Editor’s Note: We are pleased to welcome David Bryan as a Guest Author. David has extensive experience in international employee benefits, and is currently a Marketing Consultant for Norfolk Mobility Benefits in Naperville, IL.
Change is constant, particularly in the realm of international employee benefits. There is a social time bomb ticking — the number of employees paying into various social security systems around the world is diminishing while the number of recipients is increasing. To defuse this situation, many governments are reducing benefits while raising taxes, thereby shifting the burden to the employer.
Today’s multinational employer is evolving into the transnational of tomorrow as corporations do away with defined headquarters and instead move to regional centers of operations. To meet these and other changes, benefits professionals are implementing global benefits strategies (GBS). Yet, in recent surveys in which I have participated, nearly 78% of multinational firms have no formal international employee benefits strategy!
Designing Your Strategy
There appears to be more centralization of core corporate functions in light of the global economy. While authority for certain functions may be retained on a local or regional level, strategy setting is still at HQ. In the end, as long as the global corporate benefit strategy is being deployed, certain aspects, for example the selection of vendors/contracts, can be left to the local operations.
A Global Benefits Strategy will provide for some of the following benefits:
- A blueprint of your company’s decisions describing what employee benefit strategies should be deployed for the enterprise. It is a living, breathing document that needs to be adaptable to change.
- Agreed-upon policies to create universal understanding and, hopefully, support from the local subsidiaries.
- A framework for future benefits changes and enhancements.
- A written strategy which allows employees to see how certain benefits decisions were made, and is very helpful when new stakeholders are brought into the process.
- Strategies to manage costs; global benefit costs are substantial.
- An organization-wide reference when trying to understand or drive employee benefits decisions and planning.
Key Elements of a Global Benefits Strategy
Global benefits strategies can take many forms, and range in length and depth, but most successful strategies will include many of the following elements:
- Global Benefits Committee – This team should consist of representatives from HR, legal, treasury/finance, risk management and, when possible, various global business units. Initially, the committee should meet frequently and agree upon a system of review and evaluation for the work as it progresses. Remember: the more senior the committee representation, the stronger the strategy’s influence on upper management.
- Statement of Objectives – The team should develop a written, agreed-upon statement or set of statements that defines the overall objectives of the GBS. Some statements try to benchmark by using outside data from consultants (e.g., having benefits at or above the 50th percentile). While data may be readily available in some countries, it may not be in others. Benchmarking can be a useful measurement tool, but benefits professionals need to be aware of the need to obtain consistent criteria across countries.
- Policy Guidelines – Policy guidelines provide specifics about the various benefits and levels of benefits that support and are tied to the GBS statements. For example, life, accident, disability, medical, retirement and savings plans are outlined with target levels of coverage; and integration with social plans is detailed. Keep in mind, though, that too much detail can lead to guidelines that cannot be applied globally. With medical plans, for example, specific co-insurance percentages may not apply when a supplemental medical plan in a particular country is based on a schedule of fees.
- Implementation and Review – After agreeing on its strategies and supporting guidelines, the GBS committee must put certain processes in place to activate the plan. Typically, an announcement from a senior-level executive to key, local employees helps gain attention and buy-in. Local buy-in should be targeted to management, HR and, in many countries, should include the Works Councils or unions. This step is critical to successful implementation of any global benefits strategy.
Reaping the Rewards
After the announcement of the new global benefits strategy, a benefits audit is often conducted to educate the central benefits staff about what plans are in place. For a new company, implementing a GBS is easier than for a well-established firm that must harmonize many plans to create a unified and consistent global benefits strategy. The benefits professional’s role is essential at this stage. Many consultants and insurers offer software packages to assist in this process, although many corporations devise their own audit form to meet their specific needs.
Set procedures need to be in place to implement, review and enhance local plans. Usually, one individual has a certain dollar amount of approval authority to exercise any latitude permitted by HQ (for new and/or enhanced benefits). The more senior the individual, the more authority. Local benefit needs — and wants — must be measured against predetermined criteria. This authority can be with corporate, local or both, as set forth in the GBS.
Along with these approval procedures, established communication chains must be followed. In cases of mergers, acquisitions and divestitures, reliable benefits data (pension reserve, for example) must be readily available. Pre-established lines of communication will help in this type of scenario.
In most instances, resources are scarce, resulting in a decentralized approach. In spite of this, there have been more than a few “ideal” GBS roll-outs. An announcement, then an audit, followed by site visits from benefits staff to bring the local plans into compliance with the new philosophy is a typical, effective approach.
Taking the First Step
While global benefits strategies can be similar, each company must tailor one to fit within its industry and corporate HR philosophy. The first step in this process is creating a shared vision for a GBS that is flexible, simple, legal and tax compliant. Further, it should integrate governmental social plans with new or existing supplemental plans provided by the company.
A multinational enterprise must look after its global employee benefit plans. We all are under the budget microscope. However, a well-articulated global benefits strategy will enable HR to manage benefits resources globally and ensure a compliant and competitive benefits approach in every country.
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