Employee

benefits

Should your CFO, head of tax and general legal counsel bother about employee benefits?

“Of course!” will be the most likely response: the CFO should know about the financial impact of the different pension and benefit schemes, the head of tax should know about current and future tax implications and the general legal counsel should know about the structure of such plans, in particular related to disclosure from a compliance and legal perspective.

So, if that’s the case, why do so many companies have a vast array of different pension and benefit schemes? Typically resulting from mergers, acquisitions, divestments... Sounds familiar?

We typically see different levels of awareness around this topic, varying from:

  1. No awareness of or visibility into the broad set of employee benefit schemes;
  2. Awareness and some visibility, but no urge, interest or time to address this topic
  3. Awareness and having carried out a feasibility study with regard to harmonisation
  4. Started, but not yet completed, a harmonisation project
  5. Harmonisation project successfully completed.

So what should you do?

So what should you do when your company does indeed have a large and diverse set of pension and benefit schemes in a number of countries:

Visibility: make an effort to consolidate all the information about your pension and benefit schemes. If you don’t have visibility into the existing plans, participants, conditions, costs etc., you won’t be able to make sound decisions going forward;

Analysis: analyse whether a harmonisation project would lead to increased employee satisfaction, lower costs, lower handling fees, reduced administrative work etc.;

Programme management: create a programme management role so there is someone to lead the harmonisation project across the organisation, in multiple countries/subsidiaries, someone who can work with senior management, with the four departments involved, someone who understands the complexities of dealing with employee representative bodies and has the stamina and practical skills to see the project through to completion.

Our experience has shown that this type of harmonisation programme typically fails for two reasons.

  1. Due to a ‘one department’ approach, meaning that typically HR or finance takes the lead and spends a lot of time and energy on the project, but either the project will not be completed – due to internal politics for instance – or the benefits of the project will be limited because of a limited view on the whole subject.
  2. Due to ‘fatigue’: such processes take time and, after time has passed, have a tendency to fall off people’s radars. A key HR VP or CFO leaves or gets promoted and the replacement isn’t familiar with the project, or the discussions with a works council take much longer than envisioned and, almost without noticing, the project comes to a standstill.

Practical advice

So let me give you two crucial pieces of advice. Only start such a programme if you are committed to a multi-department approach, meaning that it will be a joint effort between HR, finance, tax and legal. Secondly, appoint a strong programme manager who is capable of leading such a project over a period of up to two years, with ‘on-off’ involvement over time, and who is capable of involving the right internal and external resources.

Of course we at Blue Capital Management can assist with the visibility and analysis phases of the project, but our highest added value will come when we work with you on the programme management side of the project, ideally with a dedicated counterpart in your organisation.

I’d be very happy to discuss this or any other topic with interested clients or candidates. Please don’t hesitate to get in touch with me.

Gerrit van Munster

Partner
  • November 30 2015
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