SA Franchise Warehouse

Ravi Govender

Secure employees are happy employees

 
One of the major attractions of small businesses is that they rely on small teams of dedicated people for their ‘family feel’ and success. Looked at from an outside perspective, however, it is these very advantages that can add substantially to the risk of running a small business.
 
Ravi Govender, Head of Small Enterprises at Standard Bank, points out that in a small business severe injury or death of a key person, or even an employee’s family member/s, can severely disrupt the operations of a small business. 
 
On the other hand, planning for such events can help employees avoid financial stress. The benefit for employers lies in increased employee loyalty, and reduces the time off required.

“It is in this arena that embedded insurance policies, which cater for various contingencies, can be used to reduce risks and increase benefits for employees. They can also assist in differentiating your business from similar enterprises, and serve to attract those considering employment with you,” says Mr Govender.
 
“Embedded insurance products for employees are beneficial in that they offer flexibility. Schemes can be compulsory or voluntary, and funded in different ways. An employer can choose to fund the entire cost of the insurance chosen. Alternatively, the company can partly fund the benefit, and use employee contributions to fund the outstanding premiums.  Otherwise, a scheme that is totally funded by employees, but offers increased benefits because of the number of members involved, can be set up.”
 
The choice of cover available is also wide open. Cover can vary from personal life insurance, permanent disability cover and funeral cover, to household insurance and even retrenchment cover.
Where a small business has agreed to provide small loans to assist employees with unexpected personal expenses, the repayment of the loan itself can be insured.  In this case, if an employee cannot repay the loan due to circumstances covered in the policy, the outstanding balance can be paid on behalf of the employee.
 
Other options that can be offered to employees include:
 

• Pension-backed lending products, also known as credit life insurance

This is for large loans, and enables employees to loan money against funds accumulating in a company pension fund. Generally, these loans, which would have a significant value, could cover events like buying a home, home renovations or paying university costs.
An individual’s pension fund is used to back the loan. Insurance is then taken to ensure that the pension is not negatively impacted on in the event of the lender being permanently disabled or dying before the loan can be repaid.  Disabling injuries that could occur in the workplace or outside working hours are covered.  Best of all, the value of the pension fund is preserved for an employee’s family as any outstanding loans are repaid as part of a policy’s terms.

• Insured events

These employee benefits can cover a number of contingencies. They can range from life insurance to family-based funeral policies, and can be tailored to meet requirements of a company scheme. For instance, an employer can offer a policy which provides for an immediate cash payment to be made to an employee in the event of a death in the family. This ensures that potential financial stress is avoided and the employee can confidently concentrate on work.

• Debt protection/ retrenchment

In company insurance policy schemes, retrenchment is an insured event that is regarded as part of an overall package. It is offered as one of many insured events that can be covered by a single premium as part of a ‘debt protection plan’. Benefits vary, but typically if retrenchment occurs, temporary cover is provided.  Expenses like home loan repayments, car payments and other debts can be met for a defined period, whilst the insured person looks for a new job.
“Although these products are designed to benefit employees, employers can also use insurance to secure their positions when it comes to negative events happening to employees.”
The best example of this is:

• Key-man insurance

This allows an employer to insure himself or herself, and also secure cover for key members of staff who are vital to a company’s operations. In the event of a key person being unable to continue working due to death or disability, a payment can be made to the company. This could cover operational losses as well as costs incurred when recruiting a replacement.
 
“When it comes to providing employee benefits and making a company an employer of choice, an insurance benefits package can be very attractive. Designing a suite of products to suit specific requirements is as easy as calling on your bank or broker for advice,” says Mr Govender.

 

For more information contact:         
Sihle Bolani at Standard Bank
Tel:  011 721 9354 or mobile:  073 710 1459
Email:  Sihle.Bolani2@Standardbank.co.za

 

The subject of ‘Managing your employees with a focus on business risk’ is covered in Standard Bank’s series of BizVideos. The series has been designed to bring on-tap support to SMEs, making it easy to access practical advice on a wide range of topics.

Anyone interested in viewing the videos need only log on to www.standardbank.co.za/bizconnect.