emea employee choice survey in benefits 2014
TRANSCRIPT
EMEA EMPLOYEE CHOICE SURVEY IN BENEFITS 2014
CONTENTS
ABOUT THE SURVEY 3
INTRODUCTION 4
KEY FINDINGS 5
SURVEY RESULTS 7
CONCLUSION 19
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ABOUT THE SURVEY
DISTRIBUTION OF RESPONDENTS BY COUNTRY, REGION, INDUSTRY, AND EMPLOYER SIZE Countries were selected for inclusion in the survey on the basis of our knowledge that some form of employee choice was in place and that the legal and tax regimes in these regions would not prevent it. The survey was conducted from November 2013 through to January 2014. In total, 636 employers participated.
Country Number of respondents
Percentage
Bulgaria 22 3%
Germany 65 10%
Ireland 19 3%
Italy 76 12%
Netherlands 40 6%
Poland 33 5%
Portugal 47 7%
Romania 32 5%
Saudi Arabia 28 4%
Slovakia 18 3%
Spain 65 10%
Turkey 49 8%
United Arab Emirates
25 4%
United Kingdom 95 15%
Other* 22 3%
*Austria, Latvia, and Switzerland also participated in the survey. Due to their low responses, the participation numbers are not indicated in the table above. Their participation total is indicated in “Other”.
Region Number of respondents
Percentage
Western Europe 420 66%
Eastern Europe 160 25%
Middle East 54 9%
The Western Europe region includes Austria, Germany, Ireland, Italy, Netherlands, Portugal, Spain, Switzerland, and United Kingdom.
The Eastern Europe region includes Bulgaria, Latvia, Poland, Romania, Slovakia, and Turkey
The Middle East region includes Saudi Arabia and the United Arab Emirates.
The majority of the participants are multinational organisations:
• 28% multinational company, home country.
• 53% multinational company, not the home country.
• 16% domestic company.
• 4% public-sector organisation.
Industry Number of respondents
Percentage
Manufacturing 272 43%
Wholesale/retail trade
46 7%
Services 133 21%
Transportation/communication/utility
56 9%
Financial services 68 11%
Health care 13 2%
Public sector 6 1%
Other 38 6%
Number of employees
Number of respondents
Percentage
250 or fewer 206 33%
251–1,000 185 29%
1,001–5,000 179 28%
More than 5,000 63 10%
EMPLOYEE DEMOGRAPHICSThe average age of the employee population surveyed is 39, but this varies country to country, from 34 in Turkey to 42 in Germany. Thirty-eight percent of our participants’ workforces are female, with Saudi Arabia reporting the lowest percentage of female workers, at 11%.
Among respondents from Western Europe, on average, 55% of employees are governed by collective bargaining agreements, compared to 26% of employees in Eastern Europe and just 10% of employees in the Middle East. The need to engage unions and work councils can discourage employers from implementing an employee choice plan. Once they are engaged, however, these employee representative bodies can be a real help in shaping the design of the scheme and communicating the programme out to the workforce.
INTRODUCTION
This report examines the role that employee choice plays in organisations’ health and group benefits programmes and provides information on the different benefits that employers in the region are including in their choice programmes. Organisations can use these findings to:
• Benchmark their benefits programmes against those of other organisations in their country or in other countries in which they operate.
• Understand the advantages and challenges of implementing employee benefits choice.
• Decide on the benefits to offer in different countries.
Mercer Marsh Benefits last conducted a survey on employee choice in benefits in 2011, which was conducted in Western Europe only. The 2014 survey encompasses 17 markets across Europe and the Middle East; new additions to the survey this year include Austria, Bulgaria, Latvia, Poland, Romania, Slovakia, Switzerland, Turkey, Saudi Arabia, and the United Arab Emirates. Employers of all sizes were invited to participate and the 636 respondents ranged from small domestic organisations to large multinationals, spanning many industries as well as the public sector.
For the purposes of this report, we define “employee choice” as an arrangement whereby employees are able to control the benefits they receive through:
• Voluntary benefits: these are products, insurances, and services that employees can purchase with their own money at discounted prices, generally via a portal on their employer’s website.
• Benefits choices: employees can exchange some or all of their existing employer-provided benefits for other benefits or an increased level of cover in an existing area.
• Comprehensive flexible benefits programmes: this is usually a programme combining core employer-paid benefits with optional employee-paid benefits; they can also allow employees to reduce their core benefit provision in return for additional take-home pay. Some comprehensive programmes offer credits or spending accounts in lieu of core benefits so that employees “purchase” the benefits they need.
