A global benefits audit is a common feature of employers’ spring cleaning efforts. Here is an insight into what could be involved and the possible challenges along the way.
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- Employers must decide their objectives before embarking on a global audit.
- A communication strategy must clearly explain the purpose of the audit and what it entails for all relevant stakeholders.
- Tracking global staff can be challenging, and larger employers sometimes write off the extra expense in benefits.
The most common driver behind a global audit is an employer’s desire to assess the consistency of its employee benefits package across the countries in which it operates, and how well its offering meets local statutory requirements.
Karen Gamble, head of client relations at the Health Claims Bureau, says: “Employers are looking at what future legislation will require and making sure they’ve got a process and system in place so that when staff move from, say, India to Brazil and Brazil to the Netherlands, that they meet the statutory requirements and expectations.”
Four measures underpin framework
Compliance is one of four measures underpinning the framework that global benefits adviser Willis uses to help employers perform a global audit. The other three are competitiveness, cost-effectiveness and cultural appropriateness.
“We call it the four C methodology,” says Dieter Gistelinck, development leader at Willis. “In terms of compliance, we look at whether all local benefits plans are in line with statutory local law and legislation, whether they are totally adapted to it and whether employers are meeting all their social security contribution requirements. And in terms of competitiveness, how do they rank? Can they attract and retain valuable employees by the kind of plan they are offering?”
Willis measures how an employer is financing its benefits in order to assess the cost-effectiveness of its package, and considers whether there are efficiencies to be made, perhaps by using global services such as multinational pooling.
Cultural appropriateness is measured on the basis of how an employer’s benefits rank against their competitors’ offerings. “An employer’s benefits may all look really good, but is it really necessary to offer staff four times life cover, which is typical in the UK?” says Gistelinck. “In Belgium or Denmark, life or death cover is already included in an employee’s retirement package.”
Whichever framework an employer uses, it must have an appropriate central platform in place to store and analyse the data collected through the audit, to help determine which benefits require attention. For example, Willis has a traffic light-based system which flags up in red any benefits that require urgent attention.
Understand motivations and identify objectives
Employers must first fully understand their motivations for conducting a global audit, identify their objectives and clearly communicate them to staff and all relevant stakeholders.
Gamble says: “Global compensation and benefits managers have got to look at what they are trying to deliver at the end of the day.”
The last thing organisations want to do is create unnecessary unrest among their workforce that may, ultimately, harm the results of a project which, for larger employers, may cost hundreds of thousands of pounds to undertake.
Determining the cost of an audit
The cost of a global audit will depend on its scope, in terms of the number of benefits the employer plans to cover, and the range of countries under review.
Gamble says employers can expect to pay between £2,000 and £5,000 per country to audit developed countries, such as the US, Australia and most of Europe, and between £5,000 and £10,000 per country for less developed regions, such as South America, India and South Africa.
Gamble insists the cost is worthwhile, despite comparing the task to repairing the UK’s M25 motorway, in that it is a never-ending project requiring continual renewal.
“That is a very fair analogy, but employers can at least end up with the knowledge that when they are moving John Smith from Brazil to India, from India to Australia and from Australia to Angola, that they know at the end of the day what is going to happen should he die, should he be severely ill, or should he retire or leave them.”
Importantly, a global audit enables employers to create a coherent policy that enables them to recruit new staff onto the same level of benefits as their predecessors and existing peers.
Get buy-in from local stakeholders
Employers must also secure buy-in from local stakeholders to maximise the success of the audit.
Gistelinck says: “Employers can get buy-in by explaining very well that they are actually doing the audit to make sure their benefit plans locally are aligned with their global philosophy on benefits, and that they’re doing this for the right cause: not to cut benefits, just to make sure they efficiently finance the local design of the plans, and remain competitive and attractive for staff.”
Communication programmes that clearly explain the scope of the audit, including which benefits will be included and the ultimate objectives of the project, will help to secure buy-in from all stakeholders, which may include HR, finance, group risk and compliance and procurement staff.
Importance of tracking down all employees
It is important for benefits packages to remain unchanged while the audit is taking place to optimise the accuracy of the project, but this can be a challenge for employers facing a lengthy audit because of the multiple countries in which they operate.
It is also crucial for an audit to track down all employees that fall within its criteria, whether it is staff that work in a particular country or those that have a specific benefit that is being audited. This is why local stakeholder buy-in is key. Gistelinck says: “If somebody withholds information locally, the audit would have missed a certain population or a certain contract.”
However, losing track of employees is a common problem for global employers, and a sensitive issue to confront.
The Health Claims Bureau’s Gamble says: “It’s absolutely bonkers, but we’ve come across it time and time again. One employer I worked with merged with another and had done so many joint ventures over the years that it had lost track of the staff it had.”
Some employers are often more inclined to write off a benefits expense than conduct a global audit, she adds. “It’s normally the wealthier employers that are the worst at this, because it’s easier to write a cheque for, say, £500,000 than it is to spend the money conducting an audit.”
Gamble advises employers that are not in a position to do this to begin their staff tracking exercise by assessing the social security provision in the country being audited. “Nearly every country has some form of very basic provision and has some sort of recording mechanism,” she says. “Employers must literally request information. It’s slow, it’s grinding and it’s not accurate, but it’s a start.”
Willis’ Gistelinck says employers could instead start by concentrating on what they know. “They may know that 95% of their workforce is in 40 countries, so they could focus on those first,” he says.