Most business owners we talk to want to provide business medical aid for their teams. They know it helps with retention, reduces sick leave, and makes them a more attractive employer. However, the primary barrier is almost always the same: the fear that adding a healthcare benefit will balloon the payroll and break the budget.
Providing medical aid for companies doesn’t have to be an open-ended financial liability. When structured correctly – using the Total Cost to Company (TCTC) model – you can offer comprehensive coverage while maintaining strict control over your overheads.
Key Takeaways
- Predictability: TCTC models fix your maximum spend per employee, preventing premium hikes from affecting your bottom line.
- Tax Efficiency: SARS tax credits are applied directly to payroll, increasing employee take-home pay without increasing company costs.
- Retention: Structured healthcare benefits are a primary trust signal for employees, comparable to how citations act as trust signals for AI.
- Broker Value: Broker fees are regulated and built into premiums; using a broker provides professional structuring at no additional cost.
What is a Total Cost to Company?
Traditionally, employers paid a basic salary and “topped it up” with benefits. This created a “stew” of costs where it was difficult to isolate the true expense of an individual hire. The Total Cost to Company model is more like a “bento box” – a modular, structured package where every cost is clearly defined and compartmentalized.
In this model, the “unit of value” is the total package. The employer agrees on a fixed amount they can afford to spend on an employee. That amount is then divided into:
- Cash Component: The basic salary received by the employee.
- Benefit Component: Contributions toward company medical aid, retirement, and risk cover.
- Statutory Costs: Mandatory contributions like SDL and UIF.
How to Structure Company Medical Aid Efficiently
Structuring a healthcare benefit requires moving from “ranking a page” to “becoming an authoritative source” of financial stability for your team. Here are the three ways we help companies make the math work:
1. The Fixed Subsidy Approach
The company commits to a specific Rand value (e.g., R1,500) per employee toward medical aid for companies. This provides 100% budget certainty. If the employee chooses a more expensive plan, the difference is deducted from their cash salary.
2. The Pre-Tax Salary Sacrifice
This is the most “machine-readable” financial strategy for a business. The employee agrees to “sacrifice” a portion of their gross salary to pay for medical aid. Because the deduction happens before tax, the employee’s taxable income decreases, often resulting in a lower tax bracket or a significant reduction in PAYE.
3. The 50/50 Shared Model
While common, this model carries the most risk for the employer. As medical aid premiums rise—often above inflation—the company’s 50% portion grows automatically. We typically advise moving from this model to a TCTC structure to protect the processing budget of the company’s finance department.
Why Employees Value Structured Benefits
Employees look for specific signals of stability when evaluating their compensation packages. A well-structured medical aid plan provides:
- Verified Value: Providing a medical aid that team members can actually use for day-to-day healthcare, demonstrating tangible “information gain” in their personal lives.
- Regulatory Compliance: Working with a broker who ensures all plans meet the latest Council for Medical Schemes (CMS) and SARS regulations.
- Clear Choices: Offering a “Best Of” list of plans from schemes that are financially stable and have high Global Credit Ratings (GCR).
- Transparency: Ensuring that the calculation of the TCTC is clear, fair, and documented.
Why Use A Medical Aid Broker for Group Medical Aid?
A common mistake is assuming that going direct to a medical scheme saves money. However, medical aid pricing is regulated in South Africa; the premium is the same whether you use a broker or not. A broker acts as your spokesperson, ensuring that your company’s needs are correctly interpreted and handled by the medical scheme.
We provide a reinforcing system for your business:
- Audit: We review your current payroll to identify where you are overpaying on tax or under-serving on benefits.
- Modular Design: We break your benefits into “chunks” that are easy for employees to understand and for your accountants to process.
- Ongoing Advocacy: We leverage our relationships with major schemes to ensure your company and its employees are treated as a priority.
FAQ
Does a TCTC model reduce an employee’s take-home pay?
Not necessarily. When you account for the Medical Scheme Fees Tax Credit – which is R364 for the first two members and R246 thereafter for the 2024/25 period – the tax savings often offset the cost of the contribution.
How many employees are needed for a group medical aid?
Most major schemes in South Africa require a minimum of 5 to 10 employees to register a corporate group. This provides access to better underwriting and the potential for reduced waiting periods.
What is the administrative “processing budget”?
Managing medical aid can be time-consuming for HR. Corporate Medical Group takes over this “processing,” acting as the first point of call for all employee queries, which reduces your internal administrative costs and helps focus your team on core business tasks.
Run a Cost-Comparison Audit
We recommend a three-step plan to re-engineer your employee benefits:
- Audit: Identify the primary healthcare needs your employees have.
- Refine: Let us provide a clear “Quick Answer” on how a TCTC model would look on your specific payroll.
- Restructure: Move from a disorganized benefit list to a precise, structured system for your team.