Although what constitutes employee choice varies significantly by country, choice seems to be gaining favour with employers and employees alike as both seek to obtain maximum value from the benefits package.
“Although what constitutes employee choice varies significantly by country, choice seems to be gaining favour with employers and employees alike as both seek to obtain maximum value from the benefits package.”
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1. Benefits choice programmes remain a key weapon in the war for talent and programme offerings are expected to grow even further in these tough economic times.
2. More than half of respondents offer some choice in benefits and a further 24% intend to do so in the next two years.
3. Choice programmes are most likely to be offered by larger organisations, but fewer than half offer it as part of a total reward strategy.
4. Choice programmes are a relatively new phenomenon for smaller and midsize organisations.
5. There are key differences between how benefits choice programmes are designed for companies in Eastern and Western Europe, with companies in the former focused on keeping up with their peers and the latter wanting to leverage best-practice advice from external vendors.
6. Cost and complexity of administration are considered by respondents to be the main barriers to the successful implementation of choice programmes. Along with the need to adhere to local tax laws and compliance regulations, these challenges have led to a rise in the demand for the technical expertise offered by outsourcing and co-sourcing solutions.
7. Two-thirds of multinationals have no global strategy in place to manage employee choice programmes, creating concerns around governance, cost control, and leveraging best practice.
KEY FINDINGS
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Employers in EMEA are implementing choice in order to better compete in the war for talent. Among the top reasons respondents give for implementing employee benefits choice is to remain competitive in the marketplace, retain employees, and improve employee engagement.
Choice programmes seem to be delivering on employers’ goals; almost three-quarters say that choice is helping them meet organisational objectives.
Employees also seem to appreciate the ability to choose the benefits of most value to themselves and their families. About three-quarters of respondents say that their employees have responded positively to benefits choice and almost all respondents that offer comprehensive programmes have been happy with the level of employee participation.
Choice therefore appears to be ripe for growth in the near future; more than a quarter of the employers surveyed say they are considering adding some form of choice over the next two years.
Of course, some challenges remain. Whether or not they have implemented a choice programme, respondents worry most about the cost, administrative complexity, local tax legislation, and resources available to implement and manage choice. Yet the survey results show that outsourcing and co-sourcing arrangements, which can significantly lessen the organisation’s administrative and resource burden, are on the increase. In addition, comprehensive choice programmes are helping to reduce costs for a large percentage of employers offering them.
“Choice therefore appears to be ripe for growth in the near future; more than a quarter of the employers surveyed say they are considering adding some form of choice over the next two years.”
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SURVEY RESULTS
WHY AND HOW EMPLOYERS PROVIDE EMPLOYEE BENEFITS CHOICEGiven the shortage of skilled workers in many industries and countries, companies see the provision of flexible benefits as one differentiator in the marketplace. The main reasons respondents cite for offering their employees choice in benefits are to “remain competitive in the marketplace”, “improve employee engagement”, and “retain employees” (see Figure 1).
Although the majority of employers overall (56%) cited “remaining competitive in the marketplace” as one of their most important reasons for offering choice programmes, it remains a more pressing reason for respondents in Eastern European countries (69%). In Poland, employers are striving to offer the same benefits (even in terms of the same conditions) as their competitors. Only a few market-leading companies differentiate themselves by offering more benefits and not matching the market. However, respondents from
the UK, where choice has been in place for a number of years, are the most likely among all respondents to cite this as a major driver of their choice programmes (83%) — an indication perhaps that choice is now becoming a ”must have” component of the overall reward package. “Improving employee engagement” and “increasing employees’ understanding and appreciation of the value of their benefits” are also more common reasons for respondents in Eastern Europe than for those in other regions.
Choice programmes also allow employers to “respond to diverse workforce needs and values” (44%); this is a particularly important driver in Italy (71%) and the Netherlands (70%). For respondents in Western Europe — particularly those in the financial services sector — the ability to reduce employees’ tax payments in lieu
Respond to diverse workforce needs and values
Retain current employees
Improve employee engagement
Remain competitive in our marketplace
Take advantage of specific local tax and/or social security exemptions
Attract new employees
Increase employees’ understanding and appreciation of the value of their benefits
Support or facilitate a total rewards programme
Maximise value of existing benefit spend
Reduce/control company contribution to cost of benefits
Assist in organisational transformation or change in business culture
Equalise the value of employees’ benefits
56%
55%
54%
44%
40%
36%
33%
28%
24%
11%
10%
7%
Figure 1. Most Important Reasons for Implementing an Employee Choice ProgrammeAmong Respondents that Provide Choice in Benefits
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of receiving benefits remains an important driver for employee choice. This is especially true for respondents in Spain (73%) and Italy (53%). “Attracting new employees” is a substantially bigger driver for respondents in Germany than for those in other countries — and also for those in the manufacturing sector, demonstrating how great a differentiator choice can be in a competitive labour market. Interestingly, employers rarely cite “benefit cost control” as a reason to implement choice programmes (11%), although 43% of those with a comprehensive flexible benefits programme report that it has lowered their benefits costs.
