Business Daily (Nairobi)
Edward Omete
28 December 2011
analysis
As unions grow stronger, they are demanding more from employers. We have lately witnessed a rising number of strikes. Medical allowance is one of the popular demands by the striking employees.
But why do employers offer this? And are they obliged to do so? Many institutions offer medical cover because of union pressure. However, a few do it as a means of motivating staff — in addition to other benefits. Increasing competition and staff poaching means that to retain satisfied and motivated workers, staff loyalty is important.
Why not give other allowances in lieu of the medical one? After all, it isn’t all employees who want health allowance. Some would be okay with a membership to the local golf club.
Depending on a company’s financial standing, this is achievable through a range of benefits. Since no standardised package exists, most employers opt for medical benefit as an incentive.
It has long been known that this is better than other incentives. In times of illness we tend to associate positively with our helpers and develop “indebtedness” to them. Buck, a character in Jack London’s classic novel Call of the wild, would do “anything” for a benefactor who nurses him from his death bed. How does a firm offer medical benefits? Four options exist; pay a higher salary and no medical allowance, offer the allowance and no medical insurance, have an internal medical fund, or offer medical insurance for the individual and family members.
The first two rarely achieve their goal as most staff use the money for other things. While it absolves employers and decreases administrative work, the problems that arise when such workers or dependants fall ill negate any gains.
Medical allowance
Uninsured employees have more absenteeism and lower performance than insured ones. The third alternative is having an internal medical fund. Nobody is offered medical allowance, but the employer deposits a monthly amount on behalf of each employee to the fund. This accumulates and is drawn out whenever one is admitted.
Despite its potential to save money (since it is not used if no one falls ill), the need for full-time administrators to oversee it is its flop side. It also places challenges on administrators when deciding the limit for each staff member. Does the CEO get more than the tea boy? It obviously strains relations.
Lastly, most employers opt to give employees medical cover and forget about it. This is easier, but more expensive because if no one falls sick the insurer benefits. It also comes with fewer administrative expenses. However, it is fraught with abuse. Packaging it according to job grades also exposes disparities in such schemes.
Bigger package
Management have a bigger package and access better hospitals than juniors. In a workplace where “oneness” is the mantra, it shows the grim truth of a capitalist economy. This may create employee acrimony.
To avoid this, organisations are resorting to unique models. A new trend is having a hybrid system with an in-house clinic for outpatient cases and an individual inpatient cover. The latter is standard, but employees top up to get their desired package. This is good especially where employees are concentrated in one town.
Whatever choice employers make, they should strive to accommodate employees’ wishes.
Dr Omete is a medical practitioner. www.healthinfo.co.ke
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