It’s in our hands now. Could a reconceptualised benefits framework rebalance opportunities and outcomes for South African employees?
Five years ago, when we first launched Benefits Barometer, our team could not have imagined the journey their research would take them on. In the beginning, the mission was straightforward: provide an annual assessment of the South African employee benefits system and the industry that supports it to determine how effectively it was addressing the physical, psychological and financial needs of employees.
In setting the scene for this year’s Benefits Barometer, we contemplate the new landscape of work and the scale and intensity of changes taking place under the Fourth Industrial Revolution. We discuss how changes such as globalisation, the changing nature of production, the rise of the ‘gig economy’ and, the growing use of machines as ‘talent’ will affect the workplace.
The issue of increasing longevity – or, more correctly, an increase in our health-related quality of life before death – is a ‘disruptor’ of significant proportions that is quietly stealing its way into our lives in South Africa. In this section, we step back to examine just how we are experiencing this ageing and longevity phenomenon, how this will shape our social and economic futures, and what we could be doing to better address this constantly changing world.
The word ‘disruptive’ is fitting when describing the changes we’re seeing in our societies, economies, places of work and daily lives. It accurately captures both how new and unsettling these changes are, and implies we need to do more than simply adapt if we want to do more than simply exist in their wake.
In light of what we have covered so far, a complete revamp of the employee benefits model might just be in order. In an effort to understand what could be offered to make employees commit to and engage with their employers, we begin by delving into some of the research on what it is that South African employees value from their employers.
Having looked at the global factors shaping our world, how these are impacting on the South African context, the issues that will determine how successfully we respond to change, and how we can find creative solutions to providing benefits that matter, we now turn our attention to what it is that employers can do.
What has emerged over the course of the last five years, I believe, is a publication that holds a unique position among the plethora of studies and surveys produced each year by research groups, consulting groups and financial services companies. Many such studies frame the analysis and debates narrowly – from our work on the Benefits Barometer, we have learnt to understand the critical need for a holistic framework to grapple with the complex issues around savings and investment, social protections, social mobility, financial stability and effective employer-employee relations. To gain insights into whether the retirement fund system is effective, we simply need to examine the full financial journey an individual has to negotiate along on the way to retirement – and this is a lifetime journey. To tackle the issue of the country’s public-private partnership to provide individuals with social protections around income, we also need to address the issue of social mobility, knowing that asset acquisition plays an equally important role in the lives of individuals.
Benefits Barometer saw an opportunity to make these complex debates more accessible to each of the stakeholders involved: policymakers, employers, unions, boards of trustees and management companies, financial services companies and, of course the primary focus of all our efforts: the individual employee and their families. It’s a role that Martin Fisher, co-founder and Chief Executive Officer of Kickstart International, has come to identify as system entrepreneurship. Or, as he puts it more eloquently:
“Fundamentally, and on a large scale, changing the way a majority of relevant players solve a big social challenge such that a critical mass of people affected by that problem substantially benefit1.”
It is this mindset that makes Benefits Barometer the ‘big read’, in our opinion. The publication seeks to be the sum of many smaller debates, which makes it highly relevant and accessible to those readers who want to concentrate on specific aspects of these debates.
The theme for the 2017 Benefits Barometer is benefits that matter in the changing world of work. As part of a highly connected global community we are, and will continue to be, affected by the rapid technological changes being brought about by what is now referred to as the Fourth Industrial Revolution. This supercharged fusion of digital, biological and physical technologies is fundamentally changing how we work, where we work and what work we do. On a more profound note, it is also challenging the economic and organisational precepts that underpin our work.
As Klaus Schwab, the chair of the World Economic Forum, puts it:
“The resulting shifts and disruptions mean that we live in a time of great promise and great peril. The world has the potential to connect billions more people to digital networks, dramatically improve the efficiency of organizations and even manage assets in ways that can help regenerate the natural environment, potentially undoing the damage of previous industrial revolutions.2”
According to the World Economic Forum, South Africa is in the unenviable position of being highly exposed to this global phenomenon while having the lowest potential to cope with it. This is because of the poor quality of the country’s educational system and its high levels of unemployment3.
Our continued discussion of the holistic well-being of employees should therefore be seen in this context. If we do not acknowledge these changes in the South African context, we could exacerbate the inequality that is currently testing our economy and society.
If there has been one key learning that has come out of the Benefits Barometer series it is that systems fail when they fail to address the interests of the individual they are meant to serve. This edition re-emphasises this warning and stresses the importance of creating better outcomes for individual workers who must deliver in this changing world.
