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How you can save through employee benefits

Published May 10, 2022

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NICOLETTE’S NICKELS

The phrase “salary sacrifice scheme” is when the company offers you an employee benefits package equivalent to an amount you will have to give up from your gross income. Sacrificing a portion of your salary may feel like punishment, but it can be beneficial. By choosing to use employee benefits such as healthcare, life insurance and disability cover, you are essentially cutting the costs of doing it yourself and saving more money towards your financial goals, leading you to be motivated to work and feel more financially secure.

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How can you feel more financially secure using a company-offered employee benefits package instead of seeking your own policies?

Employee benefits are essentially there to create a more productive and wholesome workforce for businesses. Employee benefits can range from group risk cover to healthcare, retirement planning, employee wellness programmes and investment planning. The value of employee benefits extends to more than just “nice incentives” for you as the employee: some of the product benefits extend to your family members, sometimes even long after you have passed on. The death benefit from your pension fund allows for your beneficiaries to be taken care of while your estate is being wound up (which can often take long).

Taking up these employee benefits may not be a compulsory thing for you to do when you are recruited. But it is more sustainable compared with taking cover outside of the company. For example, if your company offers medical aid, it contributes to a portion of the premium, making the medical aid more affordable for you. So if you have an unfortunate car accident one day, you will be paying less through the company policy than through your own policy and you gain immediate emergency assistance. Many employers use their employee benefit schemes to attract and retain a skilled workforce.

A group benefits scheme or arrangement becomes a vital part of a company’s culture. Creating a comprehensive programme that supports employees' financial and mental well-being is a critical part of retaining a productive workforce. Group benefits are cheaper for the company due to economies of scale.

Group risk cover

According to Sanlam, “group risk products are designed to insure employees and protect their families in the event of long-term illness or death while working”. Group risk is a compulsory cover that businesses need to provide; however, it is affordable as it is taken from the payroll by the company. Another benefit of group risk is that it doesn’t take the individual employees’ health conditions into account. If you as an employee decide to take your own cover, you may have to pay higher premiums, resulting in your take-home pay being less, and on top of that, it may be even more expensive and take longer to acquire due to any health conditions you may have.

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So not only are you saving money, but you are also protecting your family, as this benefit is extended to them should anything happen to you.

Healthcare cover

Accessibility to a sound healthcare system is valuable to most employees. Knowing that your company covers you should you have any medical issues during your time working there will make you feel more satisfied going to work. Another benefit is that you have quicker access to medical services. Because contributions are subsidised by the company, taking this benefit makes your health priorities more affordable and more convenient.

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Retirement savings

According to Alexforbes, “a retirement fund introduces a disciplined savings approach where individuals can create wealth throughout their journey to and into their retirement”. The discipline comes in with the fact that the contributions are deducted from your payroll. So you don’t have to worry about creating a big savings plan in your budget. With many retirement funds, you can carry it over with you when you change companies, or you can use a preservation fund.

Although you may not see the short-term financial benefit, investing through a company retirement fund means having people who will support and manage your investments. You won’t have to wake up stressed about becoming an investment guru overnight. In addition, as an employee, your contributions are tax deductible, and there is no capital gains tax or dividend tax on the investments. However, if you change jobs and withdraw the money, there is heavy tax to be paid.

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To sum up

Employee benefits are valuable to everyone. The convenience of having a third party do all the work for you and make it more affordable for you is pleasing to any employee's ear. It is essential that when you go into a new job, you first understand your needs as an individual to know how to best maximize the opportunities these benefits offer.

Nicolette Mashile is a TV presenter and a financial literacy expert.

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