South Africans are well-known for their participation in stokvel saving schemes where members contribute a fixed monthly amount that is paid out to a specific member on a specified date. Nicol Myburgh, Head of the HR Business Unit at CRS Technologies, says employers can integrate these payments into existing processes to make it safer and more convenient for those members.
“With stokvels still an integral part of the lives of many South Africans, employers could offer this as a savings option to employees, as most payroll systems incorporate the functionality to do so. Contributions could be deducted monthly or at predetermined periods, the monies kept in a fund, and then paid out according to processes established,” he says.
Additionally, Myburgh believes that a company can further encourage savings by offering to contribute a small percentage to the fund.
If a business does decide to introduce a stokvel or transfer funds to an established one, it is important to establish a contract between all the parties involved. This should stipulate the amount being contributed, its frequency, how payments are made, when monies (including interest) are paid out, and so on.
“Putting this in place mitigates the risk of either non-contributions or someone running off with the money. However, despite the popularity of stokvels in the country, employees should ask themselves whether their money is not better placed in an investment fund with the interest and other returns directly payable to themselves, rather than sharing it with members of a stokvel.”
Even though part of the appeal of a stokvel is the social networking aspect, the employer can still play a key facilitating role.
“A company can initiate the discussion, put options on the table, and establish a structure for the stokvel,” says Myburgh. “Furthermore, it can prepare relevant agreements and advertise the stokvel to the staff. As mentioned, the business can also offer to contribute an amount as an additional incentive.”
The benefit of the employer managing the process means that any pay outs can be done via mobile money transfer, which is especially important for those individuals who do not have bank accounts. Unlike a traditional stokvel where cash is common, a company can find alternative (and safer) ways to distribute funds to members.
Alternative savings vehicles
Looking beyond a stokvel or investment fund, a company can provide its employees with a voluntary savings programme. A percentage of the employee’s salary can be deducted every month and received as a lump sum payment at the end of the year – almost like a 13th cheque or bonus.
Alternatively, if the company already pays a fixed year-end bonus, it can offer to tax employees on this amount in advance on a monthly basis. This enables them to receive a larger amount at the end of the year. However, it is essential that employees sign a form acknowledging that the company may do so. If the employee leaves the company before the bonus is paid out, the onus is on them to claim back the money from SARS.
“The most popular option is for employees to pay an additional voluntary contribution to a provident, pension, or retirement fund and receive a tax benefit on the contribution,” says Myburgh.
All these savings options can help to improve engagement with employees and position the business as a caring employer, a vital competitive advantage in today’s connected environment.