Learn the Landscape

When managing benefits globally, government-provided services, national mandates and cultural expectations come into play.

By David Tobenkin May 1, 2011

When managing benefits for a far-flung international workforce, global HR managers and benefits consultants say best practices converge into one master directive: Take nothing for granted.

HR managers should first establish, or help establish, a global corporate benefits strategy, consultants say. The most common strategy is to design a plan that complies with applicable laws and matches the benefits of competitors, says Richard Polak, president and chief executive officer of the Los Angeles-based HR consultancy IBIS Advisors.

“Decide who you want to be,” says Carol Olsby, GPHR, a principal at the Seattle area-based HR consultancy Carol Olsby & Associates. For example, one of her clients is Helsinki-based Tieto Corp. The information technology services company focuses on having low turnover for its 17,000 “high-value” employees. “Technology people have many options for employment,” so Tieto wants its benefits “to be among the top choices in the marketplace” she explains.

HR professionals at Nalco Co. take a different approach. The Naperville, Ill.-based water treatment company has more than 11,500 employees operating in 130 countries. “It’s absolutely our global philosophy to be at the 50th percentile among companies for both benefits and compensation,” says Judith Wierman, GPHR, a director of human resources at Nalco’s Energy Services Division. “We are a pay-for-performance firm. If your performance exceeds expectations, you can expect that total compensation will be above market. Benefits to us are just the price of admission, so we do what the market is doing.”

When developing a global benefits strategy, HR professionals who are knowledgeable about international benefits have much to contribute to the discussion. That’s because benefits differ across the globe.

In each country where a company employs workers, the benefits package will vary because it will reflect a different combination of:

  • Government-provided benefits.
  • Government-mandated benefits that employers are required to provide.
  • Supplemental benefits that employers make available.

Ensuring Compliance

To comply with applicable laws and regulations, HR managers and consultants say assembling the right global benefits team is essential. The team typically includes local HR professionals hired directly or under contract, local employment lawyers, international tax counsel, and international HR consultants. Clear communication is critical: “Don’t take anything for granted. You need to ask what everything means,” Polak says.

Governments in many countries are more involved in providing or mandating employee benefits than the U.S. government is. One positive aspect of governments’ involvement: Many compliance obligations, although highly regulated, have been clarified and simplified, says Francois Choquette, senior vice president of Aon Hewitt’s global benefits practice. “Thus, if you provide medical insurance as required, you most likely are in compliance,” he explains.

On the other hand, sensitive issues—such as using benefits strategies to avoid taxation on compensation in the European Union and other high-taxation zones—should be carefully checked for their legality, says Stefan Corbanie, a partner in the Brussels office of law firm Eversheds International. The tax treatment of supplemental benefits also represents a factor in whether planned benefits will be attractive to employees.

In some parts of the world, government rules on benefits that are announced but not enforced are among the trickiest compliance areas for HR managers.

“Two years ago, there was a push in the United Arab Emirates for residents to register with the government authority to get single ID cards,” recalls Brad Boyson, SPHR, GPHR, head of HR and corporate services for Hamptons MENA, a property company with operations throughout the Middle East. “HR departments rushed to have their staffs comply by the deadline. It was the law.” But authorities weren’t ready to process the applications, so the deadline kept being extended. Similar events occur in India and China, Boyson says. Despite the uncertainty, he advises that it’s always better for HR professionals to “err on the side of caution.”

Beyond compliance, HR professionals need to determine how much more than the required minimum they should provide. It is important to closely examine the standard benefits offered by established companies. Prudent HR professionals “benchmark on local conditions and add as needed,” Boyson says. He considers it “naïve” for global companies to simply import their standard international practices. They often do not realize “the cost of doing so, over the long run, can be astronomical,” he says. “You cannot be altruistic when it comes to benefits.”

In addition, international HR experts say U.S. HR professionals operating globally frequently fail to realize how much harder it is in Europe and many other countries to take away a benefit once it has been given.