Over half of respondents (54%) who offer employee choice do so as part of a total rewards strategy designed to achieve the greatest return on compensation investments, an approach that is far more common in Western Europe than in the other regions. Yet in the case of other regions, implementing choice can be an effective way of harmonising benefits provision across the whole organisation.
THE PREVALENCE OF EMPLOYEE BENEFITS CHOICEMore than half (53%) of survey respondents offer their employees choices in the benefits they receive. About one-quarter (27%) offer choice in employer-paid benefits and an additional quarter (26%) offer voluntary
benefits (fully paid by the employee) but no other type of choice (see Figure 2). The remaining respondents (47%) say that all employees receive the same benefits package and that they don’t offer any voluntary benefits. The larger the organisation, the more likely it is to provide some degree of employee choice: 73% of those with 5,000 or more employees provide choice, compared with 37% of those with 250 employees or fewer.
Employee choice is still relatively new in some of the markets included in this report. Almost a third (32%) of respondents with choice programmes have implemented choice only in the last two years. For small and midsize companies, that percentage is higher, and for those in the Middle East, almost two-thirds introduced choice within the last two years. Thus, as expected, respondents in the Middle East are least likely to offer employees choice (31% offer some choice in benefits), whereas those in Western Europe are most likely (60% offer some choice). On a country basis, choice is most common among respondents from Spain (84% of respondents offer benefits choice), the UK (74%), and Poland (67%). The choice employees do have is slightly more likely to take the form of voluntary benefits alone in the Middle East, but much more likely to take the form of choices in employer-paid benefits in Eastern Europe. In Western Europe, choice is fairly evenly split between voluntary benefits and choice in employer-paid benefits.
27% 26%
47%
29% 31%40%
26%
16%
58%
13%19%
69%
O�er choice in employer-paid benefits(other than, or in addition to, fully
employee-paid voluntary benefits)
Voluntary benefits are o�ered but no other type of choice
No choice — all employees receive the same benefits package
All respondents
Western Europe
Eastern Europe
Middle East
Figure 2. Benefit Choices O�ered to Employees
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VOLUNTARY BENEFITSRespondents report strong interest in voluntary benefits, with more than half (56%) of all survey respondents offering benefits that employees can pay for if they choose and about a quarter (24%) considering offering them within the next two years (see Figure 3). These benefits are offered as part of an employee choice programme by 26% of respondents and outside a choice programme by 29%.
Voluntary benefits are most common in Western Europe, where 63% of respondents offer them. They are much less prevalent in the Middle East, where about a quarter of respondents (26%) currently offer them and about a third (31%) report no current interest in voluntary benefits. The larger the employer, the more likely it is to offer voluntary benefits: 71% of respondents with more than 5,000 employees offer voluntary benefits compared to 43% of those with 250 employees or fewer. Larger employers are often able to benefit from the leverage they have to negotiate advantageous rates on behalf of employees and to pay lower “per head” costs on voluntary benefits provider fees. Only 1% of respondents have discontinued offering voluntary benefits, which suggests that the programmes are valued by both the employees who use them and the employers that sponsor the schemes.
CHALLENGES IN PROVIDING CHOICECost, complexity of administration, and resource constraints continue to be the top challenges in implementing employee choice and the majority of employers indicate local tax or legal issues are a main issue for them (see Figure 4). However, the percentage of respondents citing complexity of administration and resource constraints has dropped slightly since our last survey in 2011, perhaps reflecting the fact that there has been an increase in the percentage of organisations accessing outsourcing solutions to help them manage their choice programmes since that time.
For example, the majority of survey respondents with comprehensive flex programmes seek outside help with administration by outsourcing either all administration processes (42%) or some of them, using a “co-sourced” approach (31%). In our 2011 survey, over a third (36%) of survey respondents’ fully outsourced administration and 33% used co-sourcing (see Figure 5). Outsourcing or co-sourcing is even more prevalent in Western Europe, with 83% of respondents using an outsourced or co-sourced approach.
