• Shreekanth Sing, Technical Legal Adviser

How should employers decide what benefits to offer their members?

When we think about employee benefits (EB), we tend to single out our retirement fund, but a typical EB offering is made up of much more than this. In addition to a retirement fund benefit, it may also include risk benefits like group life, capital and income disability cover. EB offerings can also have a fundamental impact on the financial security of your staff, and the quality of life that they, and their extended families, are able to achieve. While many of us take our packages as employees for granted, arriving at the right set of benefits for a company is a complex process that involves carefully weighing up a variety of factors. EB consultants, who are experts at evaluating the different product offerings and options, can offer invaluable insights to ensure that the most appropriate basket of benefits is established.

This is not as easy as it may seem

While it seems obvious that employers would aim to structure EB benefits that meet the needs of their staff, the most recent Sanlam Benchmark Survey highlighted the complexity of decisions with which trustees and employers are often faced. Employers were asked to assign a ranking to different priorities for both lower and higher-income members.

The list of priorities that resulted was radically different for higher and lower-income employees. While retirement savings are the primary concern of higher-income earners, funeral cover ranked as the most important priority for low-income earners. This divergence highlights how difficult it can be to meet the needs of a group of employees who can often be very diverse and can have different educational and income levels.

The factors consultants consider

EB consultants are knowledgeable about the different providers and product options available in the market. They will consider how well positioned these various providers are in terms of both the unique attributes of your staff complement as well as the basket of benefits you would like to offer. They conduct an extensive initial investigation, considering a wide range of factors that could include those listed below.

For risk products:

  • the average age of your employees

  • industry

  • risk factors specific to your environment

  • male vs. female split

  • average income

  • number of employees

  • medical claims experience

  • pricing

For retirement products:

  • number of members

  • average number of years to retirement

  • number of resignations and retirements during the previous year

  • the number of claims in progress, including death claims

  • default portfolio options

  • fund choice/flexibility

  • investment fees

For selecting administrators for your scheme:

  • the benefits you want to offer

  • administration capability