Interestingly, this will be the first ‘industrial’ revolution where the individual will wield huge influence over how it unfolds. In Benefits Barometer 2017:benefits that matter in the changing world of work, we are not discussing the future of a business or even an industry. We are discussing the future of the entire system: the system of benefits and protections we provide to working South Africans to ensure they remain productive contributors to the economy.
For too long, the vested interests of other stakeholders, not the individual’s needs for themselves and their families, have largely determined which benefits should matter most, with policymakers focused on ensuring there is a basic safety net around income for employees. Employers have wanted to keep workers productive and functional, ensuring they would readily leave their employ when the time came to retire. For boards of trustees and management companies, the issue has been fulfilling their roles as fiduciaries through good governance and oversight.
If we are going to best serve the interests of employees, we have to go significantly beyond a discussion of benefit structures and into the heart of what constitutes a viable financial and social contract between employer and employee. By doing so, all parties will be better positioned to tackle the challenges of an exponentially changing work world. This means:
All these efforts will be necessary if we want to harness the commitment and engagement of a workforce that will need less and less from employers than employers will need from them.
While much of what lies ahead is unknown, we must recognise that the future of work is changing, and indeed challenging, our assumptions about how we should be optimally structured. Employers and their workplaces, as we currently understand them, may not play such a dominant role in our day-to-day lives. Retirement as a convention could cease to exist. There’s no doubt that the skills we will need to meet the challenges of the future will be different from the ones we have required in the past.
What we believe won’t change, though, is the need for individuals to have adequate safety nets when facing whatever challenges this new world of work might hold, and support in meeting their aspirational goals.
This is where we believe Alexander Forbes has a different perspective. If we are going to meet the challenge of these global trends, promote human capital development to meet that challenge and provide individuals and their families with the sage counsel and advice to meet the financial, physical and mental demands of these changing times, we see the need for employers to play a critical role as agents for change.
Furthermore, we believe that in partnering with employers there is a need to reconceptualise and evolve into a new framework for employee benefits that creates a powerful foundation for whatever the future holds.
It’s in our hands, now, to consider how we could use this rapidly changing world to rebalance opportunities and outcomes across our diverse population.
We trust that you will find our Benefits Barometer 2017 report insightful.
Benefits that matter in the changing world of work
The world is changing. So are our places of work and the roles of, and relationships between, employees and employers. This year’s Benefits Barometer touches on a range of socio-demographic and economic factors that will affect the world of work in South Africa in the context of a changing global environment.
With unprecedented change and transformation in the world of employee benefits, we continue to underscore the importance of the role of the employer and other stakeholders (employees, policymakers, communities and households) in developing a meaningful framework for the delivery of benefits that cater to an individual’s needs throughout their lifetime.
Globalisation, the changing nature of production, the rise of the ‘gig economy’ and the growing use of machines as ‘talent’ are some of the changes that will have far-reaching consequences for organisations and individuals. Advances in biotechnology are also impacting on the way we live – and how long we live – which means we have the potential to be economically active for longer. In our introductory discussion of this topic, we start to see how these factors combine to create a new landscape of work, and consider the possible impact on our lives.
Responding to these changes within the current structure of the South African economy presents a number of challenges at policy level. Policymakers must accommodate a very different-looking future while addressing complex issues rooted in the past. From this perspective, we examine policy debates in South Africa. Are policy measures sufficient to address matters such as growth, minimum wages, flexible-term employment, education, small business development, retirement reform and care for the aged? Our discussion of policy debates in South Africa looks at some key policies and regulations that have, or will have, a direct impact on the well-being of employees and the environment in which they work.
From policymakers to employers, we move on to examine employer–employee relations of the future. The nature of this changing world of work is such that the current power dynamic between employer and employee is changing. We do not believe this to be a bad thing. As things currently stand, South African employers provide a critical resource in social security benefits. Inadvertently, this is having a perverse impact on the willingness of individuals to engage in entrepreneurial activities and endeavours, an important building block for South Africa’s economy. Equally, for corporates to compete effectively with the flexibility and agility of the new world, these ‘power dynamics’ will have to make way for collaborative, flatter organisational structures. This will be seen as critical for retaining the type of talent that will be required into the future. Modern organisations will need to see human capital development as a critical strategic imperative.