Whether administration is handled in-house or is outsourced, however, key decisions regarding employee choice programmes do need to remain with
24%
29%
26%
All employers
20%
33%
29%
31%
24%
22%
33%
13%
13%
Western Europe Eastern Europe Middle East
Considering o�ering in the next two years
O�er outside of a choice/flex programme
O�er as part of choice/flex programme
Figure 3. Prevalence of Voluntary Benefits Varies by Region
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employers, such as which benefits are available at each “life event”, how often data is shared with the administration provider, and the type and frequency of management information required.
Similarly, most of the organisations surveyed draw on external resources to ensure that their comprehensive flex programme is compliant with the local tax and employment laws — 73% use both internal and external resources and 16% rely exclusively on external resources, up from 11% in our 2011 survey.
Interestingly, technology is a bigger challenge for the largest organisations, with 62% of respondents with more than 5,000 employees acknowledging this as an issue (up from 47% in 2011). Usually, the introduction of any new technology within a large organisation can require significant input from the in-house information systems department to ensure future-proofing and compatibility with existing systems across multiple jurisdictions. This is another reason why more and more organisations co-source or outsource the running of employee choice schemes and the systems they run on.
Even in mature employee choice markets, such as the UK and Ireland, technology is cited by about two-thirds of respondents (as it was in 2011) as a significant challenge.
Getting support from senior management for a benefits choice programme and demonstrating a return on investment are perceived as bigger challenges for respondents in the Middle East (80% and 82%, respectively) than for those in Western Europe (58% and 67%, respectively) or Eastern Europe (69% and 68%, respectively). This may reflect how recently the concept of choice has been introduced in this region and the need to convince senior managers of its potential benefits for the company and its employees. Over three-fifths of respondents in the Middle East implemented their choice programmes only over the last two years, compared to less than a third of employers in Western Europe.
CHOICE EXPECTED TO GROWSurvey results suggest that employee choice programmes are poised to spread rapidly. About a third of respondents (32%) are considering offering some
Figure 4. Most Significant Challenges Faced When Implementing and Running an Employee Choice ProgrammePercentage of Respondents Saying “Very Significant” or “Significant”
82%
81%
69%
68%
62%
59%
54%
48%
Cost
Complexity of administration
Resource constraints within the organisation to implement changes
Demonstrating a return on investment
Getting support from senior management
Legal or tax issues
Employee communication challenges
Technology
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form of choice, with 12% of respondents considering offering a comprehensive flex programme. Respondents from the new markets in Eastern Europe (26%) and the Middle East (25%), where there is little or no employee choice in benefits at present, are most likely to be considering adding voluntary benefits for employees. On the other hand, respondents in Western Europe, where some form of choice has been available for some time, are most likely to be considering adding other employee choices or a comprehensive flexible benefits plan (12% each).
HOW EMPLOYEE CHOICE IS OFFEREDThe most common way to provide benefits choice is to allow employees to exchange salary for benefits. These benefits may include an upgrade to a core benefit that employees already receive from their employer (known as a “buy-up”) or a completely “voluntary” benefit, to which employees have no entitlement and must pay for themselves. Although exchanging only salary for these benefits is the method used by over a third of respondents (36%), an additional 25% also allow
employees to exchange one benefit for another. Respondents in Western Europe are much more likely than those in the other two regions to restrict employees to the exchange of salary only for benefits (42% compared with 15% of respondents in Eastern Europe and 25% in the Middle East).
Flex funds and benefit credits give employees even more control of their benefits package. Currently only 15% of respondents allow their employees to exchange flex funds (or benefit credits) to access desired benefits. These are typically offered within the context of comprehensive flex programmes, which are discussed in the next section of this report. There is great regional variation, however, with 28% of respondents in Eastern Europe allowing employees to exchange flex funds for benefits, whereas only 13% in Western Europe and 6% in the Middle East do. There is also variation across sectors, with respondents in the wholesale/retail trade (32%) much more likely than those in other sectors to allow employees to exchange flex funds, perhaps reflecting a less paternalistic approach from employers in the provision of benefits to their employees.
