Overview

Balancing diverse employee needs for health care, financial security, work/life support and other benefit programs has been a long-standing challenge for employers. But getting the right combination is essential for workforce attraction and retention. Around the globe, many organizations are turning to employee choice or flexible benefit programs as vehicles for meeting employee needs – and some are saving money in the process.

Mercer’s Employee Choice in Benefits Survey, conducted in 47 countries, was designed to help us learn about benefit programs across the choice spectrum. Not surprisingly, we found significant variation by geography.

This report provides current information on health benefit programs for employers that are interested in benchmarking their own offerings against those of employers in their home countries, as well as for employers interested in learning about how benefit practices vary from one country to the next.

The survey was fielded between May and June 2009. More than 1,700 employers (of all sizes) participated. Mercer conducts a separate survey on health benefits in the US and thus did not invite US employers to participate in this survey.

Findings

• The types of benefits that employers offer vary considerably from one country to the next; cultural norms and competitive practices, as well as government roles in providing social services, influence the composition of employee benefit packages.

• Differences in employee demographics also play a part. For example, survey respondents in China reported an average employee age of 32, compared to 42 for Canadian respondents. The percentage of female workers in the workforce ranged from a high of 50% in Thailand to a low of 32% in Argentina.

• Some of these distinctions are blurred when countries are grouped into regions, but general differences in benefit offerings remain.

Health benefits play a key role in attraction and retention

The top two reasons employers said they offer benefits are, among all survey respondents,:

• To “provide competitive total compensation”
• To “retain current employees”

Canadian respondents included “attract new employees” as a very important objective. “Improve workforce productivity by improving health status and managing absence” was selected as a very important objective by more than half of employers (56%) in Canada and Latin America. 

Survey results suggest that while the impact of the worldwide economic recession is a concern to employers, this will not significantly affect their commitment to providing employee benefits. While nearly half (49%) of all surveyed employers said they would make at least some changes to their benefit strategies in 2009 or 2010 as a result of the economic downturn, just 7% indicated that the changes would be significant. More than a third (35%) of respondents that anticipate making changes said they will attempt to reduce spending on their benefit programs as a whole in 2010, while about a fourth will attempt to reduce spending on health-related benefits specifically.

Perhaps because employers rely on their benefit programs to assist with attraction and retention, more than 3/5 of respondents (62%) said that a very important priority for their programs for the next few years will be “to increase employees’ understanding and appreciation of benefits.” 

Degree of choice in health benefits

While the majority of survey respondents (73%) provide all employees with the same benefits package, 1/5 provide employees with “some choice,” and 7% noted that their employees have “a great deal of choice.”

Choice programs are most commonly offered by Canadian employers (42% of respondents provide at least some degree of choice) and European employers (34%). However, a great deal of variation exists among European countries; in the Netherlands, the UK and Spain, well over 2/5 of respondents provide employees with at least some benefit choices, compared to fewer than 1/5 of respondents from Russia.

Interest in providing employees with choice is high. Among the respondents that don’t provide choice, 8% have definite plans to provide choice within the next two years and 29% are looking into the possibility of providing choice. The most common reason given for not offering choice is the perceived cost (60%). The initial cost of designing a plan and implementing new administration can pose a
cost concern, particularly for employers facing budget constraints due to the recession. However, the majority of employers offering a choice program have found that it either saves money or is cost-neutral.

Effect of flex programs on benefit spending

When asked about the effect of flex programs on overall benefit program cost, the largest portion of respondents that offer choice said that implementing flex has been cost-neutral (42%). However, 30% noted that flex has helped reduce cost (8% said it reduced cost significantly).

While respondents were not asked to indicate the sources of cost reduction, savings typically result when employees switch from expensive programs that they do not necessarily value to less expensive options. Allowing employees the option of moving out of the most expensive medical plan, for example, has helped employers reduce spending. Similarly, fixing the contribution to a program over a multiyear period shifts the effects of inflation or other cost increases to the employee.

Choice in insurance coverage, allowances and other benefits

The most common benefits provided across all survey respondents are listed below, even if the types of benefits offered through choice programs vary widely by region and country, :

How employees buy benefits and what they may exchange for benefits vary across regions.

• In Latin America and Europe, flex funds are used by just 24% and 31%, respectively, of respondents with choice programs; more often, employees exchange salary and/or existing benefits for other benefits (where permitted by law).
• In Canada and Asia Pacific, flex funds are more common , where they are offered by 55% and 53%, respectively, of employers with choice programs.

The majority of respondents agreed that their choice programs have met their original objectives (63%agreed, and another 19% strongly agreed). Most respondents also said that they believe their programs have been successful with employees (83% said reactions have been positive or strongly positive).

Perhaps because the programs have achieved success, few employers indicated that they plan to make changes to their programs as a result of current economic conditions: 9% said they will raise employee contributions, and 4% will scale back the number of benefits offered, but 8% said they will accelerate plans to add a greater degree of choice.

Administration and flex fund design in comprehensive flex programs

The survey defined comprehensive flexible benefit programs, or “full flex,” as having core benefits, optional benefits, credits and a spending account. These components add a higher level of administrative, communication and funding complexity. About 14% of all survey respondents currently offer comprehensive flex programs.

These respondents are split on how they handle administration. About a third handle it exclusively in house (35%), with an additional 14% handling it primarily in house. More than a quarter (28%) outsource the entire process, with just the key decisions remaining in house, and another 23% use a co-source approach, with a mixture of in-house and outsourced resources (with claims payment and administration and the help desk/call center mostly often outsourced).

The majority of respondents’ employees enroll via an online enrollment system (68% of employees, on average); 47% enroll using printed materials and 7% enroll using a telephone voice-response system. Some use other means and others use multiple enrollment resources.

Multinational flex programs

Few multinational employers manage their employee choice programs globally (2%) or even regionally (9%); in most organizations, programs are developed and implemented on a local-country basis. However, about a fourth of global employers said they are seriously considering implementing a global employee choice strategy.

Mercer insights

Conclusion

The pressure to reduce the cost of providing health benefits, regardless of the country’s health system, does not show any sign of abating. As the survey results show, offering employees more choice in selecting the benefits that best match their needs and lifestyles not only can contribute to attraction and retention efforts but also can help reduce costs at the same time. As employers and employees accustom themselves to the concept of choice in benefits, we can expect to see more comprehensive flex programs implemented in various countries.