Benefits trends in Central and Eastern Europe

Companies operating in Central and Eastern Europe are more likely to offer employees death and disability benefits than medical and retirement benefits, according to John Swabey, Senior International Consultant of Watson Wyatt, Brussels. For medical benefits, Russia and Kazakhstan are the main exceptions with over 70% and 50% of companies, respectively, providing this benefit.

• Over 60% of companies in Hungary, Poland, Romania and Slovakia offer death benefits, compared to fewer than 40% in Lithuania, Belarus and Uzbekistan.
• Over 50% of companies in the Czech Republic, Hungary, Poland, Romania, Russia, Slovakia and Slovenia offer disability benefit; only just over 20% of Uzbekistan companies offer the benefit.
• Over 70% of companies in Russia offer medical benefits, compared to just 5% of Croatian companies. In Poland, the situation has changed dramatically compared to last year, probably allied to 1999 reforms to the social security system. Some 50% of companies provide medical benefits in 1999 compared to just 10% in 1998.
• Fewer than 20% of companies offer retirement benefits in the region generally, with Hungary, Russia, Slovenia and Bulgaria at about 18%. No companies in Belarus offer retirement benefits and only about 1% in the Czech Republic and Lithuania.

John Swabey, Senior International Consultant of Watson Wyatt in Brussels with special responsibility for Central and Eastern Europe, said that the current position does not tell the whole story. "Whilst companies in Central and Eastern Europe have not yet really embraced the need to offer retirement benefits, that is changing significantly. The increasing focus on retention coupled with reduced state provision makes retirement benefits a significant issue", he said.

That retirement provision in Central and Eastern Europe will change is clear to see:

• Hungary and Poland: complete overhaul of the pensions system "in the making", with compulsory contributions to individual pension accounts for younger employees.
• Croatia, Lithuania, Slovenia, Romania: three-tier pension systems due in 2000.
• Russia: non-statutory pension law signed in 1998, permitting defined benefit and defined contribution pension plans. Tax relief not yet in place but the aim is to make company contributions tax-free, investment returns to be tax-free and benefits taxed as income.
• Czech Republic: statutory retirement savings introduced; more radical reform once more under debate.

John Swabey commented: "The provision of benefits by companies in Central and Eastern Europe is changing rapidly. There is the need, common throughout Europe, to retain skilled and experienced workers together with the need to attract the right level of staff. Added to this is the pressure on some countries to move benefit provision more in line with Western Europe as part of the preparation for membership of the EU.

"For companies operating or seeking to operate in Central and Eastern Europe, access to the most up-to-date information is essential and at Watson Wyatt we seek to ensure that companies can make the right decisions on the bases of current information and advice drawn from substantial experience", Swabey concluded.

Notes to Editors

The Watson Wyatt Forum on Compensation, Benefits and Employment in Central and Eastern Europe

The 1999 series of Forum meetings was held throughout Europe in June and July in Moscow (June 8), Budapest (June 10), Vilnius (June 15), Warsaw (June 17), Bucharest (June 22), Prague (June 24), Vienna (June 29) and Reigate (2 July).

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