More opportunities in pooling than you might think
You don’t have to be a blue chip to benefit from multinational pooling. Expanding UK SMEs and International Middle Market (MMI) companies can also enjoy the benefits of a pooled approach says Generali Employee Benefits Network regional manager – UK, Ireland & Nordics Damian Ross
Whilst companies might have a clear idea of what employee benefits make sense in their home country, it’s not easy to know what to offer employees abroad. Specialist advice in this area, especially for growing SMEs and (IMM) companies, might just prove invaluable.
HR professionals are often, especially in expanding SME or IMM companies, unaware of how to access extra support or indeed that support is even available. This could include invaluable information and services such as benchmarking data on what kind of benefits are available in other countries – including state benefit provision; access to local insurers and local contracts and the cost efficiencies associated with economies of scale, which can make international pooling worthwhile where firms have insured premiums of as little as £17,500 a year.
SMEs and IMMs arguably need this kind of support more than their big corporate counterparts as it’s unlikely they will have the resources internally to cope when it comes to corporate governance and international employee benefit expertise.
According to the latest government statistics 99.9 per cent of all private sector businesses at the start of 2016 were SMEs, defined as 0 to 250 employees. Total employment in SMEs was 15.7m, 60 per cent of all private sector workers in the UK.
What’s more, SMEs’ added-value to the UK economy is expected to increase by 11 per cent to £217bn by 2020 according to a study in November 2016 conducted in partnership between the Centre for Economics and Business Research (Cebr) and Hampshire Trust Bank.
Few SMEs export beyond the EU at present, but according to a report by the European Commission, increasing the internationalisation of this sector is crucial for competitiveness, economic growth and innovation. The EU Commission states that an estimated 90 per cent of global growth will originate outside the EU in the coming years, while developing and emerging markets are expected to account for 60 per cent of world GDP by 2030.
The next step on from SMEs is the IMM, a sector that is little reported upon, so statistics on market size, let alone a definition of what an IMM is, are hard to come by and vary hugely. These are companies that have gone beyond the start-up phase but haven’t reached the large corporate stage. They have a clear focus on international business and international growth as part of their strategy.
For the purposes of one study into middle market growth these companies may be defined by revenues of anything from around £200m upwards. The study found 45 per cent of these firms generate more than half of their revenues internationally. And in general they are eager for international expansion, with international growth seen as a key part of company strategy for 56 per cent of the firms involved in the survey.
Offering a competitive employee benefits package to UK domestic employees can go a long way towards helping to attract and retain talent. This is a given. When employees are moving abroad for work, often with their families in tow, a good employee benefits package becomes an absolute must.
Take healthcare for example, those UK employees used to having the NHS as a fall-back, will quickly find that quality of and access to healthcare varies tremendously from one country to the next.
Advisers have a crucial role to play in not only helping employers put in place competitive benefits, but also a benefits package that is appropriate to the country and the needs of individual employees. The company will then want an oversight position of how those benefits are meeting corporate and employee needs by country. No easy task for a growing company.
This is where multinational pooling can come into its own. We are seeing more and more SMEs and IMMs taking advantage of the potential cost savings and access to global expertise associated with a pooling arrangement.
The eligibility rules vary from insurer to insurer but, in our experience, they’re available to companies with a minimum annual risk premium spend of €20,000 (£17,500), with just one initial contract – such as group life or group income protection – and employees in at least two countries.
Subscribing to a pooling arrangement gives a single point of access to a network of insurer partners around the world, the benefit of which is not only access to local products and services, which might be more appropriate than UK based contracts, but also up-to-date country and regulatory information.
They allow for competitive terms and conditions, pricing and flexibility, plus an annual overview of all the contracts in which the client company is present. And, what’s more, cashback.
Pooling arrangements offer a full stop-loss system: in other words, any negative balance is absorbed by the insurer, while potential dividends will be paid to the client if the overall portfolio balance is positive.
In the complicated international sphere, companies often inhibited by time and resource, would arguably welcome this kind of support as they grow and prosper into the relatively unknown.