Five ways employers can help to ease the financial pressure facing South Africans
Financial stresses are becoming a bigger problem for South Africans:
An average pensioner can replace only 28% of their income when they retire.
Two out of five credit-active South Africans have impaired credit records.
John Anderson, head of strategic development at Alexander Forbes, says: “Our research has found that on average, employees are spending between 13 to 20 hours a month worrying about finances.”
It makes a big difference when employees get the right information and advice at the right time. “Low financial well-being ultimately has an impact on the employer’s balance sheet because financial stress leads to absenteeism, poor work performance, a lack of concentration, increased safety hazards, and fraud,” says Anderson.
Employers therefore have a vested interest in improving their employees’ financial well-being. Anderson says: “We have estimated that the overall cost to employers for low financial well-being can be as high as 35% of the company payroll.”
Anderson outlines five ways to improve the financial well-being of South Africans and actions employers can take:
1. Use digital innovation to improve employee engagement
Our research shows that until now, most processes companies use when onboarding individuals do not facilitate good decision-making. For example, on joining a new employer, most employees select the lowest contribution to their retirement fund. This is often because they do not receive easily understood and accessible information when they join.
The same is true while they work for, leave or retire from the company.
The good news is that we have found that when companies engage with employees on their benefits, giving them the right information and tools, their employees make better decisions. This means:
giving them easily understood and accessible information
making information relatable by predicting retirement income in today’s terms
connecting people with their future selves because they tend to expect instant gratification and underestimate their future needs
Where companies have taken this approach, we have seen employees increasing their benefits and selecting higher contribution rates to save for retirement – ultimately assisting them in improving their financial well-being.
2. Engage proactively with employees at key life events
Our research shows that people need adequate time to engage with the benefit decisions they need to make when joining, working for, leaving or retiring from a company.
Poor decision-making usually results from individuals being rushed to make choices at these critical moments. For example, when buying a new house, an individual would typically