Customary Benefits

Then there are the benefits themselves. The most common international employee benefits are similar to those offered in the United States, but there are considerable variations.

Leave. The most widespread benefit provided around the globe relates to basic time off, including time for bereavement, illness, maternity and vacation, Boyson says. U.S. federal laws do not require employers to provide paid vacation or leave time. In contrast, many developed countries mandate several weeks or more of employer-paid leave. In the United Kingdom, for example, effective April 2010, all female employees are entitled to up to 52 weeks of paid maternity or adoption leave, with the first six weeks paid at 90 percent of full pay and the remainder at a fixed rate, says Kendal Callison, GPHR, a Seattle area-based global HR consultant.

Leave can be a significant issue in some parts of the world, Boyson notes. “Certain Muslim religious holidays are mandatory leave in many countries,” he says. “It’s usually in the labor code as a type of pure entitlement to which a company can’t say no. Similarly, during the holy month of Ramadan, workers have restricted hours.”

Health and wellness. The second most common benefit provided internationally is health care. Most national governments, even in the developing world, are far more involved than the United States in providing or mandating health care services. In countries where government-provided benefits are extensive, HR executives may find little need to add to them.

In many countries, however, governments provide only very basic health care services, Boyson notes. Even in those with good overall health care systems, an elective procedure might not be covered or employees might be placed on waiting lists. Thus, many companies supplement nationally provided health care benefits, says Lisbeth Claus, SPHR, GPHR, a professor of global HR at Salem, Ore.-based Willamette University.

In less-developed parts of the world, quality of care is often a problem. One of Polak’s clients is a religious organization that has 1,400 people on its payroll throughout Africa. “They provide health care for everyone,” he says. But “they lack medicines, enough doctors, and what care there is may not be up to Western standards. The same is true in Western China and certain parts of India.”

In-kind benefits. Another common benefits category provides allowances for the costs of transportation, housing or other services.

In many European Union countries, Boyson says, companies frequently reward workers through in-kind benefits to reduce taxes. The idea is that “If I gave you money, you’d be taxed. So I’ll give you transportation instead,” he explains.

Many companies in Northern Europe, for example, have professional events in Southern Europe during the winter that are essentially paid vacations, Claus notes. Meal vouchers are also common in some European countries.

Workers in the emerging economic powerhouses want different in-kind benefits. Education benefits, including English and leadership training, motivate many workers in China, Olsby says.

Indian workers expect companies “to offer very heavy benefits,” generally more than 10 different types, she adds. Some companies even offer health insurance or other benefits to employees’ parents. “Their salaries are not as high, but their total rewards package is large,” Olsby says.

Retirement and severance. With respect to retirement benefits, much depends on what a government requires. Social security or pension-type benefits are provided by many governments, particularly in the developed world. In France, government-provided retirement benefits replace 70 percent of pay. Where the benefits are generous, corporations often do not supplement them.

Executives typically take another approach in some of the poorest developing countries. “In Botswana, Congo and Nigeria, there is a high occurrence of AIDS and a low life expectancy,” Polak says. “People there are not interested in retirement programs. They want cash and immediate benefits like medical care.”

Retirement benefits are being affected by global trends, including the movement from defined benefit pensions to defined contribution plans, such as 401(k)-type plans. Companies are offering defined contribution plans in developing countries where retirement benefits previously have not been provided.

Implementing these programs may not be easy. Nalco executives are considering establishing a 401(k) plan for employees in India. “We are looking to see if that is feasible if there is a vesting requirement,” says Nalco’s Wierman. She notes that these employees may not stay long enough to get vested because they have so many job opportunities.

Other considerations, such as cultural norms, can also play roles in benefits selection. HR professionals must tailor benefits to different classes of workers, including employees in the local market; expatriate workers from other countries; and contract workers, who may or may not be required to receive benefits under the laws of the country.

The author is an attorney and freelance writer in Chevy Chase, Md.


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