Globalisation changes benefits system for expat employees

by Ray Clancy on October 26, 2012

Benefits, such as health care, are affected by globalisation

Many expats rely on their employers to provide benefits such as health insurance but growing globalisation is changing the way benefits are provided, experts suggest.

A move in expat populations from places like Dubai to Asia means that multinational companies are aiming to significantly increase the corporate control and oversight of their employee benefit programs worldwide with the intention of countering rising costs and financial risks.

A study by Aon Hewett, a major human resources solutions business conducted by the American Benefits Institute reveals that most employers are still allowing flexibility for their local operations to make decisions.

However, fewer than one in five companies say they are confident that local practices are in line with corporate guidelines and fewer than 10% said they are confident that corporate controls are adequate to reduce financial and operating costs and risks.

‘Globalization poses a unique set of strategic and compliance challenges for multinational employer-sponsors of benefit plans. To continue their commitment to health coverage and retirement security for their employees, they must manage the growing risks associated with plan sponsorship,’ said James Klein, president of the American Benefits Institute.

‘It appears that centralization of corporate benefits governance is already helping to mitigate some of these challenges by improving communication between headquarters and worldwide operations,’ he explained.

More and more companies want to have a better line of sight and at least some control over the benefits decisions made by their local operations, according to Amol Mhatre, global benefits strategy and solutions leader at Aon Hewitt.

‘While financial drivers play a big role, companies want to do this for a variety of other reasons, including managing reputational risks and resource constraints on the ground. Companies that want to design more sustainable benefits programmes need to implement a more formalized governance structure to manage financial and operational costs and risks,’ he explained.

The study found that 88% of companies say that employee benefits are on the agenda for boards and senior management of their companies due to the costs and risks of benefit programmes.

Approximately 70% of employers say that they are leveraging their global scale to reduce costs of benefits operations and are implementing stricter controls and corporate oversight in both mature and emerging markets.

More than 90% of companies expect to have corporate benefits policies in place over the next three years. However, less than 60% of organizations are certain that their local benefit plans will be aligned with corporate guidelines.

On average, only about 40% of companies have formal structures in place. Of this group, an average of 65% said that protocols such as this are effective. On the other hand, only 16% rated their governance protocols as effective when established informally or in an ad hoc manner.

‘As the world itself gets smaller, the decisions employers make regarding benefit plans take on even greater significance for the success of multinational companies,’ added Klein.

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