GLOBAL EMPLOYEE BENEFITS LEVERAGING IDEAS FROM …...Although not prevalent in Asia currently, Flex plans will be gaining in popularity as 59% of employers indicated their intent to

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GLOBAL EMPLOYEE BENEFITSLEVERAGING IDEAS FROM AROUND THE WORLD

April 23, 2012

Marc-Andre Paquette, Mercer New York

1MERCER All rights reserved. Proprietary and Confidential

Session objectives

• Review global trends that impacts how organizations – and employees –approach employee benefit

• Share how organizations are responding to these trends around the world

• See if any of these ideas can be leveraged in Canada


Agenda

• What trends are impacting organizations around the world?

– The Employer View

– The Employees’ View

• How are organizations responding?

– Health management and wellness

– Defined contribution approach

– Flexible Benefits

Section 1

What trends are impacting organizations around the world?The Employer View


Current market realities

• Financial, legal and reputational risks

• Increasing pressure from Boards and Management teams to mitigate risk

• Regulatory changes. g.g., US Health Reform

• Movement from DB to DC not limited to retirement

• Downward pressure on social security

• Regulatory changes, such as introduction of phased retirement

• Impact of current government spending

• Workforce strategy and alignment of existing programs

• Companies’ perspectives and infrastructure are becoming more global

• Move to shared service model; fewer HR and finance resources available

• Increasing importance of emerging markets

• Drive to implement cost saving

• Leveraging of buying power, consolidation of vendors

Globalization Risk managementAging of society

Organizations – and you !! – will continue to be asked to do more with less, but will also need to do it perfectly…


Global business and health issues: the world at a glance

Aging and low birth rate

Outsourcing, shared services and centres of excellence

War for talent

Health cost is increasing

Stress and engagement problems

Social media and technologies

4 Generations

Diabetes epidemic

Cardiovasculardisease

People getting sicker but living longer

Growth and profitability, especially in emerging markets

Corporate social responsibility

Lifestyle/risk factors

Governance, litigationand risk management


Setting the global context:A large gap emerging between what governments can afford and what employees need and expect

Government provision

decreasing

Health needs increasing

Who is going to fill the gap?

Ensure programs support need to maximize labour productivity in order to remain competitive

Optimize expenditures to ensure maximum return on investment for benefit spend

Develop and communicate guiding principles to guide design, delivery and financing

3. Address productivity2. Maximize effectiveness1. Be strategic

Employers must:


Populations are ageing and the old-age support ratio will halve in the OECD

Section 2

What trends are impacting organizations around the world?The Employees’ View


About Mercer’s What’s Working™ survey

• Proprietary research on employee views on work

• More than 100 survey questions covering pay, benefits, careers, leadership, performance management, training, engagement, communication and more

• Conducted in last 18 months among nearly 30,000 workers in 17 markets worldwide

• Reflects overall workforce demographics in each market (age, gender, job level)

• Uses conjoint analysis to show which value proposition elements employees value most

• Prior data available for most markets to highlight year-over-year changes, trends


Survey conducted in 17 key markets worldwide

Americas:ArgentinaBrazilCanadaMexicoUS

Asia Pacific:AustraliaChinaHong KongIndiaSingapore

Europe:FranceGermanyIrelandItaly

NetherlandsSpainUK


Key findings globally

• Wide variation on where benefits rank in terms of importance…but satisfaction with benefits is down in most loca tions, when compared to results of prior surveys

• Loyalty is eroding

– Across all markets, increasing numbers of employees are seriously considering leaving their organizations

– Figures are highest for the youngest employees

• Apathy is a serious hidden problem

– Large portion of workforce not committed to staying or leaving, but most disengaged/dissatisfied of all

• Base pay, type of work, career advancement rank as the most important elements of the employee value proposition today


Most important value proposition elements: Americas


Most important value proposition elements: Asia-Pacific


Most important value proposition elements: Europe


Shifting views on key issues: Benefits

“The benefits in my organization are as good as, or better than, those offered by other organizations in our industry”

Change in prior versus current scores:Most decreased

Prior data not available for Argentina, Hong Kong and Italy.


