What do workers need?
Common economic theory suggests that, except in special cases, an in-kind transfer is relatively less effective at improving welfare than a cash transfer of equivalent cost, since we rarely measure wealth with intangibles like a child’s education2. But in South Africa, housing and education are regarded as valuable and worth saving for3. So it needs to be recognised that the perceived value of a housing subsidy, for example, may be greater than the cash equivalent. This is a ‘win’ for both the employer and employee, so in-kind transfers should form part of the list of employer priorities.
To facilitate home ownership for individuals where credit may not be available, some retirement funds allow members to borrow against their retirement savings. However, this may not go far enough. From an employer’s perspective, housing close to the place of work has certain secondary advantages such as reducing time spent in long commutes, traffic congestion and pollution. However, the supply of housing in the area or the infrastructure needed to service a community may be insufficient. Finding a way for someone to be able to buy or build a house is unhelpful if water, sanitation, healthcare and roads are simply not there.
Similarly, offering bursaries might give employees an opportunity to educate their children but the supply of education may differ from the demand. For example, there may be a primary school in a town but no high school, or the language in which learning takes place may not be appropriate. Even if there is a school, parents need to regard the school as being good enough. This perception might be based on the number of learners in each class, facilities, medium of instruction and whether the school is public or independent.
A modified version of Maslow’s Hierarchy of Needs, illustrated below, is a useful tool for employers who are looking at providing a holistic total rewards system that goes beyond employee benefits. More importantly, employers should recognise the interconnectedness of these levels. A basic need for housing can interweave with an individual’s feelings of achievement. This way the employer provides tangible assets by providing a benefits package, as well as a psychological sense of well-being that can improve both productivity and engagement.