As state welfare provisions decline and emerging economies wake up to the value of things like health insurance, employers are reconsidering their approach to benefits. Jean-Remi Bur, Total Group’s head of group employee benefits and expatriation, explains how his company is negotiating this rapidly changing global landscape.
Finance Director Europe: In your time working in HR, how have you seen attitudes and the importance of employee benefits change over the last few years?
Jean-Remi Bur: Outside US and Anglo-Saxon companies, benefits haven't really been much of an issue. However, changes to regulations have created new corporate social responsibilities for global firms: employees in remote areas must now enjoy the same opportunities as other staff, and benefits are a more prevalent part of employers' attraction/retention propositions.
Total Group, which is one of the major oil and energy firms, ensures its employees are well aware of what's in it for them in terms of benefits. The company has 110,000 employees worldwide, with businesses in 130 countries, and offers the same benefits to everyone. These include medical or health insurance (life and permanent and total disability coverage), and a pension, or failing that, a long-term savings option.
How significant a role do benefits play in retaining staff?
Total measured the impact of benefits, not only in terms of cost, but also in terms of retention, using an employee satisfaction survey.
A year after the company's benefits were aligned in China, South Asia, India and Vietnam, employee satisfaction was seen to increase by between 15 and 20%, depending on the location. That showed that people recognised the extra value, and were happy with the results.
By comparison, European, and other developed countries tend to employ more senior staff. Aging populations make companies more sensitive to pensions, or long-term deferred cash, whereas in emerging countries, people prefer medical cover and are absolutely not interested in things like life or disability insurance. When you're 30, you want cash and to be able to provide for a family, and go to the best hospital to be treated, if possible. This makes sense, so Total varies the way in which it communicates its benefits programme to employees according to their location and priorities.
What is your stance on international pensions and how do you see them evolving?
Pension is a retention issue, and is becoming more important to employees as state-governed social security becomes less dependable. Total used to have defined benefits (DB), but these generated liabilities, and so were replaced by defined contributions (DC). Corporations such as this are very sensitive to governance, whether it's the pension fund, or assets under management, and has dedicated teams to ensure that the investment strategy is approached very cautiously.
Aside from pensions, which employee benefits have been the most effective and influential?
Life and medical cover are as important as pensions. The latter ensures the well-being of staff, while the former guarantees that beneficiaries receive something in the event of an employee's death. Again, the need, or appetite, of employees varies from country to country, and according to demographics. Well-being is becoming more prevalent; the double-digit increase in costs for medical, means there is a shift from curing to prevention.
In-house prevention or wellness initiatives that anticipate the cure should make people healthier, or more aware of the need to look after themselves. In terms of diabetes, obesity and alcoholism, for instance, wellness programmes could vary according to location. This is not yet Total's policy, but the company is moving in this direction.
Given that international expansion is currently more of a necessity than a luxury, how well have organisations adapted their global HR processes?
It's interesting to see how quickly HR attaches itself to the expansion of businesses. It's a never-ending process. Total has an internal framework for benefits, but no global affiliate is entitled to design its own programme, or pensions scheme, without reporting it. It's quite a centralised system; it's not that HR wants to control everything, but it does want to advise on pensions, ensuring that anything that might trigger a liability is avoided.
Within that framework, HR selects brokers, or preferred partners. Partnership vs worldwide is a must, so an agreement regarding pooling insurance partners ensures that affiliates have to insure risk benefits. A partnership with a broker or insurance company is made, and everything that is happening in benefits and pensions is reported internally, including the financial and accounting elements of what are known as 'benefits committees'. These are set up for every business line and HR, finance, accounting and my team meet twice a year to deliver reports and make decisions for the future. This makes sense, because the group is large and has operations running everywhere, and an affiliate may ask a question without their branch's HR, or finance person, present. This mitigates risk and keeps communications open.
Can you tell us a little bit about your relationship with Swiss Life?
Total has worked with Swiss Life for years. It runs the offshore pensions solution for expats in Luxembourg, which works pretty well. The web and communication systems fit in with the needs of the employees.
The pensions service is good, and a pooling relationship exists for the other risk benefits: every time Total goes on the market, Swiss Life is also invited to quote, and this works very nicely.
How do you see the employee benefit market changing over the next few years?
I was surprised to discover that there weren't any insurance companies in some remote, emerging countries, and that benefits plans had to be managed in-house. Total is uncomfortable with such internal arrangements, because data protection is becoming such a sensitive issue, so having the firm's own HR managers, or administrators, managing employees' claims doesn't make sense. Total tries to outsource this, but how can a company commit to promoting benefits when there are no partners? Over the next few years, there will be a shift.
New partners, vendors and third-party administrators are emerging, especially in South Asia and East Africa. Insurance companies are competing to promote new products. This is good for us, but, when East Africa is taken care of, Total must look at, say, Kazakhstan, and ask partners or vendors to set up affiliates or businesses there. I fear that corporations will end up supplementing social security, and people will rely more upon their employer for benefits.
In Europe, state welfare provisions are decreasing, which puts a new emphasis on what corporations offer their employees. That's good, because it puts the focus back on attraction and retention, but it may not be affordable in the longer term.
The shift from a state-governed plan to an employer-centred plan involves complex issues, and people may not understand how things like pension plans work, so the focus needs to be on communication.
Monitoring overall cost prevention is not a nice thing to do, but it has to be done. Wellness initiatives must be implemented. How this will be achieved has not been defined, but things like digital equipment that can monitor health are being investigated. Maybe this is the future.