Multinationals of all sizes continue to grow their foreign operations, and many are expanding abroad even more quickly than at home.
Despite the slow growth of the global economy and relatively high unemployment in many markets, demographic imbalances are causing talent shortages worldwide. Most believe employee benefits can be used as a magnet to woo the best of the available employee candidates, increasing company appeal and worker loyalty. Recent surveys show effective workplace benefits programs rank just below salary in attracting and retaining talent.
Any organization planning to grow internationally should focus on three particular benefits issues: developing a global employee benefits strategy, the exploding costs of global healthcare and effective cost-mitigation strategies.
Warren Buffett once famously said, “Risk comes from not knowing what you are doing.” Introducing a well-designed global employee benefits strategy enables a multinational to actively manage benefits on a national and global level. It ensures benefit programs align with your company’s global philosophy and operating guidelines for plan design, financing and administration.
As a first order of business, it is important to develop a process roadmap. Use the map, which should include input from key leaders in your organization, to determine the operations model that best fits your company’s style and culture. You also need to build consensus with other key stakeholders in your organization (global, regional and local) and establish accountability, roles and responsibilities. As you develop the strategy and supporting guiding principles for plan design, financing and administration, it’s important to build a governance framework to support decision-making, approvals and delegated lines of authority.
An effective global employee benefits strategy ensures you have the appropriate local plan design to meet your goals of attracting and retaining the right talent. It also means your benefits programs are being funded and financed in the most cost-effective manner so you realize maximum operational efficiency on a global basis. Finally, it ensures your plans are in compliance with local laws and regulations. Compliance is not only important from a legal and reputational point of view—it’s also a key cost-avoidance issue.
As governments around the world reduce spending, public health program benefits are being scaled back and costs are increasingly shifted to employers and individuals. The result: employer-sponsored health benefits are growing rapidly and becoming the most used and valued benefits program offered to employees in many countries.
Rising global healthcare costs are becoming one of the biggest financial challenges faced by multinational companies and organizations. Recent surveys show a 10% average increase for healthcare costs around the world in 2012. The same is forecast for 2013.
Following the current trend, healthcare costs around the world could double in just seven years. There are many reasons for the increases, but the following four trends are key factors:
- Health risks and chronic conditions are growing in many markets,
- Aging populations are overwhelming healthcare systems,
- New medical technology is expensive, and
- Hospitals and doctors are recommending too many procedures and services.
On a national scale, multinational companies traditionally achieve cost mitigation through active claims analysis and effective renewal management. On a global scale, they create successful international pool arrangements provided by global employee benefits insurers operating locally.
Introducing an employee benefit captive arrangement can lead to further cost transparency and potential savings. In addition, multinational employers are increasingly looking at starting global wellness programs.
The definition of wellness differs from country to country, but no matter how you define it, adopting best practices in healthy living and supplementing them with a comprehensive global strategy can make a big difference in controlling costs. Up to about 50% of healthcare costs result from a person’s unhealthy habits. If employers can influence lifestyle issues in positive ways through successful wellness programs, they’ll benefit from healthier employees across the globe.
Although global wellness programs are a new trend, with fully credible metrics still emerging, recent studies have shown as much as a 4-to-1 return on investment from such programs. Healthcare data analytics is also taking on a significant role and offers the hope for greater transparency in costs, utilization and quality.
As companies further their global expansion or become multinationals for the first time, the increasing prevalence and rising costs of benefits will be a critical issue to address as part of an effective employee benefits strategy.