Multinational companies are looking to greatly gain control and oversight of the employee benefits programs on a global scale as they are trying to manage growing costs and financial risks, according to the 2012 Corporate Governance of Global Employee Benefits Study released by Aon Hewitt, the global human resources solutions business of Aon plc, in partnership with the American Benefits Institute.
Still, most respondents continue to allow for flexibility among their local operations to make decisions. Fewer than one-in-five respondents report feeling confident that local practices are in line with corporate guidelines, and fewer than 10 percent of respondents say they are confident that corporate controls have the power to reduce financial and operating costs and risks.
"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," says 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 programs need to implement a more formalized governance structure to manage financial and operational costs and risks."
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Another 83 percent of respondents say active cost management and slow growth are top business issues impacting their companies in mature markets. Only 37 percent of respondents report that this is true for emerging markets. Conversely, 75 percent of respondents say they are investing for growth in emerging markets where they are troubled by talent shortages and salary inflation. Sixty-four percent of respondents say employees in emerging markets continue to expect new and higher benefits.
"Globalization poses a unique set of strategic and compliance challenges for multinational employer-sponsors of benefit plans," says James Klein, president of the American Benefits Institute. "To continue their commitment to health coverage and retirement security for their employees, they must manage the growing risks associated with plan sponsorship. 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."
Because of the costs and risks of benefits programs, 88 percent of respondents say employee benefits are on the agenda for boards and senior management of their companies while 70 percent of respondents say they are leveraging their global scales and following stricter controls and corporate oversight in mature and emerging markets to cut costs of benefits operations.
Although more than 90 percent of respondents say they anticipate having corporate benefits policies in place over the next three years, fewer than 60 percent of respondents report being sure their local benefit plans will be aligned with corporate guidelines. An average of 40 percent of respondents has formal structures in place, and among those, an average of 65 percent says these practices are effective. Just 16 percent of respondents consider their governance practices as effective when established informally or in an ad hoc manner.
"As the American Benefits Council's research and education affiliate, the Institute is keenly interested in globalization's impact on employer-sponsored health and retirement benefit plans," Klein says. "As the world itself gets smaller, the decisions employers make regarding benefit plans take on even greater significance for the success of multinational companies."
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