Benefits packages offered to employees are usually based on employee demands, local taxation and legislation, amongst other factors. In multinational organisations, however, HR can be faced with the task of taking these local issues into account, whilst at the same time remaining market competitive around the world. Lucie Benson looks into what types of international benefits work and why.

They say it’s a small world, but for multinational corporations, the challenge of managing benefits packages on an international scale can be made all the more complex when trying to balance global strategy with local requirements, including the multitude of cultural differences and priorities of employees that determine which package is the most attractive for that particular nation.

For instance, UK employees work long hours and have a current minimum holiday allowance of 20 days, therefore extra annual leave would be a popular benefit. Yet this may not be so important for their Austrian counterparts who are entitled to a minimum of 38 days annual leave.

When taking these differences into account, large multinationals must decide on the best benefits package to offer their staff by benchmarking the organisation’s global position to gain that competitive edge, while ensuring the benefits are cost-effective and in compliance with the legal requirements in each country.

To decide what employee benefits to offer globally, an organisation needs to look at whether it will be able to devise and implement a global policy or whether it will be more appropriate to have regional policies, dependent on a number of contextual factors. Frances Wilson, manager international at the Chartered Institute of Personnel and Development (CIPD) says: “In terms of global rewards, an organisation needs to look at making sure corporate values are translated into policies but allowing for local adaptation to make sense in different regions.”

Choosing the right reward programme for each international office obviously depends on the tax, legislation and cultural values in the different countries. “What is important in one country may not be in another,” comments Wilson. “For instance, in the USA, complementary health insurance is critical, whereas in France it is not so important. Or in Scandinavia, where there is good and more affordable childcare, vouchers to contribute towards the cost of this would not be considered as valuable as they are in the UK.”

Borders Group operates more than 1,300 book and music stores worldwide and has 34,000 employees. It is an American company, with an international division covering the UK and Asia Pacific. Beverley Newman, HR director for Borders UK, says that all employees are remunerated in line with their country’s benchmarks. “There is an HR department in each country and they each have complete autonomy on the remuneration of employees, in terms of base pay and benefits,” she says.

There is, however, a significant importance placed on harmonising benefits across all worldwide locations. “As a general philosophy, we try to ensure our benefits reflect our culture across the world,” comments Newman. “There are similarities between the US and the UK in that we both operate the Borders Foundation Fund, which is a fund that employees can draw on in times of hardship, and Asia Pacific is likely to follow suit soon.”

In addition to the foundation fund, the organisation offers a company wide executive and senior manager bonus programme.

Simon Dudley, UK senior consultant in international practice at consultancy firm Watson Wyatt, says that large multinationals will tend to set down a series of very broad statements and aims that they would like to see in their benefit programme as part of the total reward. “Then it is a question of trying to interpret those broad statements into what you can do locally,” he adds. “That may well lead to desires to change local plans and accelerate the move away from defined benefits.”

When it comes to implementing benefits policies, Dudley comments that it is important to remember that people perceive benefits in different ways in different countries. “You have to engage with people so that they understand the rationale behind it but also, in the corporate sense, they will have to adapt and try to get the essence of what they want to achieve and not necessarily the fine detail. And that is one of the biggest challenges because we are all biased by our own home country.”

There is also the issue of streamlining some benefits to help ensure cost-effectiveness. Dudley says that risk benefits such as life assurance is a good place to start with this. “You may have a preference to provide something like two years’ salary, which could be a benchmark that you try to do everywhere, but it’s usually a difficult thing to pin down precisely,” remarks Dudley. “However, what you can do is say that you want to provide life assurance and that an insurance company in a particular network must be used to get the benefit of it being a global arrangement and to get synergy from a cost point of view.”

The same goes for pensions, says Dudley. “What we are also seeing now is companies seeking to try and do that with pension plans, where they may be trying to get pooling of investment management to get better returns or to have a shortlist of investment management providers around the world that everyone would use,” he says.

Once these policies are in place, it is then a question of finding out whether they are working successfully or not. The CIPD’s Wilson says much of the success of international benefits can be measured by gauging employee satisfaction in a survey or other measures. “Organisations can look at retention trends or the information provided by exit interviews,” she comments. “Other measures would include looking at labour turnover, or if you are finding it hard to recruit, it could be that the pay or benefits aren’t right for your employees.”

When measuring the success of each rewards package at the Borders Group, the company prefers to keep this local. “We don’t compare each package against each other,” says Newman. “Any analysis would be internal to ensure the benefits provided have the desired outcome in each country.”

At the end of the day, international HR is an extremely complex area, remarks Wilson. “Benefits and rewards are even more so, due to the legal, fiscal and cultural issues,” she adds.

Watson Wyatt’s Dudley says that terminology is another thing that can cause issues. “People don’t necessarily understand things in the same way,” he comments. “If you talk about pensions in some countries, they may think you are talking about a lump sum scheme as opposed to an income and vice versa, so it is making sure people understand the language and what it is you are describing because people will have different interpretations based upon their own experiences and cultural backgrounds.”

What is clear is that it isn’t a case of ‘one size fits all’ so what might work for one organisation may not necessarily be the best approach for another. However, it seems the most successful approach to take is to ensure corporate values can be tailored to fit in with local requirements, so perhaps it can be a small world after all.