Next we highlight the role that empathy and a clear understanding of what employees value is fundamental for employee engagement, plays in reconceptualising employee benefits that will really matter. Personal circumstances, cultural nuances and sociological drivers of an employee’s relationship with money must be taken into account when developing meaningful benefits that will matter. We look at the ‘responsibility lens’ of employees, and the factors that influence their interactions, decisions and outlook regarding money. These are important drivers for developing benefits frameworks that actually work. We also look at how historical views and socio-demographic changes are creating a sharply contrasting value set among today’s employee populations.
We conclude this section with a discussion of why a changing world of work matters to retirement funds. Trustees are grappling with the dual challenges of keeping members committed to their savings journey while ensuring their income needs are adequately provided for after employment. We highlight how certain shifts have already taken place in this environment. The future for retirement funds, social security, employee benefits and even trustees is decidedly uncertain at this point in time. But we see this as providing an important opportunity to trustees. Now is the time for trustees to seize on the critical role of ‘agents of change’, leading the charge on the individualisation and customisation of benefits.
In this section, we shift the conversation from the demographic issue that concerns most policymakers – our ‘youth bulge’ – and look at the trends and consequences of ageing in Africa. While the attention of policymakers is rightfully focused on the issues of youth and unemployment, demographic changes – specifically increasing longevity and urban migration – are placing an increasing strain on assumptions that a culture of reciprocity will mean that families will take care of their elders.
It is the fact that we remain so much a ‘barbell economy’ that is creating a problematic situation. For higher income groups, retirement may be viable, though not desirable as individuals stay physically active for much longer. For lower income groups, everything rests on family support which is slowly fading. For lower income groups, everything rests on the availability of family support, and with urban migration, that model of support is changing.
We ask some hard questions about how ready South Africa actually is for the tsunami of caregiving that will be required when older people look for options for long-term care within their communities and discover there are none, or that they are badly or poorly managed. It may well be that the highest impact of ageing will be in populations where social as well as economic hardships are greatest.
We begin our discussion by looking at some of the dynamics impacting on ageing in South Africa, and how these are starting to shift. A closer Longevity: the demographic disruptor exploration of the particular demographics of ageing, makes it clear that the way our population is ageing requires our serious attention. We then explore how the shifting sands of demographic flow are placing strain on the traditional model of intergenerational family support.
Finally we consider what this means for South Africa when it comes to developing a policy on ageing and reimagining long-term care in a way that reduces healthcare costs and increases quality of life at the end. We consider some creative approaches to addressing the inequality of health and care, and set out an action plan for ageing reform that suggests a way forward for the various stakeholders involved.
Having raised a number of questions and matters to consider, we take a closer look at what we should be doing. How should we respond to all these changes in a way that ensures the long-term success of our economy, our businesses and, most importantly, our people?
We introduce this discussion with some insights as to how the modern organisation will need to start managing human capital, not jobs. We introduce what we see as being the four building blocks that can position companies to effectively navigate this rapidly changing workplace. These will be the hallmarks of the organisation of the future: HR data analytics; an integrated employee wellness programme; a skills and education framework that cuts across all needs; and a customised benefits platform. As the employer–employee relationship shifts, developments in these areas would go a long way to encourage enhanced employee engagement, participation and long-term commitment. We explore each in more detail in the subsequent chapters.
We then go on to introduce the concept of workplace analytics and the value it can introduce to engaging and retaining human capital. South African companies are only just beginning to understand the power and potential here. A case study from Mercer, global leader in pension, benefit, investment and HR consulting, shows how data analytics were used to successfully predict and address employee turnover in an organisation – something to consider when we set employment policies for the changing world of work. With South Africa facing the dual demographic challenges presented by a youth bulge and the prospect of greater longevity, we see how effective workplace analytics can be in taking the issue of age off the table when determining what drives productivity. Investing in an older working population can actually result in significant benefits to both organisations and the younger members of the workforce, something that policymakers and employers would do well to consider.
The successful modern organisation will do more than simply offer a fair wage in return for a job well done. In our discussion of the emerging concept of employee well-being we propose ways to develop employee well-being programmes that will provide holistic family care and proactive solutions for dealing with the physical, financial and emotional issues that affect both individual and family well-being and, ultimately, employee engagement and productivity. We ask serious questions about how to create a sustainable programme that will ensure commitment and ongoing engagement from all stakeholders without introducing potential conflicts of interest. We use the example of employee health programmes to demonstrate how an integrated benefit (in this case, healthcare) can be implemented to provide value to both employer and employee.
Another area that will require a complete rethink if we are to get the desired results is that of skills development. Regardless of their industry, age or career stage, all workers will need to develop the skills that the new world of work will demand. In the next segment we urge industry, policymakers, employers and trainers to get together and accelerate our skills development journey so we can meet the challenges of an interconnected future and compete with a rapidly changing global labour market.
