Multinational firms looking for global control of benefits

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Multinational companies are looking to have more global control over benefit offerings as many fear that local rules are insufficient or incompatible with business' guidelines, research from Aon Hewitt finds.

The 2012 Corporate Governance of Global Employee Benefits Study supports comments from Aon Hewitt reward principal Martha How who said multinational clients were asking her for more global benefits solutions.

"Organisations are saying we want global strategies, a global platform and, where it makes sense, to have global flex benefits," she said.

According to the research, more than 90% of companies expected to have corporate benefits policies in place over the next three years.

However less than 60% of companies were certain that their local benefit plans would be aligned with corporate guidelines.

This was echoed by fewer than 20% of companies saying they were confident that local practices were in line with corporate guidelines and fewer than 10% were confident that corporate controls were adequate to reduce financial and operating costs and risks.

Aon Hewitt global benefits strategy and solutions leader Amol Mhatre said: "We are seeing more and more companies wanting to have a better line of sight and at least some control over benefits decisions made by their local operations.

"Clearly, financial drivers play a big role here, but we found that companies want to do this for a variety of reasons, including managing reputational risks and resource constraints on the ground.

"On the other hand, companies are still allowing flexibility for their local operations to make decisions; corporate policies tend to be more a guideline rather than a mandate for local operations.

"Interestingly, this then poses a challenge for implementation."

Another key finding was the differing challenges in mature and emerging markets.

While 83% of respondents stated that active cost management and sluggish growth were a major business issue affecting their company in mature markets, this compared to just 37% for emerging markets.

By contrast, 75% of companies are investing for growth in emerging markets where they currently face talent shortages and salary inflation and two thirds (64%) said employees in emerging markets were increasingly demanding new and higher benefits.

Other key findings included:

•88% of companies said that employee benefits were on the agenda for boards and senior management of their companies due to the costs and risks of benefit programmes.

•Around 70% of companies said they were leveraging their global scale to reduce costs of benefits operations and were implementing stricter controls and corporate oversight in both mature and emerging markets.

•On average, only about 40% of companies have formal structures in place. Of this group, an average of 65% said that protocols such as these are effective. On the other hand, only 16% rated their governance protocols as effective when established informally or in an ad hoc manner.

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