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Updated 26 Feb 2020

The importance of medical aid provision for small businesses

Never mind incentives, bonuses and team-building events. Providing healthcare is more important for smaller companies. 

Catherine Black, 18 May 2017  Share  0 comments  Print

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If you’re a small- to medium-sized business employing staff, you’ll know that there are other benefits you can offer them besides the salary amount they take home each month. Travel allowances, bonuses, extra leave days – there are plenty of perks that can make your company desirable to work for.

Overall, though, one of the best benefits you can provide is a medical aid plan, whether you pay for it in full or provide a subsidy for it as part of your employees’ overall remuneration package.

Why provide healthcare assistance?

According to employees interviewed in a recent survey, medical aid was named the second most important employee benefit in South Africa behind retirement funding.

This isn’t surprising given how expensive private medical care is in the country. But is it as important to businesses as it is to employees? Here’s why offering it can be an advantage to your company:

  • It improves productivity. If your employees have access to good healthcare, this means they’re more likely to proactively look after their health – which means they manage illnesses before they become serious, and they get sick less often. This means less time away from the office, which means more productivity for your business.
  • It can help your cash flow. If your employees don’t have medical cover, they may approach your company for a loan to cover their medical costs. As a small to medium business you may not have the cash flow available to lend this money to the employee in question. Having your staff on a medical aid eliminates this potentially negative impact on your cash flow as a business.
  • It can be more cost effective for your employees. Medical aid contributions will always be the same regardless of whether the member joined as a private individual or through their employer. However, if your employees join through your company, you can subsidise some of their contribution – so they end up paying a reduced amount for their medical aid cover. This added value can help your employees feel a sense of loyalty and goodwill about your company. 
  • It offers tax advantages to your employees. Individuals in South Africa are eligible for a tax credit from SARS for every month they belong to a medical aid during the tax year – even if their company is paying for it. As of March 2017, this amount is R303 per month per main member, R303 per month for the first dependant and R204 per month for every additional dependant thereafter. It’s important to note that your employees can only deduct this credit against tax payable – so if they have no tax payable they won’t be paid out this deduction in cash.

Related: Everything you need to know on King IV and corporate governance in South Africa

  • You have more choice than a private individual. While there are several open schemes in South Africa that anyone can join, there are also lots of closed medical schemes that are only open to certain industry sectors or companies. Given this, you as a company may have more of an opportunity to shop around for a medical aid provider that offers the most value for money.
  • You can benefit from value added benefits. If you do choose an open medical scheme, many of them offer packages that are aimed specifically at corporates and SMEs. Fedhealth is one such example which has a variety of options which are ideal for SMEs. With these corporate packages, you can get a lot of extra benefits, for example wellness days, which an individual wouldn’t be able to benefit from.

  • It increases your competitiveness. If you’re on the lookout for skilled employees, chances are you’ll be up against tough competition in the marketplace. But if you offer medical aid benefits, this can go a long way towards making your company an attractive employment choice for qualified, experienced candidates.

Every business owner knows that employees play a vital role in a company’s bottom line. But, there aren’t always enough hands on deck to cover all the gaps left by an extended illness, and happy employees are more productive, valuable employees.

If you can afford to offer some kind of contribution towards your staff having medical cover, the benefits are likely to far outweigh the costs involved. 

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About the author

Catherine Black

Catherine Black is co-founder of Black Mountain, a specialist web copywriting agency that produces high quality, search-friendly web content. The agency reflects the unique personalities of its founders, Catherine Black and Belinda Mountain.

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