,” says Jagdessi.

A new generation of retirement fund models, such as Umbrella Funds (multi-employer retirement funds), have dramatically lowered the “burden” to employers and decreased costs. This is thanks to the economy of scale created by group participation, says Jagdessi, adding that, to further support SMEs in delivering tangible benefits of retirement provision, professional employee benefit consultants are also available at a minimal fee to provide support, appropriate advice, education and communication tools.

“Like any corporate organisation, SMEs are unique in their product and service offering, size and in this case employee benefit requirements. Each SME will require a tailor-made benefit structure to suit the business.” Jagdessi lists three aspects that need to be taken into consideration when implementing an employee benefit structure:

Consider how retirement provisions will be funded

SME decision-makers need to consider whether the business will contribute toward employees’ retirement savings fully, partially or only manage the administration thereof.

While the introduction of enabling retirement savings will ensure positive outcomes for staff, debt-burdened staff may struggle financially should they experience a dramatic decrease in take-home pay in favour of contributing to long-term retirement savings. Jagdessi suggests decision-makers also consider using a percentage of their staff’s annual increase to fund retirement provision before they grow accustomed to an increase in salary. “The ‘like-for-like’ funding model where the employer matches the contribution made by the employee,” she explains.

Consider the levels of flexibility required and the associated cost

By limiting choices available to low-income employees – those who tend to rely more on their employer to make responsible financial decisions on their behalf – administrative costs can be reduced, thereby passing on more value to employees. White-collar workers, however, generally want more flexibility and control over their investments. Jagdessi advises SMEs with a mixed workforce (blue- and white-collar workers) to invest in advanced payroll software that allows staff to individually tailor their contribution level.

Consider how investment-savvy staff are and what level of support is required

While white-collar workers tend to have greater levels of formal education and have sufficient access to the information required to make good financial decisions, blue-collar employees generally display higher rates of consumer vulnerability. In a workplace with both white and blue-collar workers, hands-on seminars and workshops should be facilitated by trained employee benefit consultants to bridge the gap in education and financial confidence.

When making these decisions, it can be beneficial to seek expert advice. Employee benefit consultants can assist in advising on the best structure for a specific business or workforce – one which not only delivers positive retirement outcomes for its staff but also delivers on long-term strategic goals for their business.



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