For those who choose to take a different path and run their own businesses, we explore ways to accelerate the development of entrepreneurs and small, medium and micro-sized enterprises (SMMEs). Government has high hopes for the power of SMMEs and entrepreneurship to unlock economic growth. The question addressed in this segment is, how effective plans to achieve this have been thus far, and how the financial services industry could be more effective in meeting the requirements of this rising sector.
To introduce this discussion we delve into some of the research that’s emerging on what South African employees value from their employers. What could employers offer that would make employees commit and engage with their employers? What we are hearing is a dual message: on one hand it’s about helping the employee plan for an unknown future, while mitigating expense risk, and on the other it’s about giving employees a clear path to promotion and a way for them to thrive at work. This means we have to address both the future of jobs as well as the future in talent when responding to this new world order.
We make the case for getting creative about value creation, and suggest how the industry and employers can work together to design benefit offerings that respond to various employee needs, from lifestyle and family to financial and health.
Having considered what may be required for us to successfully navigate a changing world of work, we turn our attention to how employers can provide better support to employees through a comprehensive benefits framework. Our starting point is that the best benefits provide value for both the employee and the employer. As the world of work evolves, benefits need to go well beyond being customised and integrated. We see the introduction of fully portable benefits that any individual could purchase and maintain throughout the course of their financial lives increasing in importance.
Finally we set out some bold proposals as to how HR departments could go about designing an alternative benefits platform that transforms the benefits framework into a life-planning tool that can be used by any employee, regardless of how or where they are employed. We use the idea of personas to explore the process of creating customised solutions that can solve for highly heterogeneous employee populations without appearing to be paternalistic. We see this as the only viable way to create an array of benefits that truly matter. We explore some of these benefit offerings in greater depth in the last segment of this discussion.
In our final section, we flesh out five new benefits concepts that creatively capture our thinking about our win-win criteria – where both the employer and employee derive significant value from benefits that will make critical differences in everyone’s lives.
In Benefits Barometer 2016, we argued that there is a historical overhang of ‘asset deficits’, particularly in the areas of housing and education. We continue that discussion this year and look at some potential solutions. If housing constitutes one of the largest investments an individual makes over the course of their lifetime then surely we need to start integrating a discussion of housing into every financial well-being initiative. We explore the macro-economic multipliers associated with investing in residential housing and discuss mortgage funded retirement as an alternative way to address asset deficits and retirement risk.
Another factor that often goes unexamined in assessing an employee's financial well-being is their true cost of commuting and the impact that the financial costs, travel time and transportation options have on employees’ workplace productivity and financial well-being. We present an agenda for action that explores how policymakers, government and employers can start to address the legacy of issues our current transportation system presents.
We then look at why a concept such as providing an early childhood learning facility at the workplace can prove to be one of the most impactful employee benefit that an employer can offer. While not a ‘traditional’ benefit, this is an innovative solution that addresses a number of concerns for employees: how to give their children an affordable head start in life in the context of a failing educational system; the need for childcare solutions at the workplace; and how to provide children with an opportunity to develop essential social skills in a culturally diverse environment.
Also high on our list of employee benefit choices is how to put skills development ‘on steroids’ for employees themselves. This will require a learning programme that responds to how the learner learns best, that adapts to the learner’s interests and skills level, and informs employers if the employee is engaged or indeed succeeding. Whether it is used for a financial well-being programme that evolves as employees need it, or for providing training on a highly complex aspect of an employer’s business, this next-generation learning system is a bold step forward in ticking all of the right boxes.
We end with a new take on retirement financial advice in a world where retirement is as long as pre-retirement. Importantly, we try to provide a more realistic picture of what an individual is looking at when they hit a date the employer has defined as ‘retirement’. In planning for a better ending, we reflect on how little we know about what that period holds, why certain trajectories may be likely, and how one could go about preparing for them. We look at the reality of post-retirement careers, options for continued income generation, and how we need to start thinking about our inevitable winding down
With the unprecedented change and transformation in the world of employee benefits, we continue to underscore the importance of the role of the employer and other stakeholders (employees, policymakers, communities and households) in developing a meaningful framework for the delivery of benefits that cater to an individual’s needs throughout their lifetime.
Furthermore, we believe that in partnering with employers, we can reconceptualise a new framework for employee benefits that creates a powerful foundation for whatever the future holds.
It’s in our hands, now, to consider how we could use this rapidly changing world to rebalance the opportunities and outcomes across our diverse population.