16% 15%
36%33%
19%
8%
42%
31%
Exclusively in-house Primarily in-house, using existingresources and technology
Outsource entire process with key decisions
remaining in-house
Co-source approach with a mixture of in-house and
outsourced resources
2011–2012 2013–2014
Figure 5. Nearly Three-quarters of Respondents Outsource or Co-source Flex Programme AdministrationAmong Respondents with a Comprehensive Flex Programme
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COMPREHENSIVE FLEXIBLE BENEFITS PROGRAMMESOf the different levels of employee choice, comprehensive flexible benefits programmes require the greatest investment. In general, these are programmes that combine core, employer-paid benefits with optional employee-paid benefits. Sometimes, the employer will provide credits or spending accounts for employees to use to “purchase” benefits. Of all companies surveyed, 10% currently offer fully comprehensive flexible benefits programmes. Countries where comprehensive flexible benefits programmes are most likely to be offered include Italy (17%), Ireland (14%), the UK (21%), and Spain (20%). Unsurprisingly, small employers (those with 250 or fewer employees) are the least likely to offer a comprehensive flex programme: just 4% offer one, compared to 14% of organisations with more than 5,000 employees. Employers in the financial services and transportation/communication/utility sectors are most likely to offer their employees comprehensive flex programmes compared with other industries.
ELIGIBILITY AND PARTICIPATIONThe majority of comprehensive flex programmes are open to all employees (86%), whereas only 12% are limited to certain employee groups and 2% are available to management only. Where flex has been implemented, the overwhelming majority of employers (92%) have been satisfied with the level of employee participation. Only 6% were dissatisfied with participation levels, and the remaining 2% either don’t know or are waiting to see whether the flex programme will fit the needs of their employees.
FLEX FUND DESIGN OBJECTIVESEmployers with comprehensive flex programmes were asked about the objectives that influenced the design of their flex fund (or benefit credit system). As might be expected, the most common objective, cited by 61% of respondents with flex programmes, was to demonstrate the value of benefits to employees (see Figure 6).
61%
26% 25%
13% 13% 11%
7%
20%
Demonstrate to employees the value of their
benefits
Replicate the previous level
of benefit cover
Provide a core level of cover that cannot
be flexed
Facilitate the release of cash to employees
Reduce labourcosts
Move some additional cost
to our employees
Encourage positive behaviour change
Other
Figure 6. Objectives that Influenced Design of Flex FundAmong Respondents with a Comprehensive Flex Programme
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In a flex fund, the value of specific benefits is made explicit so that employees can make informed “purchasing” decisions. In about a quarter of the flex programmes, design of the flex fund was influenced by employers’ intention to replicate the previous level of cover. Other considerations included providing a core benefit that may not be “flexed” (25%), reducing labour costs (13%), and facilitating the release of cash to employees (13%). About one in 10 respondents used the flex fund as a means of shifting additional cost to employees, and a handful used it to encourage positive behaviour change.
FLEX COMMUNICATION AND ENROLMENTChoice is no different from other HR projects in that the better the communication, the better the take-up. Internal email continues to be the most common method used to communicate information about the flex programme to employees, with 84% of employers communicating this way (up from 80% in 2011). Other common methods used to engage employees on choice are online company-sponsored portals (63%) and vendor portals (45%).
Despite the rise in technology-driven communication, traditional forms of communication, including printed materials and face-to-face meetings, are still widely used to ensure employees’ understanding of, and participation in, the choice plan. 53% of organisations continue to use desk-drops, handouts, and newsletters to deliver the relevant information to their employees, although that is down from 60% in 2011. Over two-fifths of the respondents (44%) conduct face-to-face meetings to communicate with employees about their flex programmes.
The enrolment process is almost exclusively conducted online, with 87% of surveyed employers using online enrolment system to gather their employees’ elections. Just 12% still enrol via paper materials and only 2% by telephone.
IMPACT OF INTRODUCING FLEX ON THE COST OF BENEFITSAlthough most respondents, whether or not they offer any type of employee benefits choice, perceive “cost” to be the primary challenge in offering an employee choice programme, our survey results suggest that this is becoming less of a barrier. Over two-fifths of employers with comprehensive programmes (43%) believe that implementing flex has helped to lower the cost of benefits provision, up from 36% of respondents in our 2011 survey. About a third of respondents reported that their cost is higher, whereas 23% said their costs have been unaffected by the implementation of flex (see Figure 7).
Cost is higher than it would have been without flex
Cost has been largely una�ected by implementing flex
Cost is lower than it would have been without flex
Figure 7. Impact of Flex on Programme CostAmong Respondents with a Comprehensive Flex Programme
34%
23%
43%
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EMPLOYEE CHOICE PROGRAMME BENEFITS AND DESIGNIn this section we look at the benefits in programmes that offer any degree of choice, not just comprehensive flexible benefits programmes.
