Global Benefits Spending Is a Mystery to Multinationals

Highly decentralized benefits programs hamstring big global companies from optimizing spending and risk management.
David McCannJune 25, 2014
Global Benefits Spending Is a Mystery to Multinationals

Ably managing the costs of employee benefits on a global scale remains elusive for most big, multinational companies. Only 22 percent of 492 global and regional benefits managers for such firms who responded to a recent Towers Watson survey said they have timely and comprehensive access to aggregate spending data.

For multinationals, the operations and delivery of benefits tend to be extremely decentralized. Each local business typically has a handle on its benefits spending, but data on it is not often recorded in systems “in a way that somebody can just go in and extract it,” says Michael Broomhead, senior international consultant for the consulting firm.

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Premium expenses for medical, life and disability insurance, for example, tend “to be rolled through payroll into local P&L as a cash expense along with a whole bunch of other cash expenses” and not often identified as separate line items.


That means a global benefits manager trying to understand the full scope of a multinational’s benefits-related risks and opportunities must communicate with each local benefits manager. “If there is a dire need you can find the information, but it’s painful, and the problem is that it’s a snapshot in time, and then it changes,” Broomhead says. Towers Watson’s survey report calls the situation “a key weakness in global governance and oversight, for which global and regional managers need to find a solution.”

Currently, such managers’ best shot at obtaining aggregate worldwide data is through insurers with which their companies have multinational pooling arrangements, under which benefits programs in multiple countries are combined so as to generate financial savings and better risk control. But that information is generally not available until the end of vendor accounting cycles, meaning companies may get data 12 to 18 months after expenses are incurred. “The delayed reporting is a significant flaw in the process,” says Broomhead.

For the most part, big multinational companies have not yet adjusted to a gradual shift from a longtime historical norm, where medical costs outside the United States were not “material,” Broomhead says. Even now, he notes, because of the prevailing socialized-medicine and integrated-care environments in many other countries, companies’ per-employee medical costs there are typically no more than 40 percent, and in many cases as little as 5 or 10 percent, of what they are in the United States.

But because of various trends playing out in recent years — medical-cost inflation and population growth outside the United States, as well as the simple fact that many multinationals now employ as many or more people outside their home country as within it — the global cost of benefits is increasingly problematic. Companies need their systems and accounting procedures to catch up with that reality.

“Our survey tells us what we also hear from our clients broadly, which is that first and foremost companies are concerned about managing cost — and yet for the most part they do not have any reliable aggregated data on what they’re spending that they can pull together when they need it at headquarters,” Broomhead says.

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