Employers 'must invest in wellness'

Published Aug 15, 2015

Share

Employers should do a lot more to ensure the physical and financial well-being of their employees and ultimately to ensure they retire comfortably, key people in the financial services industry say.

Employers should invest time and money in putting in place employee benefits and assistance programmes, not only because it is the right thing to do, but because they have a vested interest in improving productivity and reducing absenteeism, they say.

Launching the findings of Alexander Forbes’s annual retirement benefits research, the Benefits Barometer, chief executive Edward Kieswetter says your company has a moral obligation to help you, as an employee, achieve financial stability, and in doing so it will ensure that you remain a productive employee.

It is not enough for an employer to provide a retirement fund, tell you to save and then leave you to find out how to retire comfortably or to deal with the financial challenges that come with daily life, Kieswetter told retirement fund trustees, employer representatives and financial advisers at the Benefits Barometer launch last month.

This year’s Benefits Barometer focuses on financial well-being and acknowledges that most existing employee benefits arrangements fail to ensure employees’ physical, mental and financial well-being.

Kieswetter says employers and the financial services industry need to focus on employees’ welfare throughout their financial journey and not just at retirement. To do this, there needs to be a focus on how to get you to engage with your finances, by paying attention to what matters most to you and how your finances actually serve the rest of your life.

Echoing Kieswetter’s sentiments at the recent Institute of Retirement Funds Africa conference, Viresh Maharaj, the chief marketing actuary at Sanlam Employee Benefits, urged employers to have a positive influence on their employees’ retirement funding and finances, not just because it is the right thing to do, or because it eases the government’s social security burden, but because it makes business sense to do so.

Maharaj says the 2015 PricewaterhouseCoopers (PWC) Employee Financial Wellness Survey of employees in the United States found that nearly half of the respondents were in a stressful financial situation, and 35 percent felt their financial stress had increased over the past year.

The survey found that almost one in five employees reported that their personal finances were a distraction at work and almost 40 percent of respondents reported that they had spent more than three hours a week or more at work dealing with their personal financial issues.

Maharaj says that this amounts to more than 150 hours a year and is “a very scary number for any employer” in the prevailing economic conditions.

A recent survey by US-based global life assurer MetLife found that three out of five employers cited financial stress as the leading cause of absenteeism.

Four out of five employers canvassed in the Metlife survey said employees had had to take time off work to deal with financial problems, Maharaj says.

Retirement-funding is a key pillar of wealth creation, and inadequate retirement funding contributes materially to financial stress, particularly as employees age and move up the ranks in a company, he says. Longer-serving employees have greater institutional knowledge and add greater value to the company. They need to be engaged at work, rather than worrying about their finances, he says.

Maharaj says employers are well positioned to nudge you, as an employee, to make the right decisions about your retirement at critical points in your working life. But, he says, employers have gradually shifted away from playing an engaged role in your retirement funding, partially due to the move away from defined-benefit funds to defined-contribution funds and partially due to a decline in human resources departments’ ability to facilitate better retirement outcomes.

There has been a global shift away from defined-benefit funds (funds that guarantee you a pension based on your final salary at retirement) as companies have sought to remove the liability for providing this benefit to employees from their balance sheets. Most employees now offer defined-contribution funds, which provide you with a lump sum at retirement that is based on the contributions, and the growth thereon, that you and your employer make during your working life.

Increasingly, employers are making use of financial institutions’ umbrella and retirement annuity funds, which further diminishes their role in and responsibility for your retirement funding.

The PWC employee survey, together with academic research that shows a strong link between improved financial wellness and both reduced absenteeism and increased productivity, make a compelling case for employers to take the financial wellness of their employees seriously, Maharaj says.

He says that employers are able to influence most factors that affect your financial wellness: your financial literacy, your financial behaviour, your financial situation (such as home ownership, wealth and salary) and the financial factors that cause stress, he says. The only factors your employer cannot influence are your personal characteristics, such as your personality, age and marital status.

Although financial wellness programmes involve some effort, they are potentially beneficial for both employees, who stand a better chance of a good retirement outcome, and employers, for whom financial well-being reduces absenteeism, improves productivity, is a source of long-term value and a competitive advantage.

Financial ill-health is often the cause or the consequence of physical ill-health. At the recent conference of the Board of Healthcare Funders (BHF), which represents medical schemes and their administrators, the general manager for clinical fund management at medical scheme administrator Medscheme, Jane Ball, said employers also have a critical role to play and a vested interest in ensuring the physical well-being of their employees.

Absenteeism costs South African employers an estimated R12 billion to R16 billion a year, and it has been established that it is concentrated in employees with high health risks, she says.

Ball says lost productivity as a result of employees not being in optimal health is difficult to quantify, but PWC estimates that the cost of lost productivity is 400 percent more than the cost of treating chronic illnesses. Medscheme data shows that the schemes it administers spend 19 percent of their healthcare costs on chronic conditions.

Ball says there is a body of research that suggests that companies need healthy employees to perform well. Despite this, employers are one of the most neglected stakeholders in the medical scheme industry. They should be engaging more with schemes and administrators to ensure targeted programmes deliver the best returns on investment, Ball says.

Medical schemes are offered to employees as an employee benefit, but they should also be an employer benefit, which delivers lower absenteeism and improved productivity, she says.