BENEFITS OFFEREDFigure 8 shows how often a particular benefit is offered as a core benefit (an employer-paid benefit that is offered to all employees and may not be traded for other benefits), how often it is offered as a flex benefit (an optional benefit that may be gained by trading salary or other benefits, or by “purchasing” it with flex funds), and how often it is offered as a voluntary benefit that is fully paid for by the employee.
Core BenefitsAmong respondents in Western Europe, the top core benefits provided to employees are those that provide income protection as well as training and tools for the job. Although a pension or retirement savings plan
is the most commonly included core benefit among respondents in Western Europe, it does not make it on to the list of top core benefits for respondents in Eastern Europe and the Middle East. In the Middle East particularly, the majority of companies do not provide pensions — instead they are mandated to provide an end-of-service gratuity. However, a trend towards offering a workplace savings/pension plan is slowly emerging.
Among respondents in Eastern Europe, the top core benefits are more about preparing and equipping employees for work than in other regions, although insurances like medical and accident are offered by a higher percentage of respondents in this region than by those in Western Europe. Health screenings, an increasingly important part of employers’ wellness strategies, are much more commonly offered as a benefit by respondents in Eastern Europe than by those in other regions in EMEA.
Western Europe Eastern Europe Middle East
Core May be flexed
Volun- tary
Core May be flexed
Volun- tary
Core May be flexed
Volun- tary
Insurance
Life 60% 20% 9% 58% 13% 25% 57% 0% 7%
Accident 63% 8% 11% 65% 14% 12% 58% 17% 0%
Medical 44% 37% 24% 69% 31% 14% 67% 27% 13%
Critical illness 26% 14% 13% 40% 7% 18% 50% 8% 8%
Long-term disability income 47% 12% 10% 37% 11% 17% 57% 7% 7%
Long-term care 13% 4% 6% 17% 2% 15% 33% 0% 0%
Dental 20% 20% 36% 18% 18% 22% 50% 7% 36%
Travel 30% 6% 23% 33% 7% 11% 43% 7% 7%
Optical/vision 23% 9% 17% 30% 18% 16% 36% 7% 21%
Maternity (additional coverage) 35% 4% 4% 23% 7% 2% 64% 7% 7%
Figure 8. Prevalence of Benefits Offered, by Region
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Western Europe Eastern Europe Middle East
Core May be flexed
Volun- tary
Core May be flexed
Volun- tary
Core May be flexed
Volun- tary
Dependants' insurance 20% 17% 21% 6% 17% 27% 62% 15% 15%
Pet 0% 1% 5% 0% 0% 2% 0% 0% 8%
Homeowners 0% 1% 11% 7% 0% 5% 8% 0% 15%
Allowances
Mobile phones/telecommunications
50% 5% 8% 80% 11% 2% 53% 13% 13%
Computers 35% 8% 15% 81% 4% 2% 60% 0% 13%
Meal vouchers 35% 8% 10% 54% 15% 2% 25% 0% 0%
Housing 5% 6% 7% 15% 2% 2% 73% 0% 20%
Bicycle to work 3% 11% 27% 4% 0% 2% 0% 0% 0%
Gym membership 11% 11% 32% 25% 31% 17% 7% 7% 29%
Public transportation/commuting fund
18% 6% 19% 27% 6% 4% 25% 17% 0%
Child care (e.g. vouchers, onsite nursery)
16% 16% 40% 10% 2% 2% 8% 8% 0%
Elder care 5% 3% 5% 0% 0% 4% 0% 0% 0%
Professional subscriptions 26% 6% 2% 15% 4% 2% 8% 17% 8%
Cars 42% 20% 10% 68% 19% 6% 31% 23% 8%
Employee training 58% 9% 12% 72% 13% 2% 69% 8% 15%
Health care cash plan 18% 12% 19% 15% 9% 4% 0% 0% 0%
Educational allowance for family 7% 4% 2% 2% 6% 6% 58% 8% 0%
Services
Legal counselling/will writing 4% 2% 8% 2% 2% 2% 17% 0% 0%
Financial planning/tax returns 4% 2% 6% 0% 4% 4% 17% 0% 0%
ID theft 2% 0% 1% 0% 0% 0% 8% 0% 0%
Health screening 41% 14% 14% 65% 11% 6% 38% 8% 15%
Health training/lifestyle management programmes (smoking cessation, etc.)
