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Articles from The Business Forum Journal

MANAGING YOUR INTERNATIONAL BENEFITS - Part I  
by Richard Polak

This is the first of a three-part series of articles from Polak International Consultants on International Benefits.  In subsequent issues of the Business Forum Journal we will be discussing Performance Management, Leadership Development and Employee Recruitment and Retention.

Step One: Develop an International Benefits Philosophy

The first step before designing any programs is to develop an international benefits philosophy.  Generally, this philosophy will be consistent with your home country philosophy.  However, there are some marked differences.  Here are some topics to include:

§         Ranking - Determine where you want to benchmark your company; i.e. in the top quarter; right in the middle or below average.

§         Follow local customs, not your home country’s - Don’t get trapped doing business “US style” for example.  Understand the local customs and culture.  Be sensitive to the local company’s needs while adhering to a strong philosophy.

§         Define Compensation - Be consistent as to what you include as compensation, i.e. base pay only, base plus commissions, target salary.

§         Discrimination Policy - In most countries you are permitted to discriminate.  Is this the policy you want to adopt?

§         Integration with Global Programs - Many companies have worldwide travel accident policies.  You should determine how you want these integrated with the local plans.

§         Defined Contribution plans preferred over Defined Benefit plans - Most employers select this approach.  It’s important to be clear with your local offices.

§         Active vs. Passive control - Determine if and how you want your local offices to seek approvals for benefit changes.  If so, to what extent.  Pension only?  All benefit changes?

§         Reporting - Determine how you want the local subsidiaries to report costs and benefits.  Make it clear so there is no question on compliance.

Step Two: Place your International Benefits Philosophy on Paper

State the philosophy clearly so there is no misunderstanding among your local offices.  Export the philosophy worldwide then adopt the following principals:

§         Think globally -- Act Locally (this old adage still applies).

§         Do not use your home country as a model (other than in philosophy).

§         Review all benefits: pension, death, disability, etc.

§         Understand the employment conditions: employment contracts, work rules, minimums required by law.

Step Three: Designing the Programs -- Getting Assistance

You’ll want the most cost and tax-effective programs worldwide.  That goes without saying.  Now, the task of “how to do it” begins.  Here are your options:

§         Do it yourself - You can design these plans using the knowledge you’ve acquired, research materials and sources such as your relationships with other companies.  In addition, international insurance companies are quite anxious to help -- the downside to their advice may be slanted toward their products.

§         International Consultant & Local Consultant - You can contract the services of an International Consultant such as ourselves who work jointly with local consultants in each country.  This approach provides you with the highest skill-set both globally and locally.

§         Local Consultants only - Should you have the inclination, time and aptitude you can contract the services of a local consultant directly.  This would be appropriate for those who have the skills to understand the local customs and ideologies.

Special problems:

§       Medical Travel - Many employers have employees who travel from country-to-country and therefore must be assured that they are covered for medical expenses.  There are several international medical carriers that specialize in this area.

§       Worldwide Policies - Many employers have accident policies that provide coverage worldwide.  These are generally written in lump-sum amounts of $100,000, $200,000 or higher.  We suggest that these be changed to provide an amount as a percentage of salary, say two times annual salary, versus a lump-sum.  This is more equitable worldwide.

Step Four: Approvals, Marketing and Implementation

§       Get Approvals - In your philosophy statement you clearly outlined the steps necessary to have benefit plans approved.  Once this process is complete you must market the plans.

§       Marketing the Plans - This is where it is critical to get local assistance that you trust.  The Local Consultant, often in concert with the International Consultant, will market the plans on your behalf so the company will achieve the most bang for it’s buck (or whatever currency it is).

§       Implementing the Plans - Once again, a Local Consultant who knows the lay of the land is essential in this process.  The Local Consultant will assist your local office through an easy, understandable implementation process.

Step Five: Communicating the Plans

§         Summary Plan Descriptions (Booklets) - The requirements vary by country.  However, it’s important to understand the cultural concerns.  For example, you wouldn’t want to put a slick brochure together in most of the Asian countries.  They will view it with skepticism and waste.

§         Web page - Many firms are now placing their worldwide plans on their intranets.

§         Employee Meetings - This is always the best way to announce the plans.  Most companies don’t take advantage of this option enough.

MANAGING THE PLANS

The plans are in place, they are running efficiently, without much Corporate assistance.  All looks well, and it is.  However, everything needs a level of maintenance.  Here are some suggestions:

§       Set-up Administration Guidelines

1.      Enrollment procedures

2.      Premium payment

3.      Claims administration

This process involves creating an Administration Manual.  The Manual will outline all the procedures, forms and letters to be sent to employees when and how often.  With a well-designed manual, anyone can refer to it for answers to most administrative questions.

§       All plans should be monitored when the company:

1.      Cannot attract and retain employees

2.      The population exceeds 50 employees

3.      At annual renewal

4.      Every 3 years

5.      Grows to a level to be concerned about FAS 87, 404a or IAS 19

6.      Must comply with other local laws and regulations

You’ve designed the plans, they’re up and running and you’ve done a terrific job communicating them to the employees.  However, sometimes scenarios arise that will pose some challenges and will need to be addressed.  

Part II of this article will discuss how to effectively tackle these problems. 

You can contact Richard Directly at:

E-mail:           [email protected] 
Web Site:      www.polak.net
Telephone:   (323) 465-1000

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