Ian Mann, of ECA International, talks about the major challenges of the one-size-fits-all approach, stating cross-border benefits are so inconsistent that only the largest organisations seem to make them work.
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The varying treatment of tax, long-established state entitlements and contrasting work cultures across international borders can all act as barriers to the introduction of a global benefits package.
Ian Mann is managing director of ECA International, the global HR trade body and consultancy. With 30 years experience working in HR across four continents, he is well placed to observe the challenges that can befall a globally co-ordinated benefits strategy.
According to Mann, one of the fundamental concerns for a multinational company is negotiating the tax minefield.
"For most organisations, when they are moving people around, one of the biggest challenges is how tax is treated and particularly how to reduce tax exposure. Just take Europe, for example. With the common currency, varying taxes mean there isn’t the convergence you’d expect. Now if you had common tax, social security and pensions, it would ultimately lead to convergence but that is not going to happen in the short term."
The practice of multi-national pooling has thus developed, where employers contract a central provider to supply benefits internationally, and entitlements can be structured according to local conditions.
"Big organisations definitely use multi-national pooling, especially if they have major relationships. The major providers can deliver genuine savings for employers with big benefits plans, and big staff numbers.
"Often those relationships include not just life insurance but other associated benefits that can be lumped together in the one package," says Mann.
But the obstacles to the administration of benefits on an international level are such that pooling is restricted largely to the mighty corporates.
"It is more popular with large organisations. For most small organisations it is just too complex. The challenge is firstly the structure, that is how you deliver benefits fairly across borders, and two, how this squares with the big topic of risk management, because it is putting all the eggs in one basket."
Employers face the choice of either entrusting global provision to one provider, or balancing the risk by relying on local providers to cater to local employees.
Large companies are inclined to reduce the risk by banking on a suitably large-scale provider. "Pooling may increase the risk, but the likelihood of a major provider going bust is very small. There is, however, all sorts of debate," observes Mann.
Obviously, technology makes it easier to standardise perks internationally. Consider online technology, which allows organisations to present benefits in a uniform manner, with common branding and via the same software platform.
"The internet is an interesting phenomenon as it delivers transparency where there was opaqueness before. Where organisations are offering flex, clearly the technology allows them to reinforce that," says Mann.
However, new opportunities have brought new challenges. How can an organisation with centrally co-ordinated benefits ensure that service delivery in Hong Kong is equal to that back at its headquarters in London?
"You have to have the internal capacity to judge, and not devolve responsibility for maintaining standards. The danger comes when you outsource the knowledge required to judge service quality. At that point you are at serious risk," he says.
Taking a wider view, however, Mann believes that firms are not rushing to outsource their HR function."Quite a lot of organisations I know that have gone into outsourcing their HR have pulled back. If you’re not careful you can divest yourself of knowledge. The good news is that it can be more efficient."
And looking at the off-shoring of HR, India’s booming support service industry highlights just how popular it has become to base services in destinations with an educated workforce.
However Mann explains the logistics are considerable.
"The law of the unexpected applies when you’re dealing across cultural boundaries. People find that when they do off-shoring it does 80% of what they want, but the other 20% suddenly becomes considerably more difficult to run. It’s challenging, but it doesn’t mean it can’t be done," says Mann.
Some of the cultural differences to which he refers can be seen in varying work habits. While the concept of work-life balance and the 35-hour week fascinates much of Western Europe, those issues remain foreign concepts to employers in Far East cities like Seoul and Singapore, where extremely long hours remain the norm.
"Asia has been building an enormous economic power on the basis of a fairly heavy time commitment. In Europe, people value that work-life balance very highly. It will be interesting to see whether economic pressures drive the EU to become less wedded to work-life balance or whether [organisations] in Asia become more adept at balancing the two," says Mann.
Given those cross-border differences, employers need to carefully align benefits when relocating staff.
"The genuinely global companies have realised that to get the best people for the job, you might transfer them from perhaps less-developed countries into highly-sophisticated environments and vice versa.
"When trying to create a global package on similar terms, you need to look at benefits such as pensions and life assurance and how that relates if you move [staff] elsewhere in the world, as there could be an erosion of quality."
Employers must also bear in mind the length of the assignment. "If you are a purely transitory person, and nipping in for an audit control function, or you’re filling a skills shortage in a technical role, then you’re likely to be there for two or three years. You will require short-term benefits such as cars and staffing, [which are] provided to ensure equality or security in the local environment.
"However, if you’re trying to build up a long-term relationship, maybe with government or major corporations where the whole thing could take three to five years or more, there’s a big break there in schooling, and pensions, potentially, so those are things people want protected. You need to build in continuity," says Mann
And when the destination is an undesirable location, further measures are necessary. Mann offers the extreme example.
"If you send someone to work in Iraq or Afghanistan, you’ve got to provide a car, driver, interpreter, staff, and [employees will] probably live in a compound. In these circumstances, the offer has to be as attractive as possible. International organisations compete in the global market for the same pool of talent, so what you can’t ignore is what other firms are doing if you want to attract those talented staff. You’ve got to be on top of that, regardless of where you’re operating."
And no matter what the destination, pensions will be an important consideration.
"In the past you had three models of benefit provision. In Asia your family looks after you in old age and during sickness, in Europe the state does, and in the US you save for yourself. A big problem, in this country and others, is the consumer debt burden, and the impact that will have."
So what are the likely future trends? "Asia is beginning to look at the longer term, at retirement provisions, and is starting to put some of those provisions in place. You will see that is a growing trend. The US is probably going to go down the same road, although being richer it will continue to have more attractive savings plans."
Mann is not convinced current solutions will sufficiently bridge the pensions savings gap. He is critical of the UK government’s decision in 1997 to abolish tax credits paid to companies and pension funds, which was intended to encourage firms to re-invest. He agrees with the critics at the time who voiced concerns that the decision could limit pensions revenue.
"Short-term interest is affecting long-term planning provisions. Companies are concerned about shareholder return, and the government wants to get re-elected in five years. Meanwhile the employee’s career lasts 30 years or more. How do you then square that circle?
"The challenge for employees and employers is to reduce the short term and increase the long-term thinking.
"After all, we are going to have to deal with an ageing population who are still going to be very demanding in terms of their standard of living."
Ian Mann is managing director of ECA International, the global HR trade body and consultancy. He joined the organisation in May 1996 and was appointed managing director in June 1997.
Mann oversees operations globally, and the company has offices in London, New York, Hong Kong, and Sydney. It employs around 100 staff and supplies data, software solutions and advice to over 1,500 international organisations.
Mann has worked in international human resources for thirty years, including stints in the US, Asia, Europe and Africa, where he was employed both locally and on international assignments. As well as working for his own consultancy business, Mann has held HR positions in companies such as Avis, Rolls-Royce and NatWest. He has also served on the general assembly for the Euro-Asia Centre of Insead, the international business school, and the London Regional Council of the Confederation of British Industry.