Key reasons why every SME must have an employee benefits plan

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    • Employee benefits plan Employee benefits plan
    18 November 2020

    Key Takeaways

    • Medical costs have been increasing rapidly in Malaysia and will continue to rise. Small and medium-sized enterprises (SMEs) can minimise expenditure shocks from accidents and other health-related emergencies by adopting a cost-effective employee benefits plan for their employees
    • Talent retention is important for SMEs, therefore, having good employee benefits such as health insurance in addition to salary packages can make a difference in bringing in good talent as well as retaining them
    • The COVID-19 pandemic has increased health risks and changed work patterns. Companies need to find ways to restore stability by addressing the concerns of their employees and helping them to feel safer, less isolated and more engaged with the firm
    • UOB offers an employee benefits plan that SMEs can use to recruit and retain skilled workers and motivate them to maximise productivity, as well as control medical costs and reducing tax liability

    Providing medical insurance for employees is necessary in these challenging times when medical costs are rising, technological change is accelerating, and increased health risks are changing the way we work.

    Medical inflation has been increasing rapidly in Malaysia in recent years, hitting 12 per cent in 2018 and nearly 14 per cent in 2019. These rates are among the highest in South East Asia and are even higher than the general rate of inflation. Even before the COVID-19 pandemic, an increase in the price of medical goods and services was expected in 20201. Without health insurance to supplement public or private healthcare provision, employees may be burdened with large sums of medical bills.

    The Covid-19 pandemic has accelerated the needs for digitisation and other technological changes; where many services have moved online. As a result, businesses need to adapt rapidly, and this requires the recruitment and retention of skilled and talented staff to adapt quickly to the changing trends to survive. However, skilled workers are currently in short supply in Malaysian SMEs2.

     

    Increasing pressure for SMEs to be competitive employers by offering employee benefits


    SMEs in Malaysia are under increasing pressure from global competitors, especially online3. Many of these competitors are large firms with regular programs of employee benefits that are affordable because large workforces enable such companies to take advantage of significant economies of scale. SMEs, therefore, need to adopt cost-effective employee benefits packages to survive in this increasingly competitive environment.

    To tackle these problems and turn them into opportunities to achieve greater stability and higher returns, SMEs can consider providing employee benefits such as group medical insurance and insurance against accidents and injuries. Under its Banca program, UOB offers a range of benefits packages, including Group Term Life (GTL) and Group Hospitalisation & Surgical (GHS). Companies can choose from six Basic Plans, with optional riders, or combine GTL and GHS into a Comprehensive Package.4

     

    Employee benefits plan offer many advantages for SMEs


    To help companies provide benefits for their workers, these programs are supported by the Malaysian taxation system: any group insurance premium covering work in cases of injury or accident, and for medical treatment, is tax-exempt5.

    A major advantage of an employee benefits plan is its contribution to a company’s bottom line. Making regular payments into a group health insurance plan evens out the cost of health provision for a company’s workforce, by significantly reducing the risk of sudden high payments in the case of an unforeseen events such as employee required hospitalisation and industrial accident.

    Expenditure on employee benefits is also a sound investment as it energises a company’s workforce. By reducing health and financial worries, a benefits package can motivate workers to work more effectively and can also reduce employee turnover and absenteeism6. Such benefits have been shown to increase organisational commitment on the part of the workforce7 and increase productivity8.

    In conjunction with other positive elements in the work situation (especially salary and pension schemes), health insurance can play a key role in recruiting and retaining the best talent9. Staff will have a peace of mind knowing that their healthcare costs will be covered by the company’s insurance so that they do not have to worry about excessive hospital bills. This assurance is also an indication of how much the company values them and their work, helping to increase their identification and engagement with the company.

    All SMEs in Malaysia should consider adding an employee benefits plan to their success factors so they can attract and keep the best workers, increase productivity, control costs and maximise returns. Contact us to find out more.

     

    1https://codeblue.galencentre.org/2020/01/16/health-insurance-premiums-rise-30-amid-medical-inflation/

    2https://www.researchgate.net/publication/306386907_Addressing_Skills_Gap_in_Small-sized_Enterprises_Malaysian_Case_Study

    3https://www.researchgate.net/publication/42385949_Small_and_Medium_Enterprises_SMEs_Competing_in_the_Global_Business_Environment_A_Case_of_Malaysia

    4https://www.uob.com.my/business/insure/banca.page

    5https://help.payrollpanda.my/malaysian-tax/which-benefits-in-kind-are-tax-exempt
    https://www.ajobthing.com/blog/what-kind-of-allowances-that-are-tax-exempt

    6https://onlinelibrary.wiley.com/doi/abs/10.1111/1468-0009.00037

    7https://www.researchgate.net/profile/Kamaruzaman_Jusoff/publication/41846246_The_Influence_of_Employee_Benefits_Towards_Organizational_Commitment/links/53ea2d060cf2dc24b3cb116a/The-Influence-of-Employee-Benefits-Towards-Organizational-Commitment.pdf

    8https://clutejournals.com/index.php/JABR/article/view/9771

    9https://www.ijern.com/journal/August-2013/03.pdf
    https://www.researchgate.net/profile/Robyn_Berkley/publication/292424949_Applicant_attraction_practices_and_outcomes_among_small_businesses/links/5bf6f13992851ced67d0d761/Applicant-attraction-practices-and-outcomes-among-small-businesses.pdf

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