Make sure a higher-pay­ing job re­ally will give you more

Don’t com­pare the ba­sic salaries of jobs with­out tak­ing into ac­count the value of your em­ployee ben­e­fits. Make sure you know your “cost-to­com­pany” fig­ure; if you don’t, you may find your­self out of pocket in your next job. re­ports

Weekend Argus (Saturday Edition) - - FRONT PAGE -

Em­ploy­ees who leave a job for “more money” of­ten find that the mon­e­tary value of their new pack­age was ac­tu­ally not worth the move, says Le­sego Mpete, an em­ployee ben­e­fits cor­po­rate con­sul­tant at ac­count­ing firm BDO South Africa. Such is the cost of fi­nan­cial il­lit­er­acy.

Em­ployee ben­e­fits, such as group life cover, dread dis­ease cover and your em­ployer’s con­tri­bu­tions to a pen­sion or prov­i­dent fund, have be­come in­creas­ingly im­por­tant, Mpete says. And if a prospec­tive em­ployer doesn’t of­fer these ben­e­fits, you need to ne­go­ti­ate a pack­age that will com­pen­sate you for the loss of such ben­e­fits.

“Leav­ing a com­pany that has em­ployee ben­e­fits for one that doesn’t, but pays more, is a mas­sive risk,” she says. This is be­cause you will have to fund these ben­e­fits your­self, which is likely to cost an in­di­vid­ual more.

“Ob­tain­ing life cover, in­come pro­tec­tion in­surance, or even a fu­neral cover, on your own is likely to be more ex­pen­sive when com­pared with get­ting it as a group em­ployee,” Mpete says. With group cover, there is no un­der­writ­ing of in­di­vid­u­als: the risk is spread across the group. This makes group cover rel­a­tively cheap and a very at­trac­tive em­ployee ben­e­fit. If you are a high-risk client ow­ing to a health is­sue, life cover would cost more if you were to ob­tain it as an in­di­vid­ual than if it was part of your group cover.

“Your salary is your big­gest as­set, and if you’re work­ing for a com­pany that doesn’t of­fer in­come pro­tec­tion [dis­abil­ity cover], dread dis­ease cover, or life cover, think of what could hap­pen to you or your fam­ily should you find your­self in a po­si­tion where your in­come is com­pro­mised. This means that [un­less you have taken out credit life cover] if you have a mort­gage bond or a car loan, the bank might be knock­ing at your door to re­pos­sess both your house and your car [if you can’t cover these ex­penses due to be­com­ing dis­abled].”

Meet­ing your fam­ily’s ba­sic needs may also be­come a chal­lenge, Mpete says.

Be­fore you ac­cept a re­mu­ner­a­tion pack­age with­out life cover, de­ter­mine the value of your cur­rent group cover and then ob­tain a quote for what it will cost you, as an in­di­vid­ual, to re­place that cover.

For ex­am­ple, if you have cover of twice an an­nual salary of R250 000 a year as a lump sum on ei­ther death or dis­abil­ity, find out what it will cost you to buy R500 000 of cover for ei­ther death or dis­abil­ity and make sure that the terms of the cover are the same.

In­di­vid­ual poli­cies can ap­pear cheaper if the dis­abil­ity cover, for ex­am­ple, is an ac­cel­er­ated ben­e­fit of the life cover. This means that if you are dis­abled, you will be paid the ben­e­fit. How­ever, if you die a year later, your de­pen­dants will not re­ceive a life as­sur­ance ben­e­fit, be­cause you re­ceived it when you be­came dis­abled.

“I can­not stress enough the im­por­tance of speak­ing to a fi­nan­cial plan­ner be­fore chang­ing jobs,” Mpete says.

Sue Torr, the man­ag­ing di­rec­tor of Crue In­vest, agrees. There are many is­sues to con­sider, she says, in­clud­ing mov­ing tax brack­ets, earn­ing com­mis­sions/bonuses and chang­ing med­i­cal schemes.

“With dra­matic in­creases to med­i­cal scheme pre­mi­ums loom­ing, any com­pany sub­sidy with re­spect to a med­i­cal scheme is an enor­mous ben­e­fit,” she says.

It is also worth­while talk­ing to a fi­nan­cial ad­viser be­fore you leave a job so that he or she can point out to you the risks of spend­ing your ac­cu­mu­lated re­tire­ment sav­ings in­stead of rein­vest­ing them in a preser­va­tion fund, Torr says.

“A ma­jor ben­e­fit of work­ing for a com­pany that has a com­pul­sory re­tire­ment fund in place is that it forces you to save for re­tire­ment. If you move to a com­pany that doesn’t have for­mal re­tire­ment fund­ing ben­e­fits, you need to be dis­ci­plined enough to in­vest in your own ca­pac­ity, not only the con­tri­bu­tion you are cur­rently mak­ing as an em­ployee, but also any con­tri­bu­tion your em­ployer makes on your be­half.

“There are lots of trans­fer, preser­va­tion and con­tin­u­a­tion op­tions, and un­der­writ­ing im­pli­ca­tions when mov­ing em­ploy­ers, and these all need to be ad­dressed in a fi­nan­cial plan,” Torr says.

Chris­tine Masinga, the man­ag­ing ex­ec­u­tive of hu­man re­sources at MMI, says that, to seal the deal with the right peo­ple, em­ploy­ers need to of­fer can­di­dates a per­son­alised, value-ad­ding ben­e­fits pack­age.

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