With different laws, taxes, cultures and traditions, introducing an identical international flex scheme across all territories seems like an impossible dream, says Vicki Taylor
International flexible benefits plans are still the exception to the rule, but interest in such schemes is gradually increasing.
Not too long ago, organisations that introduced a flexible benefits plan in the UK, let alone internationally, were considered to be breaking new ground.
Now, flex is commonplace in the UK with more European countries such as the Netherlands, Portugal and Italy starting to view it with interest. However, there will always be some countries, such as France, where state benefits are so substantial that there is little demand for flex.
Martha How, reward team leader at Hewitt Associates, implemented her first pan-European flex scheme around ten years ago. This initially rolled out in four European countries and then spread to a total of six or seven. “The practical issues of international flex were the same then as they are now. There are a few more [schemes], but it hasn’t exploded and taken off in the same way as it has in the UK, and the practical reasons are very obvious. [Different countries have] got very different laws, very different cultures and traditions and very different tax practices,” she says.
Because of these variations, employers aiming to introduce international plans will find it practically impossible to implement identical schemes across all locations. Tony Morgan, head of flexible benefits at KPMG, points out that other countries tend not to have the same breadth of tax-efficient benefits that exist in the UK. “A lot of our clients operate in several countries and what they are saying to us is ‘we know the benefit and social security provision is different in each of the countries and we know that flex won’t necessarily have the same return on investment as it will in the UK, however, we would like to have consistency across all of our employees in terms of the benefits branding, in terms of the messaging [and] in terms of communication’.”
As a result, employers are increasingly looking at the types of benefits they want to provide to all staff globally, such as childcare provision, and managing the schemes centrally.
Marcus Underhill, director at benefits technology provider Vebnet, believes this top-down approach is becoming more common. “Five years ago, [benefits] were all delivered locally. Now, you are starting to see firms pull it together into more of a coherent strategy.”
Kim Honess, head of flexible benefits at Watson Wyatt, agrees that the market for international schemes is growing, although it is still relatively small. “[Schemes] are evolving at an increasing rate, but there are still not very many of them,” she explains.
If standard benefits products were available across all locations, international flex schemes could become increasingly common. This could happen if insurers begin to offer the types of cover that are typically included in flex on a global basis.
Hewitt’s How explains that the first flex scheme she implemented had a common branding, but some variation between countries because it used different suppliers. “When I put the scheme in, I had a different supplier for each benefit in each country. I couldn’t find a supplier that would offer it across all countries.”
Underhill agrees that the market would receive a boost if providers started to develop international products. “If the insurance companies can get some good multi-country products, I think the market will grow very quickly.”
Reductions in state healthcare and retirement provisions could also lead to an increase in global flexible benefits plans as employers introduce schemes to encourage staff to take greater responsibility for themselves.
At a glance
- International flexible benefits schemes are still relatively rare, but are slowly becoming more common.
- Employers are beginning to take a top-down approach, where head offices specify which benefits each country should implement, rather than permitting each location to do its own thing.
- Global flex schemes are likely to grow in number if insurance companies begin to offer more international products.