Expanding into foreign markets and carrying out cross-border mergers and acquisitions hold obvious appeal for ambitious business leaders wanting to take advantage of emerging economies and untapped markets.
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- Aligning an international benefits strategy with global business objectives can improve efficiency, administration and bring economies of scale.
- Carrying out regular country-by-country audits is a good idea, but many employers fail to do so.
- It may be helpful to bring in a consultancy with international experience.
International expansion, however, can create a range of challenges when it comes to benefits and reward.
Organisations can end up with a piecemeal, inconsistent or fragmented benefits structure that fails to satisfy not just at a local level but also in terms of the organisation’s global business objectives.
Chris Metz, client development director at employee benefit brokerage and consulting firm Willis Employee Benefits, says: “What often happens is an organisation puts time and effort into acquiring a company, making it profitable and co-ordinating operations globally. But benefits get overlooked, despite the fact these can be really important in terms of keeping people on side locally.”
James Spencer, international benefits manager at employee benefits consultancy Jelf Group, adds: “Doing [benefits] on a country-by-country basis is not only quite clunky but it potentially leaves employees with the same job roles and packages on different benefits just because of what that HR or country manager has decided.”
These problems can be eased by the effective alignment of benefits, which, in addition to streamlining reward and achieving greater consistency, can also reduce costs and administration. “Rather than having, say, five or six medical insurers in five or six countries, [employers] might be able to reduce this to three covering multiple territories,” explains Spencer. “That is likely to give economies of scale, reduce invoicing and administration and mean less relationship management.”
Conducting a review of international benefits
For organisations wanting to align international benefits, a country-by-country review or audit is a good place to start. However, according to research by Jelf, published in May 2014, 42% have either never reviewed benefits or had only done so more than a year previously. This was despite the fact that 93% felt it would be extremely useful to have access to regular country-by-country or region-specific updates around benefits changes, risks or issues they needed to be responding to.
According Metz, a country-by-country audit seeks to establish: what benefits are in place; what the social security or administrative norms are; and what the state already provides. “Are there specific union or collective bargaining practices? How [is the organisation] benchmarking against [its] peers?” says Metz.
“Then it’s a question of looking to see whether things can be done more efficiently; whether [the employer] is getting the economies of scale it could be; whether there are gaps or overlaps in the sort of cover or benefits they’re offering.”
Addressing business challenges
Employers also need to consider to what extent their benefits package reflects the needs of the business and the challenges it faces. Metz says: “[They] need to be thinking about what employee risks they’re facing as an employer, whether that’s, say, attracting or retaining people, absence, wellbeingor presenteeism.”
Other factors employers may have to consider are: the risk of losing key talent; working with an overseas subsidiary; or integrating an acquisition.
Jeremy Hill, director within the international consulting group at Towers Watson, says: “It is about retention and attraction but also about aligning with thinking about what risks [the organisation] faces, whether reputational, governance or operational.”
“Think about benefits carefully within the total reward picture; don’t think about them in isolation.”
It is often valuable for employers to start from the centre with an over-arching strategy and then look at how they can apply that at a local level.
It’s also important to recognise that alignment in this context does not necessarily mean offering the same benefits in every country. “It is about ensuring you are managing your benefits more efficiently, auditing more frequently and having a long-term strategy that everyone agrees on,” says Spencer.
Metz points to a growing trend towards the use of captive insurance companies, or those owned by the company and often domiciled offshore. The advantages of such arrangements include cost savings, spreading risk, tax efficiencies and increased flexibility. “[Employers] can have the captive insurance company effectively write the policy,” he says. ”We are increasingly seeing this being used as another way globally to harmonise benefits.”
A clear understanding of the sort of governance and oversight processes that will be needed will also be valuable, as will be thinking about what technology and systems will help keep track of reward and benefits in each country.
Jill Neilson, managing director, international consulting and strategy at Buck Consultants at Xerox, says: “It is not just understanding what the local issues are [such as] statutory requirements, local market practices, what’s going to make [organisations] competitive within that market and so on, it is how they maintain any type of record and how they renew and update programmes.”
International expansion can be hugely rewarding, especially for organisations that motivate diverse global workforces with a benefits package that is fair, country appropriate and linked to wider business objectives.
Case study: Aker benchmarks benefits globally
With 17,000 employees spread across 20 countries, aligning benefits globally to business objectives has long been a priority for Aker Solutions, a provider of products, systems and services to the oil and gas industry.
The company benchmarks its benefits package on a global basis in order to better understand what the market norms are in each of the countries in which it operates.
Philip Hutchinson, head of reward at Aker Solutions, says it is all about combining a global philosophy with local principles; combining a strategic approach with pragmatic delivery on the ground.
“For example, we say each country should have some form of retirement provision but we do not go down to say whether that needs to be a pension scheme or some other provision,” he explains. ”It is about making this global but on the understanding it must have some flexibility built in for local delivery,” he explains.
“Each country has its own statutory requirements, tax laws and so on. So in the UK we provide a pension scheme but in India, say, they provide what is called a provident fund, which is similar to a pension but sponsored by the state and much wider than a pension scheme. In India, too, it is quite common for employers to offer medical insurance also to cover family and in-laws.”
One of the challenges the oil and gas industry faces from an employment perspective is that it has an ageing workforce. To that end, the company recognises that benefits priorities for older workers are significantly different from younger graduates. For example, they are far more likely to be concerned with retirement planning.
For young graduates, the focus is around incentives such as help with financial planning, lifestyle benefits and assistance with career development.
“It is about knowing what to pitch, what to buy and how to sell it,” says Hutchinson. “You have to have a really good idea what the business drivers are; you need to understand what you are trying to do. Reward is a fine balance between money and psychology.”
International benefits statistics
Source: The benefits research 2014 , Employee Benefits, March 2014.
13% offer benefits to local employees only, but manage their benefits strategy centrally.
Source: The benefits research 2014 , Employee Benefits, March 2014.
Source: The Benefits research 2014, Employee Benefits, March 2014.