Is there more you can be doing as an employer to help your employees save towards their future financial security?

South Africans remain under tight financial pressure as a result of higher prices and low salary increases. This is evident in the poor savings rate in the country and our high debt figures.

“Many employees are facing a great deal of financial stress. Employers should help their staff overcome these burdens, which will allow employees to focus on their work and not be distracted by financial problems,” says Saleem Sonday, head of group savings at Allan Gray, adding that companies offer wellness programmes to encourage a healthier lifestyle in a bid to reduce absenteeism, yet many haven’t extended these programmes to discuss financial wellness.

The fact that employees are feeling financially burdened is echoed in a recent study by consulting firm PwC, which found that 53% of full-time employed adults in the US are stressed about their finances, far ahead of their jobs (17%), personal relationships (15%) and health (14%). These challenges are not only confined to our shores.

“By helping employees overcome their financial woes employers not only foster employee engagement, loyalty and productivity, but also help boost the national savings coffers,” says Sonday. “This includes putting in place arrangements that facilitate, promote and encourage savings for staff.”

He says that the bulk of South Africa’s national savings currently comes through employer-assisted savings, in particular through employer-sponsored retirement funds, with data from the Financial Sector Conduct Authority (formerly the FSB) indicating that employer-assisted compulsory savings accumulated R212 billion in 2015. “The opportunity is for employers to put in place similar arrangements for discretionary saving.”

Automated solutions, Sonday says, like debit-orders immediately after your pay-day with appropriate pre-screened service and product providers, are key, as putting some money away every month and forgetting about it helps to create long-term wealth.

“Automated savings solutions may be more sustainable in the long term for employees as it takes month-to-month decision-making out of the equation and assigns money to savings before it can be spent on other things – you have to pay yourself first,” says Sonday. “Employers can consider arranging financial education for their employees or think about facilitating financial advice by working with good, independent advisers.”

But, he says, employer-assisted savings solutions must be client-centric and outcomes-based.

“The focus should always be on ensuring excellent value for employees. This can be done through products that offer good value for money through lower costs, flexible discretionary savings, no penalties, better transparency and are in essence, simple and easy to understand.”

When it comes to group retirement savings, Sonday says that umbrella funds have become popular saving solutions for employers due to their economies of scale. They club together multiple businesses in a single fund with standardised rules and a single board of trustees, making them an efficient and cost-effective retirement savings solution.

“If you don’t currently have a retirement saving solution in place for your staff, this should be your priority. Look for a reputable umbrella fund that is simple, offers transparent pricing and great service, and, puts member needs at the centre with access to an unbiased, limited range of high quality managers.”

He adds that good default investment options from reputable fund managers with long track records are also key. “Default investment options mitigate against poor-decision making. Quality, simple and value-for-money defaults are effective tools for better outcomes for employees.

“To grow the economy we need savings to fund productive capacity. Savings come from three sources, namely households, government and business-assisted savings. With household and government savings stretched, it is important that employers do more to engage staff, which will benefit the economy in the long term,” says Sonday.