SME monitor infographic

1. OLD MUTUAL SME
EMPLOYEE BENEFITS
MONITOR 2015
Valuable employee benefits
insights into key trends, issues and
challenges of SA’s SMEs
SMEs hold the key to SA’s
socio-economic development via
employment opportunities
Of value to all stakeholders
in our country’s future
Both parties
responsible for
staff well-being
50% 40%DECISION MAKERS EMPLOYEES
WHO IS RESPONSIBLE
FOR EMPLOYEE BENEFITS?
The findings are relevant
to all businesses with an
entrepreneurial spirit
of decision makers feel
that SMEs have a higher staff turnover
than larger business
35%
Respondents believe that
most people will need between
70%and 89%
of their current salary as income
when they retire
of SME staff believe they will be in
a position to self-fund retirement
ONLY 54%
64% DECISION MAKERS
69% STAFF
The majority of SME decision makers and
staff believe that the employee benefits
offered by a business play an important
part in attracting employees
If you’re looking
for more information, please visit
www.oldmutual.co.za/SMEMonitor
Research was conducted by Livingfacts and produced for Old Mutual
of decision makers in
SMEs believe that these
businesses attract a
different profile of staff
member than large
corporate organisations.
84%
of SME employees agree
that it is unlikely that
they will be retrenched.
Confidence in their
retirement plan is average
at 63%, and most do not
feel that they are in a better
position financially than
they were one year ago.
77%
of decision makers felt
that SMEs have a higher
staff turnover than larger
businesses – the reasons:
SMEs are unable
to compete with corporate
salary packages.
SMEs are unable to
offer large company benefits.
35%
79%
73%
of staff say it is different
working in an SME.
71%
100 80 60 40 20 0
Think I will stay in my job for at least the next year
Think it is unlikely I will be retrenched
Confident I am able to make good financial decisions
Confident about my financial retirement plans
Compared to one year ago my personal financial
situation is better
Feel confident about the South African economy
% Agreement
81
77
77
63
53
47
KEY DRIVERS OF
SMEs’ DECISION TO OFFER
EMPLOYEE BENEFITS
SMEs’ KEY DRIVERS OF
WHICH EMPLOYEE BENEFITS
TO OFFER
1. Company Cash Flows
2. Mindset of Owners: Social
responsibility or a view that staff leave
3. Need to Attract and Retain Skilled Staff
4. External Pressure: Legislation or Union
5. Stage of Business
1. Who Drives The Decision: Employer vs. staff,
Broker influence
2. Who Drives Appeal to Staff: Employer vs. staff,
Broker influence
3. Knowledge & Education: Decision makers,
Broker influence
4. Simplicity of Implementing and Managing
5. Legislation or Industry Requirements
6. Affordability: Lower contribution, Who pays
DRIVERS OF EMPLOYEE BENEFIT
ENGAGEMENT:
DRIVERS IN CHOICE OF BENEFITS:
DO POTENTIAL STAFF CONSIDER
EMPLOYEE BENEFITS?
Decision makers
Staff
64%
69%
SHOULD RETIREMENT FUNDING
BE A PRIORITY FOR SMEs?
Decision makers
Staff
Brokers
IS RETIREMENT FUNDING ON
THE AGENDA OF AN SME?
HOW MANY OFFER
ANY BENEFIT?
Decision makers
Staff
Brokers
72%
63%
Most brokers
believe it’s less
than 50%
HOW MANY OFFER
RETIREMENT FUNDING?
Decision makers
Staff
Brokers
60%
51%
Most brokers
believe it’s less
than 50%
79%
90%
90%
YES 34%
YES 53%
NO 47%
YES 48%
NO 52%
NO 66%
Decision
makers
Staff
Brokers
The majority of decision makers (64%)
and SME staff (69%) interviewed believe
that the employee benefits offered by
a business play an important part in
attracting employees – the reasons for
this belief include:
Recognition of the need
for retirement saving –
among employees older
than 35.
An expectation by skilled
staff that employee benefits
will be provided by their
employer.
A widespread
requirement for
funeral benefits.
Company
has provided
adequately for
employee
well-being
42% 37%DECISION MAKERS EMPLOYEES
PROVISION OF EMPLOYEE
BENEFITS BY SMEs
Employees need cash
more than benefits thus don’t deserve this
But most employees do not have a
savings mindset
Because of economic pressures, many
employees accept jobs even if these don’t
offer them the full benefits they desire
EMPLOYEE BENEFIT PREFERENCES
AMONGST STAFF
Employees showed a clear preference for retirement
funding and medical cover as the two most important
employee benefits.
Funeral cover was the third most sought after employee
benefit.
100 80 60 40 20 0
2 – 7 Million
7 – 13 Million
13 – 31 Million
31 – 51 Million
51 – 101 Million
101 – 200 Million
% Responses
57
65
76
83
85
87
100 80 60 40 20 0
10 to 20
21 to 50
51 to 100
101 to 200
% Responses
59
78
78
86
The provision of employee benefits by SMEs increased as the turnover and staff complement of these businesses went up.
