You are on page 1of 57

Module 0 Session 1: Foundation Level

Introduction to Global Benefits & Compensation Around the world in 45 Minutes
Giles Archibald, Manchester/London Robyn Cameron, New York Steve Gross, Philadelphia

Copyright 2010 Mercer LLC. All rights reserved. This session is part of an exclusive program called Mercer + Oxford Academics: Global Online Training which offers global human resource professionals three complimentary sample training sessions plus 30 paid online training sessions, with optional certification and worldwide peer networking. More information: www.hr-training.mercer.com

Overview of This Session

This is a Foundation Level training designed for a global professional:
 With no international experience  Entering into a new role with multi-

What you will learn today:  Skills for awareness and sensitivity around the differences in benefit and compensation practices around the world  Knowledge of global forces and current employer trends  Inspiration from the interesting variety of different employer practices around the world

country benefits and/or compensation responsibilities

Mercer

Copyright 2010 Mercer LLC. All rights reserved.

2

Overview of This Session
 How rewards differ by country  How rewards are changing because of global driving forces  Regional differences  An approach to managing compensation and benefits across countries

Appendices
 Further learning opportunities  Charts: Prevalence of supplementary benefits across all regions  Glossary of key terms  Useful links to more information

Mercer

Copyright 2010 Mercer LLC. All rights reserved.

3

Overview of This Session Three dimensions of international complexity DIMENSION 1: How rewards differ by country

DIMENSION 2: Global driving forces
Mercer
Copyright 2010 Mercer LLC. All rights reserved.

DIMENSION 3: Regional differences
4

How rewards differ by country

 Salary ranges increase in less defined markets  Employee protections – contracts. etc. Mercer Copyright 2010 Mercer LLC. base salary  Variable pay – really based on performance?  Remuneration mix varies by country  US – more “at risk” compensation than Europe. All rights reserved.Compensation Reward types differ by country  How base salary is defined – months of pay (12 or 13th month)  Merit increases – may be much bigger  Cash allowances = guaranteed cash vs. etc. 6 . Works Councils.

7 . 14% 31% “Other Benefits” examples include:  Children’s education cost  Club subscription  Car loan  Personal loan  House/apartment rent  Housing loan  Hard/soft furnishing loan Source: Total Employment Costs Around the World. Mercer (2009).Examples of Typical Remuneration Executive employee United Kingdom 6% 2% 3% 6% 7% United Kingdom  Cash compensation is a relatively high percentage of total value to employee 63% 13% Base Salary Guaranteed Cash India  “Car” includes car value + driver’s salary India 16% 26% 9% 4% Total cash and LTI Mandatory employer contributions Retirement and other savings Health Death and disability Car Other benefits Mercer Copyright 2010 Mercer LLC. All rights reserved.

All rights reserved. employee consultation  Severance: sometimes payable upon retirement  Financing systems  Absenteeism.Benefits Reward types differ by country  Level of social security  Need for private benefits  Speed of shift to DC retirement  Desired level of employee financial protection  Legislation: ability to change benefits. 8 . wellness programs Mercer Copyright 2010 Mercer LLC.

How rewards are changing because of global driving forces .

10 . All rights reserved.Global Driving Forces Global Drivers – Macro Forces Demographic Shifts Economic Performance & Investment Returns Emerging Middle Class (in developing countries) Changing Patterns – Infectious/Chronic Disease Climate Change & Environmental Degradation Urbanization (in developing countries) Global Drivers – Stakeholders Forces Changing Societal Attitudes of Stakeholders towards Social Welfare / Retirement and Health Healthcare Innovation & Regulation Financial Innovation & Regulation Mercer Copyright 2010 Mercer LLC.

United Nations. All rights reserved. Department of Economic and Social Affairs (2007). Stanford Center on Longevity (2009). World Population Prospects: The 2006 revision. 11 . Mercer Copyright 2010 Mercer LLC.Example of One Global Driving Force Demographics We have fewer children We are living longer Sources: Global aging resources.

All rights reserved. 12 . United Nations.Global Driving Force: Demographics Change in Share of Population Age 65 and Older Sources: Global aging resources. Stanford Center on Longevity (2009). Mercer Copyright 2010 Mercer LLC. Department of Economic and Social Affairs (2007). World Population Prospects: The 2006 revision.

All rights reserved.Global Driving Force: Demographics  Fewer workers supporting more retirees live longer  Major projected increases in public spending  Future generations: Less public pension. healthcare rationing likely Source: OECD (2005). 13 . figures assume unchanged policies as from the early or mid-2000s Mercer Copyright 2010 Mercer LLC.

com/wef Mercer Copyright 2010 Mercer LLC.Global Driving Forces Degrees of importance and uncertainty Note. All rights reserved. 14 . Source: World Economic Forum in collaboration with Mercer and the OECD 2009. this research publication can be downloaded from www.mercer. Global driving forces were identified and prioritized through extensive expert interviews and refined in workshops conducted 2007 .2008.

Employers Response Retirement: Shifting the risk and the cost to the employee Yesterday’s Yesterday’s Design Design Tomorrow’s Design Tomorrow’s Design Option 1 Option 1 Tomorrow’s Design Tomorrow’s Design Option 2 Option 2 Employer Risk Employee Risk Traditional DB • Fixed Employee Benefits • Fixed Employee Contributions • Generous Benefits Reduced DB • Fixed Employee Benefits • Fixed Employee Contributions • Less Generous Benefits Shared Risk  Variable Employee Benefits and/or  Variable Employee Contributions All DC • Variable Employee Benefits • Fixed Employer Contributions No Plan ? 15 Mercer Copyright 2010 Mercer LLC. All rights reserved. .

. how funds (provided by their Employers for purchasing benefits) are allocated  Employees can contribute to future benefits costs increases No Plan ? 16 Mercer Copyright 2010 Mercer LLC.Employers Response Health & benefits: Shifting the risk and the cost to the employee Yesterday’s Yesterday’s Design Design Tomorrow’s Tomorrow’s Design Design Employer Risk Employee Risk Traditional Benefit Plans • Employer provides fixed list of benefits for all employees • Employer bears future cost increase Flexible Benefit Programs  Employees choose. within limits. All rights reserved.

All rights reserved. 17 . • Pay for Performance • Increasing Role of Variable Pay • Employee Differentiation • Increasing Top Line Growth Mercer Copyright 2010 Mercer LLC.Employers Response Compensation: Shifting from how much to pay to paying for desired outcomes Yesterday’s Yesterday’s Design Design Tomorrow’s Tomorrow’s Design Design Employer Risk Employee Risk Focus on How Much to Pay • Benchmarking • Competitive Agenda Focus on What to Pay For • More Performance Measurement and Performance Mgmt.

Asia .The Forces for change are similar worldwide but the regions are different … 1.

0% 12. 20% 40% 60% 80% 100% Guaranteed Allowances Long-term Incentives Sources: Benefits and Compensation Plans Around the World. