Multi-National Companies Seek More Oversight of Employee Benefits

A study by Aon Hewitt and the American Benefits Institute finds that multinational companies are aiming to significantly increase the oversight of their employee benefit programs worldwide to counter rising costs and financial risks.

The study is based on insights from global benefit directors at 140 of the largest multinational companies based in the U.S. and Europe. Most employers are still allowing flexibility for their local operations to make decisions; corporate policies tend to be more a guideline rather than a mandate for local operations. Fewer than one-in-five companies are confident that local practices are in line with corporate guidelines and fewer than 10% said they are confident that corporate controls are adequate to reduce financial and operating costs and risks.

James Klein, president of the American Benefits Institute said, “Globalization poses a unique set of strategic and compliance challenges for multinational employer-sponsors of benefit plans. To continue their commitment to health coverage and retirement security for their employees, they must manage the growing risks associated with plan sponsorship. It appears that centralization of corporate benefits governance is already helping to mitigate some of these challenges by improving communication between headquarters and worldwide operations.”

Other Key findings include the following:

• 88% of companies say that employee benefits are on the agenda for boards and senior management of their companies due to the costs and risks of benefit programs.

• About 70% of employers are leveraging their global scale to reduce costs of benefit operations and are implementing stricter controls and corporate oversight in both mature and emerging markets.

• More than 90% of companies expect to have corporate benefit policies in place over the next three years. However, less than 60% of organizations are certain that their local benefit plans will be aligned with corporate guidelines.

• On average, only about 40% of companies have formal structures in place. Of this group, an average of 65% said that protocols such as this are effective. On the other hand, only 16% rated their governance protocols as effective when established informally or in an ad hoc manner.

As the American Benefits Council’s research and education affiliate, the Institute is keenly interested in globalization’s affect on employer-sponsored health and retirement benefit plans, added Klein. As the world itself gets smaller, the decisions employers make regarding benefit plans take on even more significance for the success of multinational companies.

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Last Updated 06/29/2022

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