A holistic approach is essential to improving the employee benefits system. This involves an increased focus on the integration between all stakeholders and all benefits. In addition, the understanding that physical, mental and financial health are inter-related is critical. Ignoring the interactions between the various components creates inefficiency in the employee benefits system. For example, the government’s older person’s grant (OPG) may be enough to meet the basic needs of a low-income earner. Requiring this individual to contribute to a compulsory employer-based retirement fund while working may reduce their standard of living due to the contributions payable, as well as cause them to lose access to the OPG for which they may otherwise have qualified. This is discussed in the article 'Low-income earners'.
By way of a second example, trustees of a retirement fund may try to increase the portion of contributions directed towards retirement funding by reducing the amount paid for disability insurance. One way of reducing the cost is to increase the waiting period that must elapse before the benefit starts. However, an employee with a disability claim may then run out of paid leave before the disability benefit starts, resulting in a break in income. This in turn may leave them unable to afford continued medical scheme membership at a time when they need it the most. The irony is there may be cases where early intervention triggered by an absenteeism management programme could have kept the employee productive. 'Absenteeism and incapacity' are discussed in more detail later on.
Hence, the ripple effect from a single change of one aspect of the complex system of benefits provision can be significant, particularly if not understood or managed. This inter-connectedness can also be used to effect positive change. An employee assistance programme can offer employees financial advice, which can help with their levels of indebtedness, which in turn frees up more money for saving or buying risk benefits as a household. Integrating this with a wellness programme that allows employees to track and be rewarded for their progress may support these positive changes. 'Incentives' are discussed in more detail further on.
The Employer as a stakeholder
Many employers have not reviewed their employee benefits structure in over a decade5, despite the rapid changes in the economic climate. Now might be a good time to stand back and consider what benefits are offered to which employees and the objectives of such a programme. Employers may not extend benefit coverage to all employees. Informal and temporary workers may be excluded, as discussed in 'Temporary and informal workers'.
Employee benefits can also benefit the employer when they are structured in such a way that they improve organisational performance, as discussed next. The impact of employee benefits on organisational performance is twofold:
- Employee benefits stimulate employee engagement, which is highly correlated with organisational performance.
- Employee benefits impact directly on physical, mental and financial health, which impact on productivity.
Employee engagement and organisational performance
An engaged work unit is 38% more productive and 27% more profitable than a disengaged one6. In addition, organisations with top quartile employee engagement levels have enjoyed a growth in earnings per share 2.6 times greater than organisations with below-average employee engagement levels6. Another study found that over a 12 month period, organisations with high levels of employee engagement showed an improvement in operating income of 19.2%7. In contrast, organisations with poor employee engagement levels saw a decline in operating income of 32.7%7.
So there is a clear relationship between employee engagement and financial results. The precise role of employee benefits in stimulating employee engagement is difficult to quantify but is relatively intuitive. In an Alexander Forbes Survey8, all respondents stated that the wrong employee benefits could lead to disengagement. When asked if employee benefits were important for employee engagement, 84% of the employers responded ‘yes’ with just 13% stating that other aspects of the work environment were more important and 3% of employers stating that they were uncertain.
Physical, mental and financial health and organisational performance
Holistic employee benefits programmes that are structured to address physical, mental and financial health can offer employers a significant return on their investment. For every rand invested, returns can range from R4.50 to R23.009. This return is delivered through improved financial health and savings on absenteeism, retraining costs and the cost of insured benefits.
