As global competitiveness becomes more crucial to business success, the majority of multinational companies are maintaining or increasing their use of international assignments.
A major new survey by Mercer Human Resource Consulting, the world’s largest employee benefits consultancy and services provider, has found over 60% of companies are increasing their use of short-term international assignments while 26% are sending more employees on traditional assignments.
However, while most respondents plan to increase or retain the number of globally mobile employees, a significant minority (38%) report a reduction in long-term assignments as they seek to preserve operational flexibility in a rapidly changing global economy.
“International assignments are valued by companies as they help equip employees with the leadership skills to launch new ventures and manage projects aboard. Employers tend to select their globally mobile employees carefully and provide them with above-average benefits,” said Peter Blake, Principal at Mercer. “Unsurprisingly, many companies do not view assignments requested by employees as providing the same level of return on investment.”
The Expatriate and Third-Country Nationals Benefits Survey, which Mercer believes is the largest of its kind, provides multinational companies with authoritative data on benefit practices affecting an influential and growing segment of their employee population. The survey includes responses for some 230 major multinationals based in North America, Europe, Asia Pacific, Latin America and Middle East/Africa with more than 50,000 globally mobile employees in total.
Policies and trends Almost all participants agreed that addressing benefit issues for globally mobile employees is a medium or top priority, though one in four (25%) does not have a benefits policy for these employees. The survey also found that 30% of companies have no formal governance procedures and one in ten (11%) has never reviewed their policies. Almost 10% of globally mobile employees have expressed dissatisfaction with their benefit package while on assignment.
“Setting and managing benefit programmes for expatriates and third country nationals is an extremely complex undertaking. Keeping approaches fair and consistent globally is very challenging, particularly as the ‘one size fits all’ approach no longer satisfies employees,” said Mr Blake. “Differentiating benefits by region or level of employee, for example, is becoming increasingly necessary but can further complicate the process.”
Pensions According to the survey, defined benefit (DB) pension provision for globally mobile employees will continue to decline. The research found two-thirds of companies with international pension plans now use defined contribution (DC) arrangements. Furthermore, one in ten organisations offering a DB plan aims to close it in favour of a DC scheme in the near future.
Commenting on the shift away from DB plans, Giles Archibald, Worldwide Partner at Mercer, said: “Ten years ago some three-quarters of international pension plans were defined benefit. Now, most multinational companies, particularly those with European headquarters, offer their mobile employees a defined contribution pension. Interestingly, almost all of the defined benefit plans that remain are open to new entrants.”
European organisations are more likely to have a DC plan for their globally mobile employees than their North American counterparts. The survey found 71% of companies with European headquarters offer DC arrangements compared with just 50% in North America. Average pension contributions by European employers tend to be greater, at 8%, compared with 6% in North American organisations.
Of the companies that plan to change their expatriate benefit programmes for such employees, 46% intend to outsource plan administration, 40% plan to enhance benefits for certain employees while 39% aim to globalise their approach to benefits provision.
“As DC plans become increasingly popular and managing them more onerous, more companies are likely to outsource the administration of their benefit programmes,” commented Mr Archibald.
Other benefits Reflecting practices in their home countries, North American companies typically provide a lower level of benefits than European organisations, though employees of American multinationals can access additional benefits if they pay for them. For example, while the majority of European multinationals provide international medical plans with no restrictions on the choice of provider and family coverage, employees of North American companies are expected to contribute towards the cost of treatment. Interestingly, a significant number of medical plans do not cover repatriation and evacuation (28%) or pre-existing medical conditions (17%).
The most common level of death benefit among participants is two-and-a-half times salary in North American organisations compared with three times salary in European and other multinationals. The long-term disability benefit provided by most multinationals is 70% of salary. Almost all companies provide emergency assistance, accidental death and dismemberment and business travel accident cover.
Mr Archibald concluded: “The survey shows trends in benefit provision for globally mobile employees continue to evolve, so multinational companies that have not recently benchmarked their own practices against the market may find value in doing so.”