Shifting views on key issues: Pay

“My organization does an adequate job of matching pay to performance”

Change in prior versus current scores:Most increased



Shifting views on key issues: Loyalty

“At the present time, I am seriously considering leaving my organization”


Change in prior versus current scores:All increasedChange in prior versus current scores:All increased


Generational insights: Paradox of the Millennials

• Younger workers present a challenging contradiction:

– More satisfied with their organizations and their jobs; More likely to recommend their organization as a good place to work

– However, much more likely to be seriously considering leaving their organizations at the present time

• Younger workers have more in common with their young peers around the world than with their in-country older colleagues

– All other ages more likely to think and act within the established cultural norms of their country

• Benefits is the area that sees the most differences between age segments

Section 3

How are organizations responding?Health and wellness


Global health and wellnessFoundation for investment

Health and wellness management� Healthy people are present

� Healthy are less likely to have high claims costs

� Healthy people have less worksite injuries

� Healthy people set a social norm

Brand stewardship� Brands grow business

� Brands matter more in emerging markets

� As of January 2011 word of mouth is 600 million people on facebook

� Employee Based Brand Equity (EBBE)

Engagement � Healthy people are more engaged employees

� Engaged employees are more focused on their customers

� Engaged employees are contagious

� Engaged employees leave the organization less often

High performance

culture

Engaged workforce

Brand stewards

Healthy

Engaged

Healthy & productive workforce

Higher top line revenue and lower cost of goods sold


Our basic biology is the same everywhereChronic diseases: driven by lifestyle choices

!!!!CardiovascularCardiovascular

!!!!DiabetesDiabetes

!!!!CancerCancer

!Chronic respiratoryChronic respiratory

Tobaccouse

Tobaccouse

Unhealthydiets

Unhealthydiets

Harmful use of alcohol

Harmful use of alcohol

Physical inactivityPhysical inactivity

4 diseases, 4 modifiable shared

risk factors


Demonstrative business supportDemonstrative business support

HealthyworkplaceHealthyworkplace

Internal role models and championsInternal role models and champions

• Senior high visibility sponsor• Global and regional and local leadership endorsement• Budget allocation

• Active participation of managers • Program owners in each location• Network of champions at site level

• Fitness centers or subsidies, walking or biking trails, etc. • Smoke free environment• Healthy food options in cafeterias, vending machines, free fruit• Safe work environment, including ergonomics• Activity rooms • Rest areas for pregnant women; lactation rooms

• Address tobacco, drugs/alcohol, work life balance • Recognize and reward healthy behaviours• Proactive absence management and early return to work • Allow participation in health activities during work time

Health related policies and procedures

Health related policies and procedures

Creating a culture of health can be done around the world


Wellness ProgramAn example in Asia (Hong Kong, Singapore and Australia)

Situation

� Employer with 240 employees interested in providing employees with more information and financial support for wellness as part of a more encompassing work-life initiative

� Primary driver to support more positive employment brand, consistent with corporate values of innovation, community, optimism

� Wanted to leverage well developed U.S. wellness programs

Challenges

� Wellness and prevention still a relatively new concept in many parts of Asia

� Few robust off the shelf programs versus what exist in the U.S.

� U.S. programs need to be culturally adapted � Locating vendors for health care delivery and

administration in short time period

Action

� Designed flexible wellness account for screening, fitness and risk management programs (e.g. smoking cessation)

� Restructured annual check-ups with aggregated health profile reporting and health portal for general health information

� Developed employee comms materials� Using Mercer BenefitsAsia platform to

administer the account

Results

� Improved employment brand and employee engagement

� Possibility for improved employee health with long term benefits for reduced health plan costs and improved productivity

Section 4

How are organizations responding?Defined contribution approach


Exit

Choices Pay, Play, or Play a New Way

AggressivelyManage HealthAnd Healthcare

Costs

Re-defineEmployer and

Employee Roles

Discontinue Offering Health

Plans

Pay Employees, who become responsible

to buy coverage

Pay

Play

Play

a

new

way

Defined Benefit Health

Defined Contribution

Health

Apply Enhanced Versions

of Traditional Solutions

Fund and Facilitate Versus Manage;

Fix /Transfer Liability


Benefits Choice Exchange

Change management/employee communication

Program design andvendor selection

DC strategicplanning

Ongoing Monitoring

Employee wellnessAccount management / Renewal negotiation

Marketplace monitoring / Regulatory compliance

Design

Employer determines Defined Contribution

amount and permitted uses

Assessment

Employees take a health, financial and risk assessment to

align needs with health plans and services.