28% 6% 3% 34% 9% 0% 25% 0% 25%
Loans 14% 3% 6% 17% 2% 9% 33% 13% 20%
Retail discounts 29% 5% 29% 20% 14% 16% 8% 8% 8%
Travel discounts 15% 3% 24% 8% 12% 16% 8% 0% 8%
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Western Europe Eastern Europe Middle East
Core May be flexed
Volun- tary
Core May be flexed
Volun- tary
Core May be flexed
Volun- tary
Concierge services 5% 1% 8% 0% 0% 0% 0% 8% 0%
Cinema tickets 3% 1% 18% 8% 22% 8% 0% 0% 0%
Online DVD/games rental 1% 0% 4% 0% 4% 0% 0% 0% 0%
Motor breakdown 2% 3% 12% 2% 0% 0% 0% 0% 0%
Other benefits
Pension/retirement savings plan (including voluntary pension)
66% 30% 5% 20% 29% 14% 46% 8% 8%
Employee savings plans (other than pensions)
9% 4% 8% 2% 8% 4% 15% 0% 8%
Holiday buy/sell 9% 16% 11% 4% 21% 6% 0% 15% 15%
Sabbatical buy 15% 3% 8% 0% 2% 0% 8% 8% 8%
Share schemes 20% 7% 7% 17% 2% 2% 15% 0% 8%
Charity donations 13% 8% 20% 7% 13% 2% 8% 0% 8%
Education fund 11% 3% 1% 8% 16% 2% 0% 8% 8%
Working time account 20% 5% 1% 11% 2% 2% 0% 0% 14%
Among respondents in the Middle East, housing is the leading core benefit provided, reflecting the large expatriate community and the widespread practice of offering such allowances. Additional coverage for maternity and dependants’ coverage are much more prevalent core benefits in this region than in Europe. Employee training is also a key benefit in both Eastern Europe and the Middle East.
Flexed BenefitsMedical insurance is the benefit most commonly offered through flex programmes, regardless of where the respondent is based. In Europe, pension or retirement savings plans are also popular flex options. Respondents in Eastern Europe also favour benefits like gym memberships, cinema tickets, and holiday buy/sell in their flex programmes, whereas a car is one of the top benefits offered by respondents in Western Europe and the Middle East. Other types of insurances, including life and dental, factor into many of the flex programmes offered by respondents in Western Europe.
Voluntary BenefitsEmployers in Western Europe and the Middle East tend to offer voluntary benefits that enhance an employee’s quality of life or promote work/life balance, such as child care (offered as a voluntary benefit by 40% of respondents in Western Europe), gym memberships, retail discounts and bicycle to work (popular in Western Europe), and housing (offered by 20% of respondents in the Middle East). These benefits give employees access to employer-negotiated rates for day-to-day necessities or leisure expenses. Child care is an interesting benefit because although it is the number one voluntary benefit offered by companies in Western Europe, its ranking is driven almost entirely by the UK (64%), Spain (59%), and Italy (30%). By contrast, only 15% of employers in Germany and 5% of those in the Netherlands offer it on a voluntary basis. This may be due in part to the prevalence of free pre-school access in some countries or the different tax treatment of child care benefits across the countries.
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A fifth of respondents in the Middle East offer their employees loans and housing as voluntary benefits. But in Eastern Europe, voluntary benefits are largely confined to various insurances, such as dependants’ coverage, life, optical, and dental insurance.
DETERMINING BENEFITSIn determining which benefits to include in their employee choice programmes, respondents in Eastern Europe are most likely to review their competitors’ programmes and conduct an employee survey, whereas those in Western Europe are most likely to seek external advice. A little more than a third of respondents in the Middle East report that they use employee surveys to determine which benefits to include; for about a fifth, management makes the decision with little or no input from others.
TAX SAVINGSOne of the major attractions of an employee choice programme is its ability to generate savings for the organisation while controlling the annual spend on benefits. Companies that have gained tax savings through their employee choice programmes have distributed them in various ways (see Figure 9). If the savings are allocated, they are most commonly given
to, or shared with, employees or used to offset the cost of the employee choice programme. In some markets where the economic environment has constrained the HR budget, the savings have been an opportunity to fund other HR programmes.
