As more U.S. employers hire international workers or extend their organization into foreign locations, benefits and tax issues have grown increasingly complicated when managing international assignees. Further complexity arises depending on the type of employee or independent contractor. U.S. multinationals have begun to fill more key positions with talent in other nations or third-country nationals, who work a position in a foreign country from the U.S., but are not from the U.S. or that foreign country, rather than implanting American expats to international positions.
The third-country and local nationals "weren't really offered benefits [in the past], but the landscape has changed in the last five years," explains Todd Hancock, vice president of the international benefits practice, AmWINS Group Benefits.
Now, an American multinational company that decides to incorporate in a new location must comply with local social security, and tax laws and labor regulations, as well as manage the local needs and expectations of employees to attract top talent.
"Benefits are culturally specific. For example, South African benefits packages will always include AIDS and HIV testing," says Nick Malhomme, vice president of global sales and marketing at PPCW, a global mental health provider and an Optum Company.
In Africa, also it is common to provide funeral benefits because funerals are so expensive, yet unfortunately are frequent due to the HIV epidemic.
"Look at context and cultural influences for why a benefit's environment has evolved the way it has" in certain countries, suggests Imran A. Qureshi, Towers Watson's director of international consulting group for central and west divisions of North America.
Without carefully considering the context, some employers have tried to replicate U.S. programs. For example, an employer wanted to roll out a lactation program globally. While this benefit made sense in the United States - where women take relatively short maternity leaves, compared to women in other nations, where women can take up to 18 months maternity leave - there is little need for such a benefit internationally.
"You have to look at the total picture; you've got to look at what's being provided by the government, by the individual on their own and by the employer," explains Qureshi. "So you have three pillars that you really need to gauge a true picture of the benefit being gained and the cost paid. Cross-country comparisons can be a little dangerous without that context."
Taking a 'top-down' view
Historically, American multinational HR/benefits executives have been relatively hands-off regarding benefits for outsourced or offshore workers. However, experts say, this is changing.
"With the economic crisis, most companies are now taking a top-down view of benefits," says Sheldon Kenton, global head of sales and client management for Cigna Global Health Benefits. "Home office participation is becoming a much more common theme." As employers expand their global workforce, "benefits will be an important battlefield in the domestic employee market and also in the attraction of foreign nationals, whether they be American or not, to the employer," Kenton says.
Core benefits coverage
Health care coverage is the most important benefit employers can offer, regardless of the location. It's important for multinationals to look at the content of government and state benefits, and how they are delivered, in order to determine how much coverage an employer should provide.
"Europe has historically had a paternalistic delivery of benefits - typically through government or state," Qureshi says. He adds that the burden of cost has shifted to individuals and employers in the last decade due to an aging population and economic strain, with the debt crisis exacerbating the problem.
For example, employer-sponsored private health care plans are prevalent alongside government systems in countries like the U.K., Germany and France. While they aren't all-encompassing, these benefits may have higher reimbursement levels, higher benefit levels or quicker access to care.
Australia and New Zealand share a more collective view of benefits, most likely due to a heavy European influence. Emerging markets, on the other hand, may have larger gaps in coverage.
In India, lagging public health care and a strong employee market means many employers decide to provide more comprehensive benefits there than in other locations.
It's also relevant to analyze benefit offerings in specific industries - such as international banking in the U.K. - that may require a higher level of benefits to attract top talent.
U.S. standards for health plans that include multiple options and voluntary benefit offerings generally don't exist globally, experts explain. Instead, "there is flexibility around benefits buy-ups," Kenton says, where employees can elect slightly higher life insurance coverage, while lowering a benefit someplace else.
Asian employee benefit plans still are emerging, experts explain, so employers are witnessing more requests for either buy-ups or optional plans. To differentiate from the competition, employers often will offer variable levels of life insurance, for example, to be offset by education or tuition reimbursements, or flexible gym memberships. Some may allow an employee to opt out of a retirement plan in favor of auxilliary benefits, such as an iPad.
Employers also may consider providing an international health plan or regional plan for third-party nationals. Mobile health plan benefits are popular among this group working in China and India because they tend to move around frequently. Also, employees in these areas value cash more than mandated benefits because many mobile employees want to buy and keep their own plan which they can maintain if they switch employers or move.
Wellness and work-life flexibility
As wellness programs and flexible work initiatives migrate from the United States to the rest of the world, some elements are universal, while others should grow organically from specific cultural needs.