Decision

Employees presented with insurance plan

options, to help make choices & enroll

$

US: The DC Model (Play a new way)End-to-end solution resulting in informed health care decisions


The Business Case for a Defined Contribution ApproachLong-Term Expense Reduction and Increased Predictability

$4.0

$5.0

$6.0

$7.0

Today Year 1 Year 2 Year 3 Year 4 Year 5

Status QuoDC Approach

AB

C C

o. a

nnua

l hea

lth c

are

spen

d ($

mill

ions

)

+6.5% unpredictable annual increase

+3.0% predictable annual increase

$3 million cumulative savings

Total Status Quo medical/Rx costYear 1 through Year 5 = $30.3 million

Total DC Approach medical/Rx costYear 1 through Year 5 = $27.3 million


Advantages of the Defined Contribution Approach

Employer

Predictable costs / risk reduction

Improved decision making

Turnkey / end-to-end solution

Increased employee engagement

Employees

Increased appreciation of benefits

Expanded choice

Informed health care decisions

Better health behaviors

Section 5

How are organizations responding?Flexible benefits


Flex Trends: the next generation

� Benefit programs need to be realigned to foster engagement of employees of four generations with different work culture and aspirations

� Although not prevalent in Asia currently, Flex plans will be gaining in popularity as 59% of employers indicated their intent to provide choices within the next three years in a recent Mercer Survey1

� The latest trends include:– simplicity– increased use of voluntary benefits– broader scope of benefits– built-in incentives to promote organization’s core values and culture

1 Source: 2011 Mercer Asia Pacific Total Health and Choice in Benefits Survey


Flex Trends: the next generationSimplicity (“more is less”)

• How?– by decreasing the number of options in the traditional benefit area

– by simplifying the price/credit structure

• Too much choice is overwhelming and can lead to:– paralysis

– poor choices

– regrets


Company Budget for

each Employee

Benefit Group for

Life Insurance &

Medical Benefits

Group Term Life + TPD

Group Personal Accident

Medical (not always)

Employee Flex Points

Spouse Flex Points**

Child Flex Points**

Additional Flex Points**

Modular Medical Options for self and/or dependents

Life / disability optional coverage

Health & Wellness

Work-Life

Personal Development

Family

CO

RE

BE

NE

FIT

FLE

X P

OIN

TS O

PT

ION

S*

Fle

xibl

e S

pend

ing

Acc

ount

(F

SA

)

** can be removed or included depending on each situation

• Basic concept is giving employees choice in selection of their benefits on year-to-year basis to meet their diverse and changing needs

Flex Trends: the next generationSimplicity (“more is less”) -- Asia “SimpliFlex” example


Flex Trends: the next generationIncreased use of voluntary benefits

• Offering individual voluntary benefits is a way for employees to supplement employer-paid benefits

• They have typically been limited to supplementary life insurance products but the offering is expending now: critical illness, long term care, travel insurance, retiree coverage and more…

• Historically, voluntary benefit programs were offered, communicated and enrolled separately

• By integrating these functions and activities for all plans, employers can realize cost efficiencies while delivering a holistic-benefits value proposition to their employees


Flex Trends: the next generationBroader scope of benefits

• Traditionally, in Canada, benefits included have been:– Life & accident

– LTD

– Medical– Dental

– Savings

• As employers and employees take a more extensive view of total rewards, flex programs are expanded to incorporate work/life benefits

• This concept is already prevalent in other geographies as flexible programs are gaining popularity


Flex Trends: the next generationBuilt-in incentives to promote organization’s core values and culture

• Be healthy!

• Be green!

• Be charitable!

• Be responsible!


Flex Trends: the next generationWhat does it look like?

Variable Flex Dollars Employee category, seniority, salary, coverage status, performance

Savings Health Lifestyle

Basic plan covering essential financial risks

� Pension Plan

� RRSP

� Savings / Stock Purchase Plans

� RESP

� Financial Planning

� TFSA

� Enhanced traditional benefits

� Critical Illness

� Out of Country

� Long Term Care

� Wellness Programs

� Elderly Care

� Child Care

� Subsidized Meals

� Gym Membership

� Health Exams

� Vacination Clinics

� Vacations

� Reward Programs

� Training

� Concierge Services

� Dry Cleaning Services

� Day Care

� Legal Counselling

� Computers / Cell Phones / Internet Access

� Group Home & Auto

Documents

GLOBAL EMPLOYEE BENEFITS LEVERAGING IDEAS FROM …...Although not prevalent in Asia currently, Flex plans will be gaining in popularity as 59% of employers indicated their intent to