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Articles from The
Business Forum Journal
YOUR INTERNATIONAL BENEFITS - Part II
by Richard Polak
PROBLEMS DESIGNING INTERNATIONAL BENEFIT PLANS
This is the second in a three-part series of
articles on International Benefits.
Here you are, the Human Resource Director or Benefits
Manager of a multinational organization, and your boss says:
“We’re opening an office in the UK. How do we
staff it?” or “We
just bought a competitor in Taiwan; they have 2 employees. Are there any
laws we need to be concerned about?”
“We’re no longer using our distributor in
Germany. Hire someone!”
Each of the above scenarios has actually occurred at
more than one multinational company. This article will give the HR
professional an overview in understanding the issues to consider when
designing an international benefit plan.
16% Employer contribution
10% Employer contribution
24x monthly salary
24x monthly salary
Rider to Life Insurance
Personal Acc’t Ins.
Computer Software Plan
Base plus plan
Domicilary Care & Hosp.
5 weeks vacation; company cars
Separate Benefits for Directors
For the US manager, as an example, while there are many
cultures within the US, it is relatively easy to combine employees of
different cultures with the same general benefits. One might encounter
differences among the HMO and managed care medical plans but these are
relatively insignificant when compared to arranging benefits for employees in
other countries. The first step is to recognize that there are differences
among countries. Note below some actual examples of benefit programs in
several countries for the same employer.
You can recognize the vast differences. In addition,
here are some other problems one must consider when designing international
Competition for Labor - In every country, skilled
labor is in great demand. Even in Germany where unemployment is high, the
competition for skilled labor is also high. In undeveloped countries, it is
a constant challenge to keep skilled labor trained and satisfied.
Multinationals vs. Local employers - Who do you
benchmark your benefits against? Often overseas, you’d want to benchmark
your benefits against multinationals. Local firms attract employees simply
because they’re local and employees feel more comfortable within their own
environment. Therefore, it is not an equal playing field. You may find it
necessary to provide a higher level of benefits than the local firms and
compare yourselves to other multinationals in your industry.
Executive Benefits - These vary widely from
country-to-country. In the UK, the company can take a tax deduction for
offshore pension funds.One can’t generally can’t do elsewhere.
In Germany, quite often, the General Manager will have an enhanced pension.
Perks: cars, housing, vacation - Without a doubt one
of the biggest issues for some multinationals to overcome is the enhanced
vacation and company car policies granted by European companies. This has
become accepted as a way of life in certain countries. If you take away or
reduce these perks, you may as well close up shop because no one will work
China, India, Russia - These countries pose an
entirely new set of problems. In benefit terms, they are just entering the
There is much that needs to be
understood when considering benefit programs in these countries.
Beware of local relationships - Your
local management in each country has relationships that have been
established over time. One must be aware that it is not always in Corporate’s
interest to continue these relationships.
Stock programs - This is an increasingly
important benefit, especially for high-tech companies. It is important to
consider, however, that in certain countries it is not perceived as a
valuable benefit while in other countries it is taxed against the employee.
One must be careful not to simply establish a worldwide stock program.
Language - Languages of course differ
around the world, but what also differs is the definitions of what is
translated. For example, in Japan, Term Insurance could very well mean a
pension plan to a Japanese Director.
Legislation and Tax - Just like your
home country, changes are occurring at a rapid pace all over the world. It’s
important to know these changes, as well as the laws, before designing and
implementing a benefit plan.
Trends - In the US most new pension
plans are designed as 401(k) plans or something similar. The trend around
the world is also to design defined contribution plans. However, in certain
countries, i.e. Germany and Japan the culture nor the tax laws support this.
Communication - It’s important to
understand that the glossy Summary Plan Descriptions (SPDs) design for our
employees in the one country are not only overkill in many countries but are
is President and CEO of Polak International Consultants, Inc. During the
past five years the company has grown to include consultants in Los Angeles,
Santa Clara, San Diego, St. Louis and Miami with affiliates in over 60
countries. In Mr. Polak’s 23 years of consulting experience he has
advised over 200 multinational organizations in the areas of international
management, human resources, compensation and benefits. Some of those
Avery Dennison; GTE; Netscape
Communications; BMW; Hilton
Hotels Corporation; Occidental
Petroleum; Caterpillar; Intel; Pan
Pacific Hotels and Resorts; Church
of Latter Day Saints; Janus
Mutual Funds; SAS
International Hotels; Computer
Sciences Corporation; Magnavox; Sun
Disney Company; Discovery Channel; Microsoft; World Vision; Fluor Daniel; NEC
America and Worldwide Church of God.
Polak has consulted management on their overseas operations and conducted
studies in all areas of international human resources including design and
implementation of overseas pension programs; benefits and compensation for
expatriates and third country nationals; multinational pooling; consolidation
through mergers and acquisitions; administration; communication programs and
corporate policy development.
to forming Polak International Consultants, Mr. Polak was the Western Regional
Manager of Foster Higgins’ international practice (now William M. Mercer).
While there, he built the largest department outside of New York, which
managed 73 international accounts.He
holds a Bachelor of Science degree in Business Management and Mathematics from
Alfred University in New York with continued studies at Columbia University,
The New School for Social Research and UCLA.
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