Sssh…the best kept secret in employee benefits
Why aren’t more small to mid-sized companies with employees overseas taking advantage of multinational pooling arrangements? asks Damian Ross, Regional Manager – UK, Ireland & Nordics, Generali Employee Benefits Network
Ever felt like you might be missing out on something? It’s something that many big multinational corporations have known – and benefitted from - for years. And unbeknown to many smaller companies, could also bring cost savings, plus recruitment and retention benefits to them. We’re talking, of course, about multinational pooling and it’s much more straightforward than many might think.
There are around 2,500 multinational pools worldwide. Figures on the number of actual multinational employers in the UK and worldwide are notoriously hard to come by but it’s safe to say that only a minority of employers that could use multinational pooling arrangements currently do so.
How does pooling bring cost savings?
For multinational companies, the cost of health and risk benefits – particularly medical, life and disability protection - can be enormous. Multinational pooling represents a way of helping companies with employee benefits needs in multiple jurisdictions including expatriate employees to manage their long-term costs and remain competitive into the future.
Put simply, it enables participating companies to benefit from favourable claims experience thanks to economies of scale: cashback where the experience of the overall pool is favourable; losses absorbed by the insurer where it’s not.
It’s a worthwhile option where firms have insured premiums of as little as £17,500 a year and employees in at least two countries, meaning that small to medium sized enterprises (SMEs) and international middle market (IMM) companies could benefit.
According to Willis Towers Watson’s Multinational Pooling and Benefit Captives Research Report 2016/17, well-managed pools can achieve savings of 15% or more.
Too good to be true?
There’s no catch here. To explain a little more: larger multinational accounts are normally self-experienced. In other words, their dividend is based on their own experience. These kind of arrangements are the preserve of the big multinational corporations.
Multi-employer pools, on the other hand, typically help attract smaller, more volatile accounts from adverse claims fluctuations by combining the experience of a number of participating companies to determine the overall surplus. The latter is the type of pooling arrangement that would be suitable for SMEs and IMMs.
If the experience of the pool is favourable, a portion of a participating company’s premium may be returned as a dividend. If the experience is unfavourable, any losses under a multi-employer pool will be absorbed by the insurer.
It’s not all about cost savings through
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.
Subscribing to a pooling arrangement also gives a single point of access to a network of insurer partners around the world, the benefit of which is multifaceted. It includes things like: benchmarking data on the kind of benefits that are available in other countries – including state benefit provision: up-to-date country and regulatory information; access to local insurers and local contracts, often affording more relevant and cost effective benefit provision than that available via UK-based contracts; plus central oversight of all the benefits provided across various countries, allowing for data collection and analysis.
Supporting recruitment & retention
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 employers are looking for a benefits package for their employees in various jurisdictions they have to consider local market practice and needs in conjunction with company philosophy.
Take healthcare for example, UK employees are used to having the NHS as a fallback, however this will not be the case in many countries where access to comprehensive healthcare varies tremendously. So it’s vital to have in place a competitive benefits package that is appropriate to both the country and the needs of individual employees and their families. Central oversight of how those benefits are meeting corporate and employee needs by country is also essential.
Thanks to the network aspect, pooling arrangements allow for competitive terms and conditions, pricing and flexibility, plus an annual overview of all the contracts in which the client company is present.
For the HR departments of SMEs and IMMs - often inhibited by time and resource - such support might help take away numerous headaches associated with the complexities of trying to achieve competitive advantage whilst entering new territories and expanding in existing.