As businesses expand beyond their borders, it can be a significant management challenge to structure an employee benefits program.
There’s the risk of failing to meet regulatory requirements or offering packages that are competitive in the United States, but aren’t appealing elsewhere, or are unnecessarily expensive.
In addition, acquired rights rules in most countries outside the U.S. make it difficult to rescind benefits after they’ve been offered, making it essential to get it right the first time.
What’s more, multinational employers need to devote sufficient management time and due diligence efforts to ensure that benefits are appropriately designed and cost-effectively delivered.
Managing global benefits means adapting to different models
To successfully expand a workforce in a foreign country, companies must have strong recruiting and retention efforts. Those efforts include competitive and compliant benefits to fit a particular country or region that won’t put an untenable financial or HR burden on the employer.
It is important that offerings are in line with local practices and take into account the country’s social programs that may already deliver benefits.
Here are three things that you need to know about offering benefits abroad:
1. Benefit expenses are often lower outside the U.S.
Private medical, dental and life insurance averages less than $1,500 (U.S.) annually per employee in Mexico.1 In Canada, where the government covers most medical costs, many employers only offer insurance coverage for dental, prescription drug, ambulatory services, and other medical needs.
But employers need to be aware that there are other expenses, making it important to have local administrative staff or the services of a qualified, independent advisor familiar with local laws and regulations.
That’s because benefits abroad are often far different than those offered in the United States. For example, Mexico and France mandate profit sharing of 10% of the employer’s annual profits. Compulsory benefits abroad include severance and retirement indemnities in India, Thailand, Mexico and other countries.
2. It’s important to test the waters.
Often, U.S. companies will start their expansion with a limited presence in a new country without having a legal local entity there. Doing so may be expedient and even make sense from a financial perspective, but requires highly specialized expertise to manage these global benefits.
For instance, many insurance companies won’t contract with a foreign entity to provide benefits to employees in that country. Hiring independent contractors initially can provide a start, though they may imply that employees need to procure their own benefits, as the company simply provides an allowance in negotiated fees for this purpose.
3. For voluntary benefits, focus on the basics.
Employers can compete for talent through voluntary benefits that are flexible and responsive to individuals’ circumstances. While this may be something to consider for non-U.S. operations, the employer is less likely to have the critical mass locally to do this effectively.
HUB International’s global benefits specialists consult with multinational employers of all sizes and in all industries on every aspect of planning and managing global employee benefits.
1 Human Resources Mexico, “Private Employment Benefits in Mexico,” accessed November 15, 2022.
