Financial stresses are becoming a bigger problem for
South Africans. An average pensioner can replace only 28%
of their income when they retire and two out of five credit-
active South Africans have impaired credit records.
Alexander Forbes’ research has found that on average,
employees are spending between 13 and 20 hours
a month worrying about finances. It makes a big
difference when employees get the right information
and advice at the right time. Low financial wellbeing
ultimately has an impact on the employer’s balance
sheet because financial stress leads to absenteeism, poor
work performance, a lack of concentration, increased
safety hazards, and fraud.
Employers therefore have a vested interest in improving
their employees’ financial wellbeing. It is estimated thatthe overall cost to employers for low financial wellbeing
can be as high as 35% of the company payroll.
Consider these five ways to improve the financial
wellbeing of South Africans.❶ Use digital innovation
Until now, most processes companies use when
onboarding individuals do not facilitate good decision-
making. For example, on joining a new employer,
most employees select the lowest contribution to their
retirement fund. This is often because they do not receive
easily understood and accessible information when they
join. The same is true while they work for, leave or retire
from the company.
The good news is that when companies engage with
employees on their benefits, giving them the right
information and tools, their employees make better
decisions. This means:- Giving them easily understood and accessible
information. - Making information relatable by predicting
retirement income in today’s terms. - Connecting people with their future selves,
because they tend to expect instant gratification
and underestimate their future needs.
Where companies have taken this approach, employees
increase their benefits and select higher contribution
rates to save for retirement – ultimately assisting them
in improving their financial wellbeing.
❷ Engage proactively with employees
The research shows that people need adequate time to
engage with the benefit decisions they need to make
when joining, working for, leaving or retiring from a
company.
Poor decision-making usually results when individuals
are rushed into making choices at these critical moments.
For example, when buying a new house, an individual
would typically research options extensively, look at
many different houses and often spend a significant
amount of time before making a decision. However,
when joining a new employer, a new employee is often
rushed to decide within a few minutes how much they
should contribute to their retirement fund – even though
the decision has significant long-term implications.
Therefore, engaging earlier with individuals is
important to facilitate better decision-making. When
joining an employer, it requires a proactive approach
to provide information upfront so that on the first day
at work new employees can make informed benefit
selections.John Anderson is
Head of Strategic
Development at the
Alexander Forbes
Group. For more
information, go to
alexanderforbes.co.za.36
business trade | industry
PLANNING
Employers need to take a holistic view of their
employees’ ability to prepare for the future
Wisdom
in reserve
The year in which the first recorded use of the abbreviation ‘OMG’ was
made – in a letter from a retired Royal Navy admiral to Winston Churchill.1917