Spotlight on South Africa – A guide to implementing employee benefits technology

South Africa’s diverse economy and strategic location as a hub for the African continent make it a key player in the global market. Employers in South Africa focus on offering competitive employee benefits to attract and retain top talent, while addressing local socioeconomic challenges. Benefits in South Africa often emphasise financial security, health, and work-life balance.

To stand out in a competitive labour market, South African employers are increasingly adopting a more flexible and comprehensive employee benefits package.

Mandatory benefits

South Africa’s employee benefits landscape is governed by labour laws and social security regulations, which provide basic protections for workers, including:

Sickness and retirement benefits

The Unemployment Insurance Fund (UIF) provides short-term financial relief during unemployment, maternity leave, or illness. Employers contribute 1% of the employee’s gross salary, matched by the employee, subject to a maximum equal to ZAR 17,712 per month.

The standard retirement benefit is a flat-rate pension (not earnings or service-related), which is typically increased marginally every year to provide some compensation for inflation. However, there are no specific contributions as this comes from the central government budget.

Defined contribution pension arrangements either appear in the form of a provident fund or a pension fund. In some industries, participation in sector-specific retirement funds is mandatory. Provident funds are typically taken as one lump sum payment, while pension funds are only allowed to provide one third of the total value as a lump sum. Contributions vary, but are generally shared between employers and employees.

Healthcare benefits

South Africa’s public healthcare system is funded through general taxation and provides basic medical services.

Employees can claim compensation for injury through the Occupational Injuries and Diseases Act (COIDA). Employers must provide compensation for work-related injuries or illnesses – including medical costs, temporary or permanent disability benefits, and death benefits for dependents.

Core benefits in South Africa

In addition to mandatory benefits, many employers offer supplementary benefits.

Health insurance and wellness programmes

South African employers with market median or above market benefit offerings will provide private medical aid subsidies or cover the full cost of private health insurance. These plans often include access to general practitioners, specialists, and hospital care in private facilities.

– the prevalent way of providing employees with cover for medical treatment – are operated on a not-for-profit basis. Medical aid plans typically include:

• Comprehensive coverage: Covering in-hospital care, chronic disease management, and preventative screenings.
• Day-to-day care: Consultations with general practitioners, specialist visits, and medication costs.
• Additional benefits: Dental and vision care, mental health support, and maternity care. Some of these may be at additional cost to the employee when selected.

Tiered medical aid plans

Employers may offer tiered medical aid plans, allowing employees to choose coverage levels based on their needs. The costs are often shared between employer and employees with those on above-market benefit packages contributing less towards the premiums. Some employers also negotiate group medical aid schemes to reduce premiums and improve access for employees and their dependents.

Gap cover

Gap cover is also common. This is an insurance plan designed to cover the difference between the medical scheme’s reimbursement rate and the actual rates charged by private healthcare professionals for in-hospital treatment. For example, in South Africa, medical aid schemes reimburse healthcare providers 100%, 200%, or 300% of the plan rate, depending on the level of cover. However, private facilities and practitioners may bill up to five times the standard rate – leaving a ‘gap’. Gap cover typically includes services such as specialist consultations, surgeries, and hospital stays. By bridging the gap between what healthcare providers charge and what insurance covers, gap cover offers financial protection and peace of mind to individuals seeking comprehensive healthcare coverage.

Retirement savings plans

Employers frequently offer private pension or provident fund plans beyond mandatory requirements, contributing 8% to 12% of an employee’s salary. Higher contributions are offered by employers with an above-market benefits package. Employees typically contribute 4% to 10%, with tax incentives encouraging participation in these retirement savings schemes.

Life and disability cover

All multinationals provide life insurance that includes total and permanent disability cover, with the market median being three times the employees’ annual salary for both.

The majority of employers also provide an income replacement plan that starts after a three or six-month waiting period. These plans tend to be up to 75% of salary with a typical payment period of two years, which is followed by a lump sum payout.

Dread Disease cover, also known as Critical Illness cover, is popular. We see half of our customers offer this to employees, in addition to the life and disability cover. This provides the employee with a tax-free, one-off sum of money after diagnosis of a critical illness such as cancer, a heart attack, or stroke. This can be used to cover rehabilitation costs, travel expenses to treatment centres, and modifications to the employee’s home and day-to-day life to help with recovery.

Popular benefits in South Africa

Transport and meal allowances

Many employers provide commuting allowances, fuel subsidies, or company cars for employees in senior roles. And in the last couple of years, we’ve seen allowances becoming more popular than fully paid cars. Transport services, such as shuttle buses, are often offered in industrial or remote locations.

In addition to travel, meal allowances are prevalent among employers where subsidised lunches or office canteens are not available.

Education and professional development

South African employers often invest in skills development programmes to address local skills shortages, with common offerings including bursaries, student loan repayment assistance, and subsidies for professional certifications.

Family and childcare benefits

Employers are increasingly offering childcare vouchers, subsidies for private daycare, and contributions toward school fees to bolster financial wellbeing among employees with children.

Charitable giving and volunteering

Many South African companies run Corporate Social Responsibility (CSR) initiatives, offering employees paid leave for volunteering, while matching charitable donations.

Wellbeing benefits

Wellness initiatives, such as gym memberships, mental health counselling, and employee assistance programs (EAPs), are also common. However, we’re seeing our global customers replacing gym memberships with allowances to provide employees with more choice in how they look after themselves, both physically and mentally.

A number of customers are also starting to offer additional holiday buy to supplement the 21 days that employees are provided in South Africa.

Key considerations for implementing employee benefits in South Africa

1. Health cover is a must. With the rising cost of private healthcare, offering medical aid subsidies or comprehensive wellness programmes is a significant value-add for employees – and can help employers attract and retain the best talent.
2. Employees are seeking flexibility. It’s important to provide employees with the flexibility they’re looking for so they can use their benefits in a way that suits their individual needs. For example, enabling them to select the right level of health cover for them and their family.
3. Employee benefits tech can help. A benefits platform like OneHub gives employees the opportunity to flex up their pension contributions and life and disability cover to suit their needs. We are also seeing employers beginning to provide funds for employees to use towards flexing their core benefits.

To learn more about the benefits landscape in South Africa, to benchmark your offering, or to see how a global benefits platform can help you deliver a seamless employee experience in South Africa, speak to one of our benefits experts.