Financial relief during Covid-19
Tax Consulting SA’s reward specialist, Janine O’Riley, reward specialist at Remuneration Consultants and Tanya Tosen, Tax and remuneration specialist at Tax Consulting SA, share their views on how flexible benefits can provide financial relief during Covid-19.
Implemented measures to battle the Covid-19 outbreak are proving to be a massive blow to the already struggling economy of South Africa.
Employers are faced with a unique situation that requires a sharp and tactful approach to balancing the payment of employee salaries, looking after the individual employee’s needs and keeping the business afloat.
Between a rock and a hard place
While salary cuts and reduced working hours are realities many South Africans are currently facing, another mechanism that employers can implement is to allow employees to identify what their preferred blend of cash and benefits would be, based on their individual needs.
This involves offering employees the opportunity to make certain changes regarding their benefits versus the cash portion of their overall remuneration package – which empowers them to choose how to structure their package according to their personal and financial requirements.
An easy way to understand this can be illustrated in the following two examples:
A family member, currently on an employee’s medical aid, might be sick and hospitalised – so they would choose to keep their current plan as is. Alternatively, they might have an immune-compromised member on their medical aid, so they would choose to move to a more comprehensive plan, reducing their cash portion but providing peace of mind that their loved one would be sufficiently covered should they require medical care.
An employee’s spouse might have been affected by retrenchment and the family is in much need of more cash to cover day-to-day essentials. This employee might opt to reduce their pension contributions, for the time being, to increase the cash portion of their package, since this is what they need most in their current situation.
These flexible structuring options empower employees to make sense of their individual needs in a time where so much power over our own decisions has been taken away – ultimately leaving them with a sense of security on various levels.
It also enables the workforce to be more focused, as they’re less likely to be weighed down with the worry of how they will make ends meet.
What’s in it for the employer?
The employer can thus ensure that there are no extra costs in terms of their existing salary bill.
This should also be an employer’s key focus at this time, when salary increases may become non-existent in 2020 and possibly thereafter.
Providing employees with a flexible benefits option is a cost-neutral exercise for the company: the employee’s package value is exactly the same before and after implementation.
What if you don’t have a flexible benefit structure in place?
This is a good time to implement a cost to company salary structure and also to consider flexible benefits as an additional offering to complement the structure.
The ideal accompaniment for this structure is a Package Structuring Tool, which will enable each employee to make changes to their package, as it suits their current circumstances, and immediately see the effect of their choices using the tool.
They can experiment with different scenarios to see what changes would suit their needs. It also illustrates the direct impact their selections will have on their net take-home pay.