EmployeeBenefits: Why it’s not working out?

Employer’s view of Employees’ Needs

Employees’ Needs

Today, working is not like it used to be. Companies around the globe and Kenya are facing serious dilemmas on whether they should offer generous employee benefits and give up profits, or grab all profits and risk losing their employees.

These dilemmas get worse due to the #YOLO culture that has become a cultural sensation and that employees are seeking more happiness and good health at work than a decade ago. From a recent survey carried out with employees, we found that employees’ benefits and needs are broken into financial, physical and mental health security. We also found that (as shown in the infographic below):

Employees rate money (access to retirement savings and financial planning) 1.4x more important than their employer realizes.

Employers rank access to relationships with family and friends 2.2x more important than employees actually rate them.

From the survey, there are similarities in employees’ need and what the employer thinks they need and yet according to the survey, only 53% are satisfied with the employee benefits they get. So where’s the problem and why is it not working out for the other 47%?

0%

Health Purpose & Work Relationships Money

25% 50% 75% 100%

31%

35%

19%

20%

25%

12%

25%

34%

Wellness Programmes

Health Related Benefits like

Medical, Personal Accident, etc.

HEALTH

Professional and Career Development

Employee Programmes and

Services for soft skills

PURPOSE & WORK

Flexible Working including working

from home

Leave

Family Friendly workplace

RELATIONSHIPS

Retirement Savings and Financial Planning

Housing and Relocation Subsidies

Total income

MONEY

At work, many employees are treated like the “average” employee where employers believe that a shoe size 10 fits all their employees. Even though, we all know that all employees are unique and have their own needs.

The great thing about employees’ needs is that they all revolve around 3 broad categories i.e. Financial, Physical and Mental health security.

We are all not that unique after all.

Therefore, a holistic approach on employee benefits is essential to improving the benefits system. There are two main shifts that need to happen:

Shifting the role of the employer to that of financier/facilitator and the understanding that physical, mental and financial health are inter-related. Ignoring the interactions between the various components creates inefficiency in the employee benefits system.

Finding the right mix of employee benefits that meet the 3 broad categories i.e. Financial, Physical and Mental health security, PER EMPLOYEE

Only 7.0% are likely to retire with enough money to achieve their goals.

The Pension Income Adequacy: Do the numbers add up?

At the very beginning of every journey, we set out a goal on what we would like to achieve and plan out the journey to best achieve this goal.

However, for retirement security which is deemed either extremely important or very important for more than 95%, we put very little focus on the goal and simply jump on the savings wagon without setting out a plan. And because of this:

Only 7.0% are likely to retire with enough money to achieve their goals.

The narrative for the retirement goal should focus on the outcome. The outcome will depend on the kind of lifestyle the individual wishes to live at retirement and will vary from person to person.

Once you start research on retirement goals, you will most definitely stumble upon the concept of replacement ratios, which is a tool used to measure whether you are on your way to a healthy retirement.

A replacement ratio is a person’s income after retirement as a ratio of the person’s income before retirement. For example, assume a person earns Ksh 100,000 per month then they retire and start earning Ksh 60,000 per month from a pension. Their replacement ratio is 60%.

The recommended range for a replacement ratio is between 60% and 80%.

In Kenya, on average, members of retirement schemes were only achieving replacement ratios of 34%.

If almost all of us deem retirement security as very important and with such low replacement ratios, what can be done to improve retirement lifestyles in the future?

1. Allow every individual to set a retirement goal2. Train every individual on importance of retirement security and wellness through professionals3. Encourage more savings into a registered retirement plan4. Educate on the benefits of preserving benefits

No matter how different the needs of every employee are, all the needs fall into the 3 broad categories i.e. Financial, Physical & Mental health security.

You Only Live Once: so what matters?

PURPOSE & WORK MONEY

Professional and Career Development was the 3rd most valued employee benefit.

Free or subsidised training for career development was the 2nd most preferred discount or subsidy after free or subsidised education for children of employees from a range of free meals, discounted loans to uniform allowances.

71% of employees that have been on a long-term sick leave (more than 4 weeks) did not receive regular communication and support from their employer. Thus, making them feel “unwanted”.

Retirement savings and financial planning ranked the most important employee benefit.

73% of employees are willing to pay a higher amount out of their pay each month to secure a better and guaranteed retirement income.

Saving for retirement was top most financial priority together with paying for rent and other housing costs, in a range of options including paying off debts, having money for leisure and entertainment and saving for a bad day.

HEALTH

Health-related benefits was the 2nd most valued employee benefit from a list of 10 employee benefits.

86% are willing to participate in voluntary work-led health initiatives.

Stress Management support and on-site health checks ranked as the top 2 additional benefits that employees are looking for.

RELATIONSHIPS

78% of employees have 3 or more people depending on them financially.

Family Friendly workplaces was ranked as the 7th most valued employee benefit from a list of 10 employee benefits.

Leave was ranked as the 8th most valued employee benefit from a list of 10 employee benefits.

The Zamara Benefits Watch – 2019 EditionCopyright © 2020 Zamara. All rights reserved.

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P.O. Box 52439 City Square 00200 Nairobi, Kenya

+254 20 4969 000 / 0709 469 000

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www.zamaragroup.com