There are many South Africans who work for companies who offer compulsory Employee Benefits. These companies feel a sense of responsibility towards their employees as it will provide capital or income to dependents in the event of death and may also provide capital for retirement.
Other individuals will need to invest for retirement and take out risk cover in their personal capacities when their employers do not offer these benefits, making it entirely their own decision.
The contributions towards an employee benefits scheme are described as a percentage of the employee’s monthly salary. An employer can choose to match the employee’s contribution as an added benefit to reward years of service.
Employee Benefits offered by employers may include the following:
- Pension- or Provident Fund
These contributions provide capital towards retirement after age 55. If an employee resigns, he/she may withdraw the capital depending on the amount and will be subject to taxes on the lump sum. The capital can also be transferred to a Retirement Annuity or Preserver. These funds can also be bequeathed to beneficiaries.
- Group Risk Cover
These benefits are meant to cover employees in the event of death, disability and severe illness. It can also include funeral and education benefits for dependants. The amount of cover will be based on their annual salary.
- Group Medical Aid or Medical Insurance
Covers each employee for option specific medical emergencies, procedures and medication.
As these benefits form part of an employee’s Cost to Company, they will also carry the costs of these benefits. The most important benefits for a specific employer’s group will be dictated by these costs and the overall level of employee salaries. The CFO and HR department may consult with employees when initially setting up the employee benefits scheme.
Here is a breakdown of how these costs might look like for a group of 20 employees:
Ruvan J Grobler RFP™