It’s been years and I still think about the day I witnessed what can happen when someone doesn’t know how to interpret their company benefits statement.
I was consulting to the employee benefits trustee board of a large South African employer. I’d been brought in to do an education session, reminding the trustees of their various benefits and explaining how they worked. We were packing up when one of the company executives approached me.
He said, “You know, a couple of years ago, I had this thing with my heart. It felt a bit dodgy and I was taken to the hospital by my wife and then I ended up having a stent put in, a pacemaker, and all these things. So should I claim for that?”
Well, I can tell you that in that moment, my own heart felt a bit dodgy. It sank. Because he would absolutely have been able to claim, and it would have been a big claim. But too much time had passed. I was pretty certain the product provider would reject his claim and, sure enough, that’s what happened. The heart attack qualified but the claim was too late.
What are company benefits?
Your employee benefits (what you might call “company benefits”) are investments and insurance products that you get through your employer when you work for them.
These are extremely important to have and understand because they form part of your overall financial plan. And yet, we see many senior executives, who have worked in corporate their whole careers, not fully understanding their benefits. Either they don’t know what benefits they have or they don’t understand how they work. It’s very common, even though our clients are highly qualified, intelligent and experienced.
Common South African employee benefits explained
In the latest episode of The Enough Club podcast, I asked my colleague, Dr Pieter de Villiers, to break down the different categories of employee benefits that South Africans will typically get from their employers.
Watch the episode:
1/ Retirement fund benefits
Essentially, these are ways for you to save towards your retirement. If your company offers retirement savings as part of its employee benefits, it will typically offer one of the following:
- Pension fund
- Provident fund
- Group retirement annuity
In the past, these different types of retirement benefits had different rules and ways of working. Nowadays, they all work very similarly.
2/ Risk benefits
In the world of financial products, “risk” means “insurance”. So these are benefits that will pay out should something unfortunate happen to you. Common types of risk benefits include:
• 𝗗𝗶𝘀𝗮𝗯𝗶𝗹𝗶𝘁𝘆 𝗰𝗼𝘃𝗲𝗿: This can take the form of income protection, which replaces your salary should you not be able to work for a period of time or for the rest of your working life. Or it could be a lump-sum disability cover that pays out if you become permanently disabled.
• 𝗟𝗶𝗳𝗲 𝗰𝗼𝘃𝗲𝗿: An insurance product that pays out to your nominated beneficiaries should you pass away.
• 𝗖𝗿𝗶𝘁𝗶𝗰𝗮𝗹 𝗶𝗹𝗹𝗻𝗲𝘀𝘀 𝗰𝗼𝘃𝗲𝗿: A product that pays out if you’re diagnosed with a critical illness, such as cancer, heart attack or stroke.
• Funeral cover: This will cover the costs of a funeral for yourself, an immediate family member and sometimes extended family members too.
Read more: Why Freedom Financial Planning focuses on people, not products
3/ Medical aid
Your employer might contribute to a medical aid on your behalf, with you contributing some of it. So essentially they subsidise your medical aid contributions and possibly your gap cover, which supplements your medical aid.
You are paying for your company benefits – either directly because they’re deducted from your salary or because a portion of your salary is being given to you in benefit form as opposed to cash in your bank account.
By knowing what benefits you have and understanding the ins and outs of them, you can make sure you’re getting value for your money.
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