In South Africa, employers are currently not legally required to offer employee benefits. However, this is set to change as the government moves closer to implementing social security reforms such as Universal Coverage through auto-enrolment. While this shift is legislative in nature, the ethical and financial implications for employers particularly around death, disability, and retirement, are already pressing.
The moral and financial risk employers carry
We believe employers have a moral obligation to provide protection for their staff against the risks of death or disability. This responsibility also extends to helping employees begin saving for retirement, so they can retire with dignity and financial security.
If these needs are not met, employers may find themselves facing a contingent liability – a potential financial obligation that arises depending on the outcome of an uncertain event. Although such liabilities don’t appear on the balance sheet unless probable and quantifiable, the emotional and reputational impact can be just as real.
We recently engaged with a company that had been in operation for over 40 years and employed 140 staff. Upon analysing their workforce data, we found that 18 of those employees had been with the company for most of its existence. However, the company offered no retirement, death, or disability benefits.
During discussions with the leadership team, we asked: What would happen if one of these long-serving employees were to pass away or become disabled while performing their duties—and they were the primary breadwinner with no savings or life insurance?
Most caring employers would feel compelled to assist the family left behind. But that raises a difficult question: How much help is appropriate – and for how long?
This type of unplanned support – while well-intentioned – can be financially burdensome and create inconsistency and legal risk. Had the employer provided structured employee benefits, such as group risk cover, this burden could have been avoided entirely.
A cost-effective solution: Group risk schemes
A common misconception is that employee benefits are unaffordable, especially for small or medium-sized businesses. However, group risk schemes are significantly more affordable than individual cover and offer broader protection at a fraction of the cost.
Introducing a structured benefit offering not only mitigates contingent liability but also strengthens employee loyalty, financial resilience, and overall workplace morale.
Universal coverage and auto-enrolment: What’s coming
The industry is aware of the government’s intention to implement Universal Coverage – a plan to ensure all South Africans have access to retirement savings, particularly those in informal employment.
On 14 December 2021, National Treasury released a discussion paper titled “Encouraging South African Households to Save More for Retirement.” The paper outlines plans to introduce auto-enrolment, whereby eligible employees are automatically enrolled in a retirement fund.
As part of this initiative:
- A retirement fund for the informal sector will be created, targeting groups such as taxi drivers, informal traders, and domestic workers.
- In the formal sector, “qualifying” employers will be mandated to provide a mechanism through which both employer and employee can contribute.
While Treasury was expected to launch auto-enrolment in the 2025 Budget, implementation has been delayed due to factors such as the postponed Two-Pot system, geopolitical tensions, and instability within the Government of National Unity.
A daunting task made manageable
Understandably, introducing a retirement fund or benefit structure for the first time may seem daunting, especially for employers with tight budgets. But with the right guidance and a phased implementation strategy, the initial financial impact can be managed for both employer and employee.
In closing
The longer employers delay offering structured employee benefits, the more exposed they become not just financially, but reputationally and ethically. What starts as an unrecorded risk can quickly turn into a costly reality.
Now is the time to act, not out of compliance, but out of conscience and care for the people who keep your business running.