Online since 20.08.2015 • Filed under Industry news

Over half of staff (54%) employed by small and medium enterprises (SMEs) are not adequately prepared for retirement, and most do not feel they are in a better position than a year ago. Those who have to rely on others to survive financially post-retirement stated they will rely on Government (26%), family (26%), or a combination of the two (16%).

This is according to the recent Old Mutual SME Employee Benefits Monitor 2015, which surveyed over 1000 SME decision makers and staff members. Doug Clothier, General Manager: SME at Old Mutual Corporate, says that many South Africans do not have a savings mindset and that employers need to be taking the initiative to improve this. “To build a sustainable South Africa, companies in the private sector need to be investing in the future of their employees.”

Clothier says that SMEs – accounting for approximately 60% of the country’s labour force – are a prime sector to drive savings behavior and can play a large role in improving financial provision at a national level.

The Old Mutual SME Employee Benefits Monitor 2015 highlights a clear gap between the understanding of what is required to retire comfortably verses actual implementation. “SME decision makers and staff believe that most people will need between 70% and 89% of their current salary to maintain their quality of life once they retire, which demonstrates a fairly good understanding of the typical funding requirement needed. However despite this, more than half of staff surveyed won’t be in a position to self-fund their retirement.”

Clothier adds that there is a clear trend in terms of certain employees being less prepared than others for retirement. “The less prepared staff are typically those in lower income brackets - as a result of affordability issues, lack of knowledge and a belief that Government will provide; are younger and think they have lots of time to prepare; those who change jobs and withdraw benefits; or who are in debt and living beyond their means.”

According to the Monitor, while SME decision makers acknowledge that employee benefits should be a priority, less than half of smaller companies (those that have a turnover of less than R13 million per annum) are currently offering employee benefits. It also reveals seven key reasons cited by SMEs for not implementing employee benefits, namely: affordability, business size, the belief that employees should make their own provision, preference for higher salaries, the administrative burden of a scheme, high staff turnover and lastly, that staff don’t want to contribute.

Clothier says that obstacles listed for not implementing employee benefits highlight the need for education around employee benefits in the workplace. “The challenge is to convince SME decision makers that there are solutions available that make it simple, affordable and achievable to implement employee benefits even for smaller businesses.”

“For example, the Old Mutual SuperFund umbrella meets diverse employee benefit needs with three solutions suited to different size enterprises. For instance, the SuperFund Easy offers a pre-packaged retirement and risk benefits solution for companies with as few as five employees. It has defaults pre-selected by the SuperFund trustees, meaning the complexity, and stress, is taken away from the employers.”

“In terms of affordability, an umbrella fund also unlocks savings of around 40% of the typical administration costs associated with stand-alone funds, while employees gain access to traditional ‘big company’ benefits.”

The other obstacle to tackle is the perception that staff don’t want to contribute or have a preference for higher salaries instead of contributing to a scheme, says Clothier. “For companies implementing employee benefits for the first time, there can be some push back and this is why financial education aimed at equipping employees to achieve their financial goals is so important.” 

He adds that there are also ways to minimise the impact of an employee benefits scheme on staff’s take home pay, such as implementing the contribution at the time of pay increases, or phasing the contributions in over a few years. “SMEs considering implementing employee benefits should contact their broker or advisor to determine what is the most appropriate solution to meet the needs of both the company and its employees.” concludes Clothier.

To view the full Old Mutual SME Employee Benefits Monitor 2015, please visit

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