Employee benefits: Trends, flexibility and legislative challenges

By Sandy Welch, Editor, MoneyMarketing

The employee benefits landscape is evolving rapidly, with technology playing a central role in streamlining processes and improving accessibility. From faster claim settlements to AI-driven solutions and digital communication strategies, these advancements are reshaping how employees engage with their benefits.

Employers and employees alike are closely watching trends that have shaped the past year and what lies ahead. MoneyMarketing spoke to Natasha Huggett-Henchie, Consulting Actuary and Director, and Trevor Kingsley-Wilkins, Principal Consultant, both from NMG Employee Benefits, to uncover the employee benefit trends for 2025.

Two-pot’s impact continues

“The two-pot retirement system was monstrous last year, significantly impacting the industry and NMG,” says Kingsley-Wilkins. “We believe the industry has handled the transition well. At NMG we paid out R650m and processed approximately 48 000 claims. This underscores the significant demand and engagement with the new system,” he says. Looking forward to 2025, a continuation of the trend is expected, particularly in January and February, due to school fees. It’s also anticipated that individuals who have not yet claimed will do so in the new year. “As the tax year finished and a new one starts, members will regain access to their funds, potentially leading to another surge in claims. We are not expecting claims to be as overwhelming as the previous year.”

Legislative changes and challenges

When considering employee benefit trends 2025, the legislative landscape must be considered. It is expected to undergo adjustments, with refinements to the two-pot legislation addressing unresolved technical details. The anticipated introduction of the Conduct of Financial Institutions (COFI) Bill remains a work in progress, with no confirmed implementation date. “While March was initially suggested, it remains uncertain if this timeline will be met,” says Huggett-Henchie. Additionally, member benefit projections and other regulatory frameworks, such as conduct standards, are expected to gain renewed attention in the coming months. Specific areas of focus include clarifications regarding late payment interest calculations for employer contributions.

Addressing the barriers

Despite advancements in financial products, such as modern retirement annuities, legislative restrictions persist. Employees are still unable to transfer funds freely between employer-sponsored plans and personal accounts, creating barriers to financial mobility, says Huggett-Henchie. Many in the industry are hoping for future regulatory reforms to introduce a system similar to Australia’s, where employees contribute to a chosen fund regardless of employer changes. It’s a space to watch.

The role of medical aid 

Another pressing issue is the introduction of the National Health Insurance (NHI) system, which has prompted medical aid providers to develop low-cost, accessible healthcare solutions. The viability of the NHI in its current format remains uncertain, with industry experts questioning its feasibility and timeline. “Employers and benefit consultants are increasingly exploring packaged solutions that combine healthcare and financial wellness offerings. These include affordable medical aid plans coupled with funeral cover,” says Huggett-Henchie. 

Something else is that many employees remain unaware of all the benefits available to them, such as critical illness cover, which provides financial support in times of health crises without requiring drastic lifestyle changes. Proper education from consultants can lead to a growth in awareness and engagement. “Gap cover, which addresses the shortfalls in medical aid plans, is gaining traction,” says Kingsley-Wilkins. “While it often requires proactive promotion, once adopted by employers, it sees significant uptake.”

Gradual contribution strategies 

Setting up a new fund can be daunting, especially for businesses with a large workforce due to the immediate impact on payroll expenses. It is essential to understand that benefit implementation does not have to be an all-or-nothing process. “Employers are encouraged to adopt a phased approach, starting with smaller contributions and gradually increasing them over time. This strategy helps prevent sudden reductions in employee take-home pay and ensures a smoother transition to long-term financial planning,” says Kingsley-Wilkins. 

Employers can take over existing funds or introduce new plans in phases to align with their financial capabilities and workforce readiness. “An option is to consider the opt-in process, as not all employees may immediately participate,” he explains. “A gradual rollout allows for better planning and financial management, ensuring the success of the benefit offering.” Employees should be given the option to contribute incrementally, such as half a percent at a time, making it easier for them to adjust to deductions.

More focus on funeral cover

One good entry product is funeral cover, which should be an essential component of any employee benefits package, and it is often affordable on a group basis. “Many individuals already have funeral policies through their bank accounts, mobile service providers, and retail stores,” says Kingsley-Wilkins. “However, these often come at a significant cost. By offering funeral cover through an employer, employees can access better coverage at a lower cost. A comprehensive funeral plan, potentially with extended cover, is a no-brainer for employers seeking to support their workforce effectively,” he explains. “It ensures that employees do not face financial burdens in the event of a loss, reducing absenteeism and financial stress.”

Leveraging technology 

The role of technology is expected to be key in employee benefit trends 2025 and companies that have embraced technology are already seeing tangible results. It is helping to streamline processes and enhancing accessibility. Previously, accessing benefits often required employees to visit physical offices or wait for lengthy administrative processes. However, with digital systems in place, employees can now submit claims remotely via web platforms or WhatsApp, reducing logistical challenges and improving efficiency. 

“More than 50% of claims at NMG last year were submitted digitally. This shift enables financial institutions and employers to build comprehensive databases with accurate and up-to-date contact details,” says Kingsley-Wilkins. 

“A critical focus is encouraging members to engage more actively with their retirement funds,” says Huggett-Henchie. “Two-pot helped with this, and further efforts are being made to encourage members to use available platforms to monitor benefits and projected statements.” Even individuals without personal devices can benefit from technological advancements. For example, in some cases, family members such as grandchildren assist older individuals. 

Targeted communication

Gone are the days of lengthy, generic documents that employees must sift through to find relevant information. “With real-time digital communication, organisations can now target employees with specific messages based on factors such as age, gender, and employment status,” says Kingsley-Wilkins. For example, an employee approaching retirement can receive personalised updates on pension plans. Younger employees can be guided on financial planning strategies. 

The role of AI 

AI is gradually transforming the employee benefits landscape. While not yet fully optimised, AI-driven chatbots are already being used to facilitate onboarding processes and address employee queries. These innovations improve efficiency, reduce administrative burdens and enhance the overall employee experience. Although the adoption of AI is still in its early stages, the industry is moving towards greater automation and customisation, ensuring that employees receive seamless support tailored to their individual circumstances.

Flexibility and open architecture

One of the key aspects of the envisioned future is increased flexibility and open architecture in benefit structures. “Many current systems face administrative and legislative restrictions that hinder adaptability,” says Kingsley-Wilkins. Removing these hurdles will allow for a more personalised approach to employee benefits.

Compulsory participation

A significant challenge in the industry is ensuring widespread participation in retirement and benefit schemes. While compulsory preservation has been introduced through recent legislative changes, the next step is to implement compulsory participation. This initiative aims to ensure that every working individual is enrolled in a fund, creating a safety net that will benefit the nation in the long term. The concept of compulsory participation was initially introduced in policy discussions around 2021, coinciding with the introduction of the two-pot retirement savings system. “Implementing this in this country remains challenging due to the diverse workforce composition, including informal sector workers and migrant labourers,” says Kingsley-Wilkins.

Building a culture of engagement

Beyond technological advancements, creating the right company culture is vital for the success of employee benefit initiatives. A commitment to transparency, education and accessibility ensures that employees are well-informed and empowered to make sound financial decisions. “Achieving a meaningful impact requires dedication and passion. The goal is not just to provide benefits but to foster an environment where individuals feel valued,” says Huggett-Henchie.

Looking ahead

The evolution of employee benefit trends in 2025 will be an ongoing journey requiring collaboration between industry stakeholders, policymakers and employees. While challenges exist, the vision for a more inclusive and efficient system remains strong.