 

TYPICAL HELP PROGRAMMES ‘NOT ENOUGH’

Employers should radically reconsider their employee benefits and employee assistance programmes, and engage with you to help you develop a healthy relationship with money, the chief executive of a leading financial services company says.

It is not enough for employers to offer their employees a retirement fund and financial literacy courses or assistance programmes that provide legal services or debt, marriage or addiction counselling, Edward Kieswetter, the chief executive of Alexander Forbes, told trustees and financial advisers at the launch of the company’s research report, the Benefits Barometer.

Kieswetter says that because employers no longer offer the critical social protection of a set pension on retirement, the “financial burden of a lifetime” and the achievement of financial well-being now rests squarely on your shoulders.

“Yet in many ways, the individual has never been less engaged – and for good reason. Even if benefits are delivering only a fraction of an individual’s retirement needs, this is of little consequence if individuals and their families are not even able to address their day-to-day financial needs,” he writes in the foreword to the Benefits Barometer.

Most people know that smoking is bad for their health, but spend years trying to quit. Simply telling them that smoking is bad is not enough motivation for them to conquer the habit, Kieswetter says.

In the same way, telling people that they should not have debt will not prevent them from incurring debt, because the problem is far more complex, he says.

Kieswetter says that, to achieve financial well-being, you need to make the link between good financial decisions and achieving your own prioritised goals, to secure what matters most to you and to provide for those who matter most to you.

He says most employees need to save more for retirement because, on average, their savings will provide only 40 percent of what they earn before they retire.

But, to do this, you have to spend less, and most people don’t want to spend less, even though they know it is the rational thing to do, Kieswetter says.

This makes a myth of the assumption that most people are willing and able to save for retirement and, if they are given the right information, they will do the right thing, he says.

Instead, people struggle to make ends meet, avoid difficult money conversations, and are seldom actively involved in improving their financial well-being, he says.

However, regardless of our social standing, we have a common desire to do what matters most to us and to take care of those who matter most to us.

Kieswetter says employers must get employees to engage in what matters to them to get them to improve their financial well-being. This demands different skills from those possessed by retirement fund financial advisers; it requires someone who can counsel you about your money issues, help you to plan, and coach you to achieve that plan.

Last month, Alexander Forbes launched a financial well-being programme with financial consultants who can engage with employees about their finances and the decisions they make, with a view to helping them secure their financial well-being. Alexander Forbes staff were first to sign up for the programme.

 

HOW MEDICAL SCHEMES CAN ASSIST

Employers should work with medical schemes to target unhealthy employees with a view to improving their health and their productivity, Jane Ball, the general manager for clinical fund management at medical scheme administrator Medscheme, told the recent Board of Healthcare Funders (BHF) conference.

Employers should also recognise the benefits of measures put in place by schemes to ensure better care of member employees, rather than viewing these as annoying restrictions, Ball says.

She says employers spend a lot of money attempting to stem the loss of employee productivity though interventions such as subsidised medical scheme membership, employee assistance programmes, absenteeism management, wellness days or wellness screening, and educational material on health. However, these interventions are often broad-based and not integrated.

Ball says medical schemes and their administrators have had good returns from their investments in disease management programmes and what is known as co-ordinated care, and employers can benefit from targeted workplace programmes.

A successful disease management programme needs to have a clear focus and be implemented through a network of healthcare providers who follow clear clinical guidelines. The programme should also focus on empowering employees to care for themselves.

Data should be collected and analysed to identify those who are particularly needy, and employers should work with these people to ensure the best outcome for the money spent, Ball says.

For example, she says, employers often embark on a flu vaccination programme in March or April to reduce flu-related absenteeism, but while the impact for sicker employees is marked, the benefits for healthier employees are minimal.

Ball says employers have focused a lot on HIV programmes, with good outcomes, but now there needs to be a greater focus on chronic illnesses, such as diabetes, hypertension and high cholesterol.

Medscheme’s data shows that employees whose chronic illnesses are not registered on a scheme’s disease management programme are absent more than employees who are registered, even in cases where registered members are not taking all the medication they should be taking.

Ball says efforts by schemes to provide co-ordinated care has also had an impact on absenteeism. In co-ordinated care programmes, schemes ensure that your primary care provider – usually your general practitioner (GP) – manages your care. Information about what other healthcare professionals are doing and your health risks are shared with the GP.

If you are regarded as at risk of incurring high medical costs, the scheme’s managed care entity will engage with you to inform you about your illnesses, give you advice about your lifestyle, and encourage you to seek care from appropriate healthcare providers, take your medication and have regular check-ups and tests.

Typically, if your scheme has a care co-ordination programme, you will be expected to use a GP within a GP network using electronic medical records. You will see a specialist only when referred to one by the GP.

Ball says many human resources managers regard these care co-ordination measures as restrictive for employees, but Medscheme’s data proves that it lowers absenteeism.

Employers should also be aware that making membership of a medical scheme a condition of employment ensures that healthier employees belong to the scheme, resulting in better cross-subsidisation of costs and lower contributions for employees than they would pay if they could choose as individuals whether to join a scheme or not.

Medscheme’s data shows that members whose membership of a scheme is a condition of employment have claims that are 25 percent lower than members who join the same schemes as individuals.

Related Topics: