Domestic workers enjoy few of the benefits extended to formal-sector workers, but insuring them is simple. Picture: The Herald
Domestic workers enjoy few of the benefits extended to formal-sector workers, but insuring them is simple. Picture: The Herald

Employee benefits play a huge role in ensuring that those employed in the formal sector provide for their retirement and are protected from catastrophic financial events such as illness, death or disability.

Many in the informal sector do not enjoy similar perks. These include more than a million domestic workers.

Umbrella retirement funds serving multiple employers do provide services to small employers, but advisers are typically only interested in servicing those likely to pay over premiums and contributions that earn meaningful commissions.

This often leaves the employees in micro-enterprises, where the majority earn below the tax threshold of R78,150 (about R6,500 a month), without any sort of cover or savings incentive.

However, technology is fuelling the development of products accessible to small employers. Whether you employ someone to help you run a small business or to work in your home, there are ways you can make your employee less financially vulnerable with savings or fully or partially subsidised medical, death and disability cover.

On this page, Money explores a few of these options.


Help your employee insure against death and disability

Salaried employees typically enjoy group life benefits that provide cover against a loss of earnings through death or disability before retirement for you or your family. In addition to enjoying subsidised cover, many employees benefit from group rates.

Sam Fleming, marketing and innovation officer at Simply, and Simon Nicholson, its head of product and analytics, say when an employee earns below about R10,000 a month, their record for paying premiums each month is so bad that it is much more cost-effective to sell cover to an employer.

As a result, the group cover is much cheaper than an individual life policy.

By way of example, Nicholson says a 30-year-old woman in the Western Cape, earning R15,000 a month and not working in a dangerous sector of the economy, could get R800,000 life cover, disability cover of R450,000 and funeral cover of R25,000 for R183 a month on an individual policy - but group life cover would cost just R82 a month.

Simply has launched a simple group life policy for small and micro-enterprises with anything from five employees, as well as a policy for domestic employees, both of which you can apply for online.

Recognising the problem that low-income earners have maintaining their premiums on life policies, MobiLife has launched funeral cover and life cover in the form of food vouchers, which do not lapse when premiums are not paid.

MobiLife CEO Frank Schutte says the life assurance industry signs up 6-million policyholders every year, but cancels 5.2-million a year when policyholders skip their premiums for more than two months.

Instead of lapsing, MobiLife's cover reduces for every month of premiums you have missed over the past 12 months.

If you pay all 12 months' premiums, you will receive 100% cover, but if you only pay nine, your cover falls to 75%, he says.


Life and disability cover options

Simply domestic employee cover

  • Employer pays the premiums and can sign up in five minutes.
  • Employee answers health, hospital and disability questions sent via a link to her cellphone or in a call from Simply.
  • Typical policy provides R150,000 life cover, R200,000 disability cover and R30,000 funeral cover.
  • The cost for this level of cover for a 25-year-old woman is R76 a month.
  • A cash-back option paying 50% of the premiums back after every five years is available at an additional, but increases premiums by about 40%.
  • Your domestic worker must have been employed for at least six months and must be a South African, and the premiums must be paid by you, the employer.
  • Underwritten by Old Mutual Alternative Risk Transfer..

Simply group life for SMMEs

  • Employer signs up in 15 minutes entering names, gender, income and age of employees or uploading a spreadsheet.
  • The premiums depend on this information, the location of your small business - which is used to determine factors such as HIV prevalence - and the industry.
  • Free cover - cover without a medical test - is up to R500,000 per life in groups of up to 50, R1m per life in larger employee groups.
  • Cover can be customised and live quotes generated.

MadeSure

  • R1,000 hospital cash benefit for up to 14 days for accidental injury.
  • Emergency medical transportation and care from ER24 up to R100,000
  • Rehabilitation benefit covering 80% of training for another job, up to R75,000.
  • R50,000 permanent disability benefit.
  • R150,000 for wheelchair and prosthetics.
  • R200 a day childcare on the disability of your employee, her spouse or child for 28 days.
  • R1,000 a week income protection for up to 13 weeks for severe illness.
  • Trauma counselling benefit of up to R25,000.
  • R50,000 funeral benefit on accidental death and R18,000 for death from any cause.
  • R35,000 for body repatriation.
  • Costs R95 a month, or R195 a month with R200 a month in airtime.
  • Underwritten by Guardrisk.
  • Online application.

Yambu domestic care policy

  • Offers R30,000 life cover, R30,000 disability cover, an R8,000 maternity benefit and R6,000 for temporary disability after an accident in the home.
  • Cost is R149 a month.
  • Underwritten by Constantia Life.
  • Online application.

MobiLife

  • Individual or employer can take this out in three minutes online.
  • You need the name and age of your employee.
  • The certificate of insurance or policy document is sent via SMS or e-mail.
  • You will be offered three options costing around R50, R100 or R150 a month with the cover amounts depending on your employee's age and gender.
  • Funeral cover is paid as a lump sum.
  • Foodsurance recurring death benefit is paid as a food voucher at Shoprite or Pick n Pay or as cash.
  • A 30-year-old woman would pay R50 a month to ensure her family would receive R500 a week for six months after her death, R89 a month for her family to receive R250 a week for two years or R130 a month for R250 a week for three years.
  • Underwritten by Guardrisk.

Offer your employee some private medical cover

Medical schemes that offer full private hospital cover and day-to-day benefits are expensive. The GTC Medical Aid Survey identified the CompCare Networx ED option as the top-rated scheme for low-income earners that offers private medical cover in a network of hospitals and with an overall limit on hospital benefits.

For those earning less than R4,000 a month, contributions start at about R450 a month.

Scheme options that offer cover for private emergency transportation to a government hospital and private day-to-day benefits are available.

For example, Discovery Health offers groups of more than 10 employees an essential primary health-care plan for R158 a month for a single member. This covers unlimited visits to a GP, acute medicines, emergency transport and R100,000 of trauma cover in a private facility.

For an additional R111 a month, chronic medicines for 27 common conditions, an eye test every two years, and basic pathology and radiology can be added.

Momentum offers a plan for domestic workers known as DomestiCare, which offers unlimited access to GPs, acute medicines, basic X-rays and pathology services to domestic workers and small business employees. The plan costs R256 a month.

For R286 a month, you can include basic optometry and dentistry benefits. Chronic medicines must be obtained from state hospitals.

A list of primary health-care plans is available on the Council for Medical Schemes website, medicalschemes.com.

Beware of the vast differences between plans. For example, consultations with a GP vary from three per year to unlimited, chronic medicines may or may not be covered, specialist visits may not be covered or covered up to a rand amount or number of visits per family per year.

Some plans have no benefits for pathology, radiology, optometry, dentistry and maternity checkups, while others offer limited benefits for these.


Encourage savings

Whether you have one employee or many, encouraging your employees to save for an emergency and for long-term goals will improve their financial wellbeing.

You can help them set a savings plan into which you can channel savings as a deduction from earnings and/or to which you contribute, or incentivise the preservation of savings.

Emergency savings can help your employee avoid having to borrow from a registered lender or an unregistered loan shark, incurring high interest charges.

Long-term goals may include buying an asset, such as a house, or saving for a child's education or retirement.

Bank savings accounts can be used initially until enough has been saved to meet minimum investment amounts for a longer-term savings product such as a unit trust fund or exchange traded fund (ETF).

Unit trust investments can be stopped or started at any time, although those with exposure to equity markets are more suitable for longer investment periods of three or more years - long enough to smooth out the market's ups and downs. The disadvantage of this type of investment is that an undisciplined investor can raid this money at any time.

If your employee is likely to save enough to exceed the tax-free interest exemption (R23,500 if you are below age 65) or when cashing in will exceed the annual capital gains tax exemption of R40,000 a year, you could recommend a tax-free savings account with an underlying unit trust or ETF.

Retirement savings have one benefit over tax-free savings and that is that the contributions made to a retirement fund are tax deductible.

But tax deductions are no use to those paying no tax because they earn below the tax threshold.

You can take out a retirement annuity (RA) for a taxpaying employee to which you can both contribute and, as the owner of a small business, you can purchase a group retirement annuity. If the employee leaves your employ, they can take over the RA and continue contributing or leave it to mature.

Savings in an RA are also not accessible until age 55. Even if, for example, the employee lost their job at the age of 50 and had a tidy sum in the annuity, the money would not be available.

Watch the charges, especially on small amounts, and beware of any policy that has a penalty for amending the contract.


Investment ideas for small savers

Retirement annuities (RAs)

Easy Equities RA

  • No minimum monthly contributions
  • Costs around 0.9% to 1.8% a year

Sygnia RA

  • Minimum monthly contribution of R500
  • Costs 0.35% a year if you invest in the Skeleton passively managed funds

Unit trusts

Gryphon money market

  • R200 a month
  • Annual management fee 0.29%

Satrix ETFs and unit trusts on SatrixNow

  • No minimums
  • Costs 0.48% a year for recurring investments plus brokerage costs
  • Choice of funds including Satrix Top40, Satrix Balanced Fund and Satrix MSCI World

Franc digital stokvel

  • No minimum investments
  • Access to the Allan Gray money market fund and the Satrix 40 ETF (fees 0.29% to 0.35%)
  • R5 a month membership fee after six months and another six months free for every friend who joins

dupreezl@tisoblackstar.co.za

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