Multinational employers may operate in diverse economies around the world, but they face certain common global human resource challenges.

Mercer’s 2008 Introduction to Benefit Plans around the World: a Guide for Multinational Employers helps global companies assess, compare and provide retirement as well as medical and other group benefits to their employees. The 2008 edition of this report identifies the top five retirement challenges and health and welfare challenges faced by employers worldwide.
 
1. Concept of retirement is changing rapidly
“The concept of retirement is changing at an unprecedented pace, driven by a number of related trends,” said Giles Archibald of Mercer. “Falling birth rates and rising life expectancy mean people will need to keep working and retire later, while the shift to defined contribution (DC) plans can make it difficult to save adequately for retirement, particularly in challenging financial times.”

Where previous cohorts of retirees in high-income countries viewed retirement as a period of leisure, current generations are increasingly expecting some employment in old age.
 
2. Defined contribution plans are increasingly popular
Many multinationals have explicitly stated a preference for establishing only defined contribution (DC) plans in the future. While several countries still have predominantly employer-sponsored defined benefit (DB) plans (South Korea, Philippines, Japan, Canada, Mexico, Belgium, Israel, Netherlands), it is rare for an employer to set up a new one anywhere in the world. Reductions in Social Security benefits and talent wars are raising employee expectations for improved, portable employer-provided benefits, but employers are not rushing to meet this need.
 
3. Employees need more support from employers
With participation optional and contribution level left up to the employee, many employers are finding that individuals contribute less, start contributing late, invest conservatively and retire too soon. Employers need to ensure employees understand their retirement plans through more effective communication.
 
4. Retirement benefits are inadequate
Unless supplemented by personal savings, many employees are likely to find their benefit plans cannot deliver sufficient retirement income to ensure a comfortable retirement at the age the employee might expect.
 
5. More companies choose for global governance
There is a pronounced trend toward more global corporate oversight of benefit programmes. “We are seeing more companies conduct global benefits inventories and analyses of where the plans are – or are not – in compliance or competitive,” said Mr. Archibald. “This is true of health-related benefits as well.”
 
Health and welfare challenges

6. Employee expectations for state-of-art care conflict with costs

Health care costs continue to outpace inflation in many countries. Aging populations, health risks, new technologies and pharmaceuticals, consumer demand and continuing system inefficiencies are among the driving forces. Exacerbating the situation, governments are trying to shift costs away from state-sponsored plans to the private sector.
 
“Health and benefit costs are likely to increase due to higher-than-average stress levels and high utilisation of discretionary health services by employees who are being laid off,” said Linda Havlin, global leader for health and benefits research. “Compounding those increases will be efforts by insurers to recoup investment losses and improve their profitability.”
 
7. Differing needs require different approaches
Another issue is that workers differ on the value of individual benefits, depending upon their age and personal circumstances. Companies are using flex benefits and total rewards programmes to address these different preferences. Young employees often prefer lifestyle/life event-based benefits, resulting in the rapid growth of flex programmes, particularly in emerging markets. Companies continue to emphasise, however, the value of benefits as part of the overall remuneration or “total rewards” package.
 
8. Healthcare budgets strained as lifestyle diseasesincrease

Some infectious diseases, eliminated in many developed economies, are still realties in the recruitment pools in emerging markets and are re-emerging in some developed economies (e.g. Italy). Chronic/psychological conditions such as diabetes, stress, obesity are also increasing. More companies are implementing programmes to keep employees well and productive as well as reconsidering health plans that exclude chronic diseases and implementing measures to control the underlying disease profiles that drive health benefit usage and cost.
 
9. Employers must increase awareness of liabilities

The survey shows that understanding and managing how changing health risks can affect employer liabilities is essential but often overlooked. Most multinational employers provide health benefits to their employees, but few understand the health risks or the implications for employees and their productivity. Employers also need to be clear about the potential liabilities hidden within these benefit promises and programmes.
 
10. Global tracking and governance needed
Tracking global health benefit costs and ensuring good governance of programmes worldwide is a necessary process but remains a challenge for most employers.
 
“More employers are establishing global guiding principles for the design, placement and management of their employee health and benefit programmes,” says Mercer’s Robyn Cameron. “Having such policies in place, and processes to support them, can help ensure appropriate decision making and information flows, and an appropriate balance between local-country and global considerations.”

[The full report is available at at www.mercer.com/bpaw]