100 80 60 40 20 0
Retirement Fund
Medical Aid
Funeral Cover
Disability Cover
Life Assurance
Income Protection
Critical Illness
Education Benefit
Special Sick Benefits
– Such as HIV, TB, Cancer
% Responses
92
82
17
13
12
4
4
4
2

2. BENEFITS OF TOP THREE SOUGHT AFTER EMPLOYEE BENEFITS
FOR STAFF AND COMPANIES
BENEFIT TO
COMPANY
BENEFITS TO
EMPLOYEE
• Makes the company more
attractive
• Satisfies a moral obligation
• Rewards long service
• Provides security
• Forced savings
• Makes the company more
attractive
• Limits sick leave/increases
productivity
• Improved healthcare
• Makes the company more
attractive
• Fewer staff loans
• Satisfies a moral obligation
• Reduces financial burden
of funerals
RETIREMENT FUND MEDICAL AID FUNERAL COVER
The percentage of SMEs offering some
type of group retirement funding differs
significantly by turnover. For companies
with a turnover of less than
R13 million less than 50% offer
retirement funds. 70% of companies with
a turnover of R50 million or more offer
such retirement funds to their employees.
66% of decision makers, 47% of staff and 52% of brokers
believe that retirement funding provision is currently NOT on the
business agenda for most SMEs in SA.
Companies with 20 or more
employees consider offering a group
retirement fund.
Once companies have been in business
for 15 years or more they appear more
likely to offer retirement funds.
Shared equally
between
employer and
employee
59% 68%DECISION MAKERS EMPLOYEES
RESPONSIBILITY FOR
RETIREMENT FUNDING:
15years
Asked whether SMEs should be making the
provision of retirement funding to staff a business priority,
79% of decision makers said that they should, while 90% of
staff and 90% of brokers agreed.
SME STAFF WHO ARE NOT ADEQUATELY PREPARED FOR RETIREMENT SAY THEY
WILL RELY FINANCIALLY ON THE FOLLOWING PEOPLE/INSTITUTIONS TO SUPPORT
THEM ONCE RETIRED:
The main factors that SMEs
believe have the impact on
members not preserving their
retirement benefit are as follows:
SME decision makers listed the following as
their primary reasons for selecting a given
retirement fund service provider:
of SME decision makers and
staff surveyed agree that
preservation of retirement
savings is important.
88%
of SMEs believe 80% or more
of staff take all or most of
their benefit in cash.
50%
CHILDREN
FAMILY
GOVERNMENT
COMBINATION
OF CHILDREN AND
GOVERNMENT
CONTINUE TO
EARN INCOME
14%
26%
16%
26%
4%
Blue collar staff in the
organisation have a stronger
reliance on government.
100 80 60 40 20 0
Desire to access cash
A lack of awareness
of preservation options
Lack of advice on how
to preserve
Withdrawal benefit is
too small to preserve
Fear of making the
wrong decision
Cost of transferring to
another fund
% Responses
81
59
58
57
50
40
of SMEs offering
retirement funds say
these include member
level investment choice.
There is an even split between SMEs choosing to deal directly with
service providers (52%) for their employee benefits requirements and
those who choose to work with brokers (48%).
A third of the SMEs
offering this choice say that
more than 90% of their
employees prefer to select
the default investment option.
39%
% Responses
1
2
2
4
5
7
8
8
10
10
10
18
20
20
25
27
34
100 80 60 40 20 0
Asset classes
Management team
Size of company
Education/Communication to staff
Investment philosophy
Service provided to company
Flexibility
Performance
Track record
Reputation
Fees charged
Financial stability/Stability
Service provided to staff
Range of choice of investment
Skills and expertise
Advice/recommendation of consultants
Ability to provide a total packaged service
Strong influencer
not to preserve
Strong influencer
to preserve
MOST OF THE SME DECISION MAKERS BELIEVE THAT THEIR BUSINESSES HAVE
UNIQUE REQUIREMENTS IN TERMS OF THEIR RETIREMENT FUND SOLUTION.
Old Mutual is a Licensed Financial Services Provider
COST
• Lower costs/
cheaper (53%)
PRODUCT
• Flexibility in the
make-up of the product
(30%)
• Simplicity/easy to
understand (23%)
• Being able to add
options on when
needed/or afforded
(16%)
• Automated or very
easy decision making
with regard to
investment choices (5%)
ADMIN
• Easy to implement
(16%)
• Low administration
burden (14%)
• Excellent admin-
istration and claims
process (11%)
RETURN
• Growth on
retirement fund/
good growth/good
returns/return on
investment (9%)
• Secure/safe/not too
risky/reliability (5%)
PRESERVATION
• A way to limit
withdrawals/
taking the cash
(7%)
EDUCATION
• Education for
staff (17%)
UNIQUE
REQUIREMENTS
11% Don’t know
53% Yes
36% No
Those SMEs that offer retirement funds demonstrated fair levels of confidence in those funds and their
providers, but not all think they will be adequately provided for:
Staff of SMEs that offer retirement funds largely mirrored these confidence levels. There is room for improvement in terms of staff
confidence in the ‘adequate provision’ and ‘claims process ease’ indicators.
COMPANY RETIREMENT FUND WILL
PROVIDE ADEQUATELY
ADMINISTRATION IS DONE PROPERLY
INVESTMENT RETURNS ARE IN LINE
WITH EXPECTATIONS
COSTS ARE REASONABLE
67
84
78
76
DECISION MAKERS
CONFIDENCE INDICATOR
PERCENTAGE RATING
COMPANY RETIREMENT FUND WILL
PROVIDE ADEQUATELY
CLAIMS PROCESS IS EASY
ADMINISTRATION IS DONE PROPERLY
FUND IS EASY TO UNDERSTAND
65
69
78
75
STAFF CONFIDENCE
INDICATOR
PERCENTAGE RATING
For more information visit
www.oldmutual.co.za/SMEMonitor
The primary requirements were listed as follows: