Financial Planning

Nearly half of SA employers won’t be issuing a 13th cheque as part of their employment package, but there is an alternative

Innovative employee savings solution aims to help alleviate end-of-year financial strain

A recent poll[1] commissioned by leading on-demand pay provider, Floatpays revealed that almost 50% of South African employers surveyed will not be issuing 13th cheques as part of their employee value proposition (EVP). This finding comes as many local companies continue to face financial pressures exacerbated by a struggling economy amidst the Covid-19 pandemic. 

However, there is a way that employers can continue to provide this crucial benefit to their staff. This is according to Simon Ward, Founder of Floatpays who explains that 13th cheques are meant to supplement employees’ December pay to cover excess expenses that come with the festive season and what we now commonly refer to as ‘Januworry.’ 

“Unfortunately, due to increasing financial strain, many South African employees have become reliant on their 13th cheque, rather than seeing it as a ‘nice-to-have.’ Without it, a large proportion of employees turn to credit,” says Ward. 

But Ward says that there is a way for employers to retain this attractive piece of the package they offer staff without it adding to their operating costs. “We recently launched our savings product which makes it possible for companies to maintain the appeal of their employee value proposition by creating the platform for staff to save toward their own 13th cheque”. 

The interest bearing Floatpays savings account is powered by Standard Bank and allows employees to make a direct investment from their earnings each month. Their contributions – the size of which are completely determinable by the employees themselves – are made directly via their employer’s payroll system. These contributions will accumulate interest over a specific amount of time. Employees are then able to make a single withdrawal from this account on a date specified by their employer, which will typically fall at the end of the year.

The only on-demand pay provider that also offers a savings functionality, the Floatpays product is a timely arrival given that research continues to show that South Africans in general, are not diligent savers. “According to a study from Old Mutual[2], in 2019 only 38% of people had enough money saved up to last them 3 months should they lose their job or be rendered unable to work. In 2020, given our tumultuous economic climate, that number decreased to 26% – and will likely decrease further this year,” says Ward. 

“By designating savings before they are actually paid into the employee’s bank account means that the Floatpays savings feature helps employees to develop a ‘save first, spend second’ mindset that will ultimately contribute to better financial wellness,” Ward elaborates.

And there’s upside for employers too. Ward says that for employers, less financial strain on employees means higher productivity, a better work ethic and more engagement: “In addition, incorporating this savings solution into an employee value proposition is set to go a long way in attracting and retaining the best people, with prospective employees gravitating towards companies who prioritise their financial freedom”. 

The Floatpays savings feature is a part of its broader  offering, which includes on-demand access to pay that allows employees to access a portion of their accrued pay at any stage of the pay-cycle, without having to wait for payday. Employees pay a transaction fee per withdrawal and no interest or hidden fees are charged. 

“Our service comes at no cost to employers who want to incorporate it into their employee benefits package. Ultimately, our goal is to promote financial wellness in the workplace, and employers have an important role to play in making that happen, to the benefit of their employees and in the long term, their bottom line,” concludes Ward.

Related posts
Financial Planning

Ten top tips on the planned two-pot system for retirement savings

Financial PlanningRetirement

Preservation remains a vital part of any successful retirement plan

Financial Planning

Nurturing a savings culture critical to the success of SMEs

Financial Planning

Financial education should support economic opportunities