Perspective - Fall 2009 |
By Watson Wyatt Asia Pacific Benefits Team
ASIA-PACIFIC employers expect some economic recovery beginning either late this year or early next year, but are still keeping a close eye on expenses. Employee benefits, which account for a sizable proportion of employee costs, are an obvious target for cost review. In the Asia-Pacific region, however, the law generally prevents employers from cutting benefits. As a result, most employers tend to control costs by stringently managing benefit claims, eliminating noncontractual perks and putting new benefit initiatives on hold.
This can be effective, but only when benefits are appropriate for the employee population and are managed efficiently. To truly maximize their benefit investments, employers need to fully understand employee needs and the details of benefit arrangements. To that end, the following reminders serve as a cost-review checklist for employers in Asia-Pacific - and can be helpful to companies everywhere.
The first step is reassessing which benefits are most valued by employees, typically through employee surveys and focus groups. As populations in Asia-Pacific countries age, retirement and health-related benefits are likely to become more and more important to workers. Keeping such factors in mind will help HR professionals advise company leaders on cost-saving initiatives without risking the erosion of employee trust.
At the same time, HR must have a solid grasp of the cost and value of the organization's current benefit spending. That means understanding the details about the most costly items, the utilization of each benefit, and spending trends and patterns across different segments of the workforce.
Now is a good time to examine benefit contracts and consider renegotiation. The current economic situation will likely lead insurers and benefit providers to offer more competitive rates.
In particular, conglomerates should seek to negotiate insurance and benefit contracts on a pooled basis to attain the best rates and pricing levels.
Through employee research and feedback, program administrators can discover which benefits are most relevant to employees in today's world. In Asia-Pacific companies, these will most likely be related to access to technology and work/life balance. Organizations can also maximize the value of their benefit investments by adding the latest tax-efficient benefits to their offering.
If you decide to reduce costs by cutting down on employee perks and privileges, be sure to review such policies across all employee levels in order to secure buy-in and minimize negative effects on worker morale. You might need to cut back on some senior-grade perks (e.g., switching from business-class air travel to economy-class and/or replacing company cars less often). These changes will signal that times are tough and that leaders are sharing the pain.
Encourage employees to join in cost-saving initiatives by rewarding them for innovative suggestions in areas such as reducing electricity waste and promoting paperless communication. For ideas that are implemented, you can conduct an analysis to measure the resultant savings and pass on a small percentage of that amount to the employee as a reward.
Smart employers will take this opportunity to add new programs that strengthen employee loyalty but cost the employer virtually nothing. A voluntary benefit program, for example, lets employees select à la carte-style only the benefits they need and can afford.
Other relevant programs include those related to work/life balance and employee well-being. Flexible working arrangements and fitness classes can help employees battle stress. Recognition programs that acknowledge employee contributions or the achievement of certain goals can boost flagging employee morale. You might choose to provide education to teach financial management skills that will help them weather the economic slowdown. In addition, employers, especially those with large head counts, have the power to negotiate discounted retail deals on essential everyday items to improve workers' spending power.
Whatever changes you make to your employee benefits, communication is of paramount importance. Your company's HR leaders need to develop a communication strategy and manage workers' expectations to help them understand what is being done and why.
This is also a good time to reiterate the total value of the benefits you provide. Remember to emphasize any nonfinancial rewards and advantages, such as flexible hours, training courses, inspirational line managers and a positive work environment.
While employers look to manage expenses in these difficult times, they need to keep employees motivated. As in other parts of the world, many employees in Asia-Pacific are struggling with increased costs of living or heavier workloads. As they identify ways to more tightly control expenses, employers should be careful about undermining employee morale, particularly among highly valued employees.
If benefits are changed with financial cost as the only guiding factor,
the damage done could far outweigh the savings gained. You might risk losing
key talent once the downturn has ended - a cost that would leave the
organization ill-equipped to ride the wave of economic recovery.
For more information about Watson
Wyatt's Asia Pacific Benefits Trends Survey, or if you wish to discuss
benefits in your organization, please contact Elaine Hwang, email:
elaine.hwang@towerswatson.com
Asia Pacific Benefits Trend Survey 2009
By Stella Kate Sung
MANAGING BENEFIT PLANS have always been a challenge for employers, now particularly so as benefit costs continue to rise.
In the Watson Wyatt Asia Pacific Benefits Trends Survey conducted across 12 countries in the region in June 2009, 'controlling costs' remains one of the top three HR challenges/objectives (see Figure 1) for 75% of survey respondents in Hong Kong.
Additionally, ongoing operational costs and cost of implementation were among the top 3 drivers for determining the level of benefits provided (the other one being getting buy-in from management, see Figure 2) for Hong Kong. These results are in line with Asia Pacific as a whole, and not surprising given that over 20% of Hong Kong survey respondents spend over 20% of payroll on benefits and close to half spend between 10% and 20% of payroll on benefits. This has become a vicious circle for HR professionals as they try to juggle between managing high and rising benefit costs and offering suitable benefits that are aligned with the company's benefit strategy while satisfying employee needs and expectations.
As such, the cost-review checklist may be useful for employers to determine their stand in benefit provisions, and in particular:
Organizations are increasingly finding that employee benefit entitlements play an important role in attracting and motivating employees. Paying attention to and managing the key drivers will help companies control cost and attract and retain key employees as the economy begins to show signs of recovery.
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Stella Kate
Sung, Benefit Consultant, Retirement Benefits Practice, Hong Kong stella.sung@towerswatson.com |
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