BUSINESS CASE FOR NOT PROVIDING EMPLOYEE WITH

CASH AND NON-CASH BENEFITS

Presented by Averile Ryder, Founding Member,

Averile Ryder Reward Specialists

Historic reasons why benefits and allowances were

first introduced in South Africa

Big business followed global fashion

Prior to 1985 all benefits and allowances were “non-taxable”

Employers were able to give employees additional rewards in the form of benefits

and allowances without increasing their tax liability.

Company cars, housing allowances and benefits, etc.. became employee status

symbols amongst South African and global talent

Lack of or no government social security and national health cover benefits

Business could discriminate in their “eligibility” criteria,

women and people of other colour were excluded from enjoying certain benefits

What this has resulted in 40 to 50 years later………

Overregulated and complex tax and labour legislation

Complex and administratively burdensome tax system

An exhaustive amount of time and money spent on payroll, the administration and

tax compliance of employee benefits and allowances

Maladministration of allowances and benefits

An employee and people culture of an “entitlement mentality”

A large and expensive accounting, auditing and tax service industry

Over regulated, time and administratively burdensome BBEEE legislation

An increase in tax and discrimination litigation

SARS continually introducing new or amended tax legislation and requirements in

order to close the tax “loop holes”

What other socio-economic factors do we have to consider?

Micro and small organisations are playing a major role in contributing to the

economy in South Africa, the African Continent and globally

Micro and small business are and will continue to be the biggest creator of jobs in the

future.

Owners of micro and small businesses do not have the resources to administer

employee cash and non-cash benefits

The creation and success of micro and small business needs to be supported and less

administratively burdensome

The Africa Consumer Revolution

Growth of the Sub-Saharan middle class

Major business constraints to business

development in Africa

Top 10 reasons why employees leave their jobs

The contribution of micro and small organisations

in South Africa

20% of employees in South Africa work for micro enterprises with fewer than five

workers.

40% are employed in small organisations with fewer than 50 employees.

This accounts for 60% of the economic employed population in South Africa.

Micro and small organisations are playing a major role in contributing to the economy

in South Africa.

Africa’s Consumer Revolution

Africa’s middle class has become the fastest growing in the world

It has tripled during the past 30 years, from 111 million people in 1980 to 313

million in 2010

One in 3 people on the continent are considered to be living above the poverty line.

Middle class spending patterns are being shaped through media and other global

influences as Africa opens up

According to a Deloite Survey , African consumers want the same as consumers

elsewhere – a mobile phone, a bank account and the latest Beyoncé CD.

Those in the African middle class own micro and small businesses or hold

done salaried jobs.

They own refrigerators, flat screen TVs and cars, are politically

assertive and are “harnessing technology”

Growth of the Sub-Saharan middle class

In North Africa countries like Morocco, Algeria, Tunisia and Egypt up to 75% of their

population is classified as middle class.

In Sub-Saharan countries like South Africa, Namibia, Angola and Botswana, between

21 and 50% of the population is classified as middle-class.

It is projected that there will be 1.1. billion middle-class consumers in Africa by 2060.

Major business constraints to business development in Africa

1. Electricity

2. Access to Finance

3. Informal Sector Competitors

4. Tax rates

5. Corruption

6. Tax administration

7. Crime theft and disorder

8. Transportation

9. Labour skills

10. Customs and trade regulations

11. Business licensing and permits

12. Functioning of the courts

13. Labour regulations

Top ten reasons why people quit their jobs.

Absolute Global a leading global candidate career management company for

professionals working in the Finance, Accounting, Banking, HR, Legal, and IT sectors.

Business Know How provides business ideas, information, resources and advice for

small and home businesses.

Forbes an American Business Magazine and whose major competitor is Fortune

Magazine

Price Waterhouse Coopers who has over 73 offices in 23 countries throughout Africa,

provide a range of financial, business and tax advice and services

Under-staffing – unrealistic workload

Poor communication – lack of transparency

Lack of challenge & not given enough responsibility

Lack of empowerment and employees not being allowed to make micro decisions in

their jobs

No recognition for efforts

Limited work-life options in particular flexible working

hours, part time and work from home options

Poor company culture – lack of business ethics

The employee’s life situation has changed

Questionable promotional practices

No enjoyment or fun at work

Absolute Global Research Results on the top 10 reasons why

people leave their jobs

Business Know How research on the top 10 reasons why

people leave their jobs

Management demands that one person do the jobs of two or more people,

resulting in longer days and weekend work.

Management cuts back on administrative help, forcing professional workers to use

their time copying, stapling, collating, filing and other clerical duties.

Management puts a freeze on raises and promotions, when an employee can

easily find a job earning 20-30 per cent more somewhere else.

Management doesn't allow the rank and file to make decisions or allow them

pride of ownership

Management constantly reorganizes,

shuffles people around,

and changes direction

Business Know How research (cont.)

Management doesn't have or the take the time to clarify goals and decisions

Management shows favouritism and gives some workers better offices, trips to

conferences, etc.

Management relocates the offices to another location, forcing employees to quit or

double their commute.

Management promotes someone who lacks training and/or necessary experience to

supervisor, alienating staff and driving away good employees.

Management creates a rigid structure and then allows departments to compete

against each other while at the same time preaching teamwork and cooperation.

Forbes Magazine Big Company Research on the 10 top

reasons why people leave their jobs

Big Company Bureaucracy

Failing to find a project for the talent that ignites their passion

Poor annual performance reviews

No discussion around career development

Shifting whims / strategic priorities

Lack of accountability and / or telling them how to do their jobs

Top talent likes other top talent

The missing vision thing

Lack of being allowed to share their ideas and have them listened to

Their direct boss is not a manager and / or lacks leadership

Pricewaterhouse Coopers (PwC) research covering 19,000+

people they conducted exit interviews on behalf of their clients

on the top 10 reasons why people leave their jobs

Limited career / promotional opportunities

Supervisor lack of respect / support

Compensation

Job duties boring / not challenged

Supervisor lacked leadership skills

Work hours

Unavoidable family reasons

Supervisor has poor employee relations

Supervisor displayed favouritism

Not recognised for my contribution

What do we do now?

Wait for more information and clarity on the Pension Fund Reform, Medical Aid and

National Health Insurance

If possible do not introduce any (additional) allowances and benefits unless it makes

economic, employee retention and business sense to do so

Continue tracking market trends, changes in tax and labour legislation and where

possible incorporate the value of cash and non-cash benefits into cash

Continue to measure your internal and external equity

QUESTIONS?