"Wellness and employee assistance programs are becoming big topics at the moment," says Kenton. "[These programs] are very established in the U.S. At the very least, U.S. multinationals are looking to provide some level of standardization across a global workforce."
These benefits, compared to others like retirement and medical offerings, often can be standardized across global operations. Usually, access to health risk assessments is provided globally.
"It's important to see well-being as a real driver, because it's one of the only things you can roll out on a global basis," seconds Malhomme. "If we can tackle some of the most difficult diseases at their very early stages or before they arrive, it's going to save health care systems countless millions of dollars in 10 or 15 years time."
What these programs focus on will vary - U.S. programs often hone in on diabetes prevention and management, for example, while well-being programs in India may deal with alleviating stress.
"We've got to find a way of targeting wellness that is relevant globally ... We can focus on what I call the 'global inarguables,'" Kenton says. "It is generally accepted that physical activity is a good thing. Work-life balance is a good thing, and stress and sleep deprivation are bad things. So there are a number of [issues] that we can target globally and realistically create employer-by-employer strategies to target [problems]."
He acknowledges that some programs simply won't work in certain locations, like smoking cessation programs in some areas of Europe and Asia, where the habit is more accepted and ingrained into the culture than in the United States.
To realistically measure the efficacy of these programs, Qureshi warns against creating them to lower health care costs. Instead, he says employers should focus on reducing absenteeism, and improving productivity and engagement.
International EAPs also are gaining traction. Says Malhomme: "In the U.S., the [main employee wellness issues are] obesity, nutrition and exercise. Everywhere else, the [primary issues are] stress, anxiety and depression."
In places under significant economic strain, such as countries in Europe, EAP utilization has increased around financial and work-life services. In the Far East and Asia, employees may feel ashamed to seek help due to cultural norms. In these societies, online and telephonic counseling may have a higher uptake than face-to-face help.
Another global trend is increasing flexibility around work arrangements and hours. International employees generally work longer hours than U.S. employees, explains Hancock. Despite perhaps getting more vacation days, foreign workers often are isolated and work-oriented. So, telecommuting has become more popular, especially in large cities with outrageous rush hour traffic.
Retirement benefits
Retirement benefits are more complicated when rolled out across multiple countries, so employers first should determine whether specific employees can participate in social security in the foreign countries in which they work. If a third-party national cannot participate in a national retirement plan or no plan exists for local nationals, employers have access to international pension solutions.
In India, for example, where workers rely on government systems for retirement, Indian nationals tend to value cash on hand and enhanced health care benefits over separate retirement accounts.
Russia's social security system, on the other hand, provides very little as a retirement benefit. Yet global employers aren't filling in the gap because life expectancy in Russia is relatively low and people don't live to retirement, explains Qureshi.
China's one-child policy will lead to a rapidly aging population by 2050, experts predict, and government systems won't be able to handle the influx in individuals depending on welfare benefits. To mitigate this crisis, the Chinese government allows employers to provide retirement for employees on a tax-effective basis, effectively creating defined contribution retirement plans.
"Many employers, particularly U.S. multinationals, have taken a wait-and-see approach over the last year or two to understand the tax ramifications and see what providers will emerge, but many state-owned enterprises in China have put these in place," explains Qureshi, who believes more companies will add them over time.
Of the BRIC countries (Brazil, Russia, India and China), Brazil's workforce has access to the most developed retirement plans, most of which are defined contribution plans provided to all employees of local and multinational companies that choose to provide such benefits. More companies are looking at providing benefits because social security doesn't provide enough income in retirement.
"Even within the developing countries - Brazil, India, Russia and China - you have very different delivery of retirement plans," Qureshi says, compared to "Western economies and Japan, where you have these legacy defined benefit plans that many companies are still managing even though they've closed them to new entrants."
The trend globally is to move to DC plans when providing supplemental retirement plans to international employees.
Since the passage of the Sarbanes-Oxley Act, U.S. multinationals want to more actively manage retirement benefits plans to ensure they are in compliance. "Since that time, companies have really centralized certain decisions and started to get a better handle on the programs they offer across the world and put in place system to manage those decisions," explains Qureshi.
Qureshi proposes that U.S. multinationals deploy an effective global strategy that aligns to an overarching philosophy that helps the company manage costs and attract talent internationally. In other words, global governance will increasingly play a role in how U.S. multinational employers manage and oversee their benefits around the world.