IMPACT OF THE CURRENT ECONOMIC CLIMATEThe majority of respondents across EMEA report that the current economic climate has not impacted the choice programmes in place. Indeed, on the whole, the pressure on budgets, headcounts, and resources is causing employers to search for more efficient ways of compensating employees to better meet their specific individual needs, such as through an employee choice programme. Respondents in Portugal, Spain, Italy, and Ireland, where economic conditions have been among the most difficult, are significantly more likely to report that they are accelerating plans to add a greater degree of choice.
EMPLOYEE AND EMPLOYER SATISFACTION WITH CHOICE PROGRAMMES The employee choice programmes offered across EMEA have been well-received by the employees of our surveyed organisations. Overall, 76% of surveyed respondents have confirmed that their employees
19%
14% 13%
14%
12%
5%
2%
21%
Savings are not allocated to anything
Give all of the savings to employees
Share the savings with
employees
O�set the cost of the employee
choice programme
Reinvest them in the core
business
Fund other HR programmes
Invest them in our retirement
schemes
Other
Figure 9. Allocation of Tax Savings Generated by Choice ProgrammeAmong Respondents with a Choice Programme
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responded positively to the benefits choices on offer, with respondents from Eastern Europe reporting the highest levels of satisfaction (see Figure 10). In Eastern Europe, flexible benefits have recently started to be offered, pushing the appetite and satisfaction to higher levels compared with other markets.
Employers also report high employee satisfaction with voluntary benefits, with 75% reporting a positive response to the programme and 22% reporting that employee’ responses have been evenly divided between positive and negative. Respondents in Eastern Europe report the most positive employee response to voluntary benefits (81%) whereas those in the Middle East report the lowest (50%).
When employers are asked if their overall choice programme has met organisational objectives, 72% agree and only 6% disagree. The same percentage also agree that their voluntary benefits programme has met organisational objectives, although 11% believe it has fallen short. The remainder report that they are unable to measure programme performance against their objectives.
GLOBAL SCOPE OF EMPLOYEE CHOICEAlthough about two-thirds of multinational respondents (66%) say that employee choice programmes are implemented and managed locally rather than globally, there is a clear recognition that a global strategy has merit: nearly a quarter of those organisations that don’t currently have a global or regional strategy in place say they are seriously considering it (see Figure 11). Those with a global or regional employee choice strategy say that it helps them:
• Improve benefits alignment and governance (67%).
• Facilitate international mobility (30%).
• Reinforce a global brand (23%).
About two-thirds of respondents with a global choice solution in place use multiple technology platforms to service their local choice programmes, with some employers looking to move to a single platform. Top criteria used in selecting a technology provider include:
• Cost.
• Ease of implementation.
• Usability of the system.
• Personal data security protocols.
14%
27%
29%
28%
21%
63%
46%
48%
57%
10%
22%
2
22%
7%
2%
2%
Middle East
Eastern Europe
Western Europe
All respondents
Figure 10. Employee Response to Choice Plans Is Largely PositiveAmong Respondents with a Choice Programme
Strongly positive
More positive than negative Evenly mixed between positive and negative More negative than positive
66%
9% 6%
19%
Programmes are developed and implemented on a local-country basis
Common approach to developing programmes
for countries within a specific region
One programme is developed globally and implemented
the same way in most or all countries
Do not have employee choice programmes outside
of this country
Figure 11. Administering Choice Programmes Across Multiple CountriesBased on Multinational Employers
CONCLUSIONEmployee choice in benefits is expanding across the EMEA region and is helping organisations to attract, retain, and improve engagement with their employees, while controlling the cost of providing benefits.
Employers have found that co-sourcing or outsourcing arrangements have eased dealing with the legal, technological, and administrative aspects of implementing and running employee choice programmes.
Mercer Marsh Benefits’ proven expertise can help you overcome the many challenges that an employee choice programme can present. Whether you are looking for guidance on a global employee choice strategy, benefits harmonisation, or on how employee choice can address a local employee retention or attraction issue, Mercer Marsh Benefits can assist.
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Copyright 2014 Mercer LLC. All rights reserved. 12476E-HB-1605-2014
ABOUT MERCER MARSH BENEFITSMercer Marsh Benefits provides clients with a single source for managing the costs, people risks, and complexities of employee benefits. The network is a combination of Mercer and Marsh local offices around the world, plus country correspondents who have been selected based on specific criteria. Our benefits experts, located in 135 countries and servicing clients in more than 150 countries, are deeply knowledgeable about their local markets. Through our locally established businesses, we have a unique common platform which allows us to serve clients with global consistency and locally unique solutions.
For further information, please visit our website at: www.mercer-marsh-benefits.com