As we commemorate Workers' Day on 1 May, we recognise the efforts made by the trade unions who advocated for the rights of South African employees and better working conditions. Even though this holiday is celebrated across the world, here at home it is a reminder of our South African spirit, and the hurdles we've overcome to enjoy the freedom we have, including the ability to work and earn an income.
However, unfortunate as it may sound, retrenchment has become a harsh reality that South Africans need to prepare for with the current retrenchment rate being at a 10-year high. According to a recent Statistics South Africa Employment Survey, the unemployment rate has increased from 21,5% to almost 28,0% over the past 10-years and this trend is not showing any signs of slowing down!
With the cost of living increasing and the economic climate becoming a tougher one, companies are being forced to downscale and in the process, entire departments are often retrenched. Being retrenched shows one that becoming addicted to a salary is dangerous, but, by knowing your options and reducing your risk, you can reinforce your ability to cope by factoring the risk of retrenchment into your financial plan!
THE IMPORTANCE OF PROTECTING YOUR INCOME
Income protection claims related to retrenchment is a growing trend according to Liberty's Claim Statistics. The statistics reveal that everyone is at risk of retrenchment and income protection cover is an essential part of financial planning. Claim Statistics for 2017 show that for young adults retrenchment was the most common cause of income protection claims making up 17% of total claims. When compared to retrenchment claims in 2016 at 11.7%, there was a significant escalation in retrenchment related claims.
The increase in claims for retrenchment cover is a serious concern and highlights the important role retrenchment cover plays in financial planning. In short you can protect yourself and your family against the financial crisis that can result from retrenchment by taking out an insurance policy specifically designed for this type of misfortune. Retrenchment cover is not widely offered by South African insurers, and the benefit is relatively small, but it can tide you over the months during which you are looking for work or setting up your own business.
WHAT PREEMPTIVE MEASURES CAN YOU TAKE TO COMBAT
THE FEAR OF BEING RETRENCHED?
1. The best defence is having an emergency fund. If you are able to, try save the equivalent of at least six months’ income into a savings type account that you can call on should you be retrenched. This can be a high target to build up, however it is something one could plan for… Alternatively, should having an emergency fund in place not be an option, we advise looking into option two.
2. Taking out retrenchment cover... One of the most effective ways to protect yourself and your loved ones is to take out retrenchment cover, an income protector that will cover your salary for several months after you are retrenched. This ensures that you won't default on any loans, repayments or debts that you have while being unemployed.
Retrenchment is never an easy process to undergo and could have quite an impact on both your and your family’s financial wellbeing, but if you have the right plans and cover in place it can soften the blow and make life far more manageable through this stressful time.
Contact us TODAY to discuss the cover plans we have on offer!