A company has to consider the
following question concerning employee benefits
opportunities are there to promote employee loyalty to attract high-quality
staff, to provide financial incentives and to enjoy tax
arrangements have been made to provide retirement, disablement and death
benefits for employees, or for self-employed or professional
- Is there
a pension or provident fund? If so, are the benefits adequate in relation to
members' current standards of living? What is the benefit formula
and what percentage of salary will be provided for each employee? Will the
employee be able to live on that income?
- Are all
employees eligible for membership, or are there certain categories op people
(such as married women) who are not allowed to join the pensions
- If there
is no pension or provident fund, are retirement benefits provided by means of
- If the
pension fund benefits do not fully cater for the needs of some employees, do
these employees have retirements annuities?
Employers' contributions to
pension or provident funds are deductible from taxable income. The employer can
pay retirement annuity contributions by means of an increase in salary. A good
pension fund, provident fund or retirement annuity scheme for employees can
ensure settled conditions of employment.
- Has adequate
provisions been made for dependants of deceased employees?
retirement benefit will be provided for older employees who may be ineligible
to join a new pension fund, or whose benefits under the newly formed fund may
be totally inadequate?
- Has the employer
used all opportunities to provide incentives using the available tax
What happens if any Employee is
You have to ask the following
employees (and self-employed people) protected against loss of earnings in the
event of permanent or temporary disability?
- For how
long will the employer bear the cost of a disabled employee's salary?
A solution to individual problems
may be to grant increases to selected employees, on condition that these
increases are supplied as premiums under income protection policies. The
employer will enjoy tax relief on the increased salary. The increase in the
employee's taxable income will be offset by the corresponding premium, which is
allowed as a full deduction from his or her taxable income under section 11 (a)
of the Income Tax Act 58 of 1962.
What is the importance of Employee Benefits?
Pension, provident and benefit funds as they exist today are modern
development. the main purposes of these funds are to provide:
for employed people from the time they are no longer able to work to earn a
for the dependents of fund members who are breadwinners; and
accident or unemployment benefits for their members.
The provision of these benefits
is done by accumulating capital in a pension, provident fund or benefit fund.
The fund releases this capital when a member dies or retires, or when the
member is sick, has been in an accident, or is unemployed.
Pension, provident and benefit funds have become an important feature in our
society, because they provide the economy with a major source of capital. The
government has assumed a major role in the development, which is evidenced by:
concessions made available through the Income Tax Act; and
supervision of the funds' financial soundness through the machinery of the
Pension Funds Act.
What are the basic features of
Pension and Provident Funds?
The difference between a pension and a provident fund is that a pension
fund is primarily established for the payment of pensions, while a provident
fund pays its benefits in the form of lump sums. (Provident funds allow members
to take their benefits in the form of an annuity, if they so wish). However, a
member of a pension fund can take up to one-third of his or her pension benefit
in the form of a lump sum.