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This year's 10th July Savings Month is putting the spotlight on how employers can play a vital role in assisting cash-strapped consumers to save.
This is in an attempt to find alternative solutions to the country's poor savings rate.
July Savings Month is a campaign led by the South African Savings Institute , supported by Absa and the Industrial Development Corporation.
SASI Savings Ambassador and businesswoman Azania Mosaka says it's important for companies to realise that helping employees can benefit the organisation too.
"Broader societal problems affect a firm’s performance and employees don’t leave worries about debt at the door.
"Talking about savings has never been more important. The picture looks negative but there are alternatives, innovative alternatives, that can have an impact," Mosaka says.
According to Absa Wellness executive Dr Lesego Rametsi, a 2017 PwC report found that 30% of employees are distracted due to financial stress, while 46% of employees spend three hours a day thinking about or addressing financial issues. This has a major impact on productivity and the bottom line.
Wealth coach Samke Mhlongo emphasises that the drivers behind financial distress need to be addressed in "honest conversations".
SASI CEO and financial advisor Gerald Mwandiambira says employers can more actively facilitate or automate the savings process for those with an income. Saving must run parallel to servicing your financial debt.
No legal obligation - but it helps
There is no legal obligation on employers to offer a retirement savings plan to employees, or to make a financial contribution to their workers’ retirement funds, but many feel a moral obligation to offer some support at least, says Hilan Berger, head of institutional business at 10X Investments.
The impact of financial stress on worker productivity is significant, says Berger. Many employers say high levels of absenteeism among their staff cost them a fortune, and that stress-related illness is one of the most frequent reasons for staff to be away from work.
"Even if employees are not away from the workplace many are less productive because they are focused on sorting out financial difficulties while they should be working, or distracted by them," he says.
In his view, educating staff about savings is a great start, and facilitating saving in some way is a huge boost to workers. It has a positive ripple effect beyond the families affected.
Berger explains that it is not about how much one earns, but rather about how much one saves.
"More specifically, it is about how long one saves for; the return on the investment of one’s savings; and how much of one’s savings are lost to fees," he adds.
"Socio-economics is a huge factor. So many people in South Africa are not in formal employment, or simply do not earn enough to be able to save for retirement."
Berger says employers can do a few simple things to help their staff develop a savings programme:
Providing information and education
Speak to a company that provides retirement and investment products and they will share information with your staff about how to get their retirement savings off the ground.
Basic information about the range of savings products is also helpful. These might include retirement funds and retirement annuities. Also giving tax savings tips can be a huge factor in getting people into the right mindset.
Establishing a company retirement fund
This is another initiative that an employer can consider.
"If you’re a small or new business or struggling with revenue for another reason, it does not have to involve a financial commitment from the business," says Berger.
"It’s great when the business is able to make a contribution to the retirement fund, but just establishing the fund with a suitable provider is a big step in the right direction.
"Once you have created the fund and offered it to your workers as an investment opportunity for them, there is much bigger chance they will start saving than if they have to do something on their own."
Fees
Once an employer has decided to put in place a retirement fund, it’s "absolutely critical", he says, that they investigate which provider to engage with and choose carefully.
"Most retirement fund providers trumpet the returns they achieve, but do not talk about the fees they charge. You could have, for example, growth of 10% for a year but if the fees charged are 3% you won’t benefit from a return of 10%," says Berger.
"The employer should be asking about the return after fees in order to make a properly informed decision about which service provider to select. After all, you wouldn’t want to recommend a fund to your employees where they lost a large part of their savings to high fees."
In the case of an existing retirement fund, employers should also keep tabs on charges. Most benefit statements from retirement funds are not particularly easy to read especially when it comes to the amount lost to fees. Berger says HR Managers should insist on a proper breakdown of the fees levied.
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