04/29/2024 | Press release | Distributed by Public on 04/29/2024 05:06
As South Africa prepares for Workers' Day, the nation faces stark economic realities: despite average salary increases starting to align with the mean Consumer Price Index (CPI) for the first time since 2020, the real cost of living is escalating at an even faster pace. This situation is compelling businesses to reassess their strategies for attracting and retaining talent.
"Adjusting salaries is just one part of the equation," said Lindiwe Sebesho, Managing Director of Remchannel. "The cost of living, especially for necessities like food, electricity, and transport, is accelerating at a rate higher than both inflation and the salary increases we are seeing.
"This means that the economic challenges that result in high indebtedness will persist, even though salary increases are now more aligned with the core CPI."
Creative Compensation Strategies to Retain Talent
"The indebtedness is very real. Members of our retirement funds are struggling to balance the cost of living against the inflation they're facing, including double-digit increases in the cost of medical aid. Everyone feels like they're moving a step backwards," said Samantha Jagdessi, Head of Strategy at Old Mutual Corporate Consultants.
From a benefits perspective, employers are re-evaluating their employee value propositions and getting creative with their strategies. "They recognise they often can't afford higher salary increases, but they understand that their employees need assistance to manage and avoid continuing in a debt-dependent cycle," Sebesho explained.
Innovative Financial Aids and Employee Benefits
In response, companies are enhancing their suite of benefits and perks to attract and retain talent."We're seeing more employers giving employees early access to their salaries, known as earned wage access, subject to financial education. This means that employers are now paying workers more frequently than once a month, helping them manage their needs more effectively," Sebesho revealed.
She clarifies the distinction between this and a cash advance: "Earned wage access allows employees to access their pay as it's earned, enabling them to manage their cash flow without resorting to expensive debt. In contrast, a cash advance involves borrowing against future earnings, which can lead to poorer outcomes if not managed properly."
Employers are also increasingly offering 'soft loans' with more favourable terms compared to traditional bank loans. These loans often have lower interest rates and more flexible repayment schedules.
"These solutions have become an integral part of employee benefits packages, designed to give employees the financial support they need to handle immediate expenses without undue stress," she said.
Increased Flexible Retirement Planning
Flexibility is also being introduced into retirement contribution plans, allowing employees to choose lower pensionable salaries and retirement contribution rates. This enables them to have greater take-home pay to manage their immediate financial needs. "However, ensuring that employees are well-informed on balancing short-term needs with long-term retirement savings is a tricky balance to navigate," says Jagdessi.
"What we see is that most employees opt for the minimum entry-level and lower default categories when it comes to retirement funding. Some employers are also reviewing their risk benefits proposition to balance current benefits with future needs from an affordability perspective."
Jagdessi warns that with flexibility comes responsibility. "Employers and HR Managers should ensure that employees are educated and provided with the necessary information on the impact of the choices they make on their retirement outcomes," she said. She further recommends that ongoing education and financial awareness are necessary to help employees with their financial and retirement well-being journey.
Flexible Work Continues to be a Differentiating Benefit
"In light of the evolving expectations of today's workforce, our latest survey reveals an ongoing trend towards offering a more adaptable work environment, with a significant uptick in hybrid work arrangements," said Sebesho.
Remarkably, 83% of employers surveyed have embraced hybrid models, a substantial rise from just 41% in 2019. This trend not only reflects the growing demand for workplace flexibility but also highlights proactive approaches to fostering employee well-being and attracting skilled professionals in a fiercely competitive landscape.
Other insights from the research revealed:
"As South Africa heads towards Workers' Day, it's evident that celebrating and supporting the workforce requires innovative and flexible compensation strategies more than ever," concluded Sebesho. "With economic uncertainties set to continue, companies that prioritise fair, responsible, and employee-centric pay and benefits policies will define the future of work and productivity in South Africa."