Offering a flexible benefits scheme internationally can help to harmonise employees’ perks, but there are a whole host of complexities that must first be addressed, says Laverne Hadaway
As opportunities open up within multi-national organisations, employers may decide to transfer staff between locations. When doing so, however, they will need to consider what happens to employees’ pay and benefits.
Implementing an international flexible benefits strategy can help employers facilitate the mobility of employees between countries without having to change their existing benefits too much. Martha How, head of reward at Hewitt Associates, says: “If a firm has a consistent total reward philosophy, it will want to provide flex and choice where possible.”
She recalls one organisation which decided to implement a global benefits strategy as it had a European sales team based in nine different countries. “It didn’t make sense to have different conditions for people working in the same team,” says How.
Employers may also introduce a scheme in a bid to boost productivity, and recruitment and retention. Chris Bruce, director of marketing and technology at Thomsons Online Benefits, says: “They may want to ensure staff understand the full value of the benefits available and are able to select what’s appropriate.”
A desire to take a global approach to branding may also be part of employers’ motivation to implement a flex scheme across all locations. “In a world where employers spend a lot of time and money creating external branding, they recognise the need to create an internal branding on pay and benefits,” says Bruce.
In addition, it may be about centralisation and gaining greater control over perks, as well as enabling an employer to understand and measure the cost and effectiveness of their pay and reward strategy. Flex may also provide employers with a mechanism for harmonising perks across territories where businesses have been recently acquired.
However, global differences in benefits mean it is not always easy to implement an international flex strategy. Employers looking to put a scheme in place will need to overcome several challenges, such as the complexities arising from local legislation, taxation, pensions, healthcare and social security conditions. In France, for example, social security is very expensive, but state medical provision is of such a high standard that private medical insurance is not really necessary. In the US, by contrast, private medical insurance is by far the most important benefit.
Another potential pitfall to watch out for is that some local human resources departments may feel threatened if they perceive that they are no longer fully in control of their country’s local benefits package.
Sourcing providers for some of the benefits offered through flex may also prove problematic, says Bruce. One solution is to avoid implementing a full flex scheme in each country, particularly as some territories lack providers for certain benefits, which makes it almost impossible to implement a full plan globally. “Consequently, there are very few truly global plans. Most will sit across regions, rather than worldwide,” says How.
If employers are able to rise to this challenge, choosing the right flex system that can be adapted to suit the different needs of locations is vital. This is particularly important when it comes to adjusting the system to suit different-sized workforces. “The technology needs to be flexible enough to be implemented quickly and cost effectively in each country. The employer needs to select a global partner which will provide the technology, scheme design and communication in the local setting, and assist with sourcing local providers and brokers,” says Bruce.
Employers will also need to ensure they select a system that can cope with the demands of each country’s tax regime.
Labour relations can be an issue too. In some countries, employers have to consult with unions before they make any changes to compensation and reward packages. Plans must also fit culturally. Traditionally, employers have a more paternalistic role in some countries than in others. For example, in Germany, employees find it an odd concept to buy electrical goods through their employer, whereas Spanish staff have no such qualms.
Nevertheless in some parts of Europe at least, How says flexible benefits plans are beginning to take off. In Hungary and Turkey, for example, there is a great hunger for this type of scheme, while less restrictive tax rules make flex easier to implement†
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- Offering a flexible benefits scheme internationally can make it easier to maintain the benefits of mobile employees or of members of teams that are spread between countries.
- It can also help employers take a global approach to branding.
- Employers looking to implement a global scheme will need to be aware of cultural complexities such as local tax, legislation and state benefits provision.
- The technology used should be flexible enough to adapt to varying market demands and different workforce sizes.
- Employers may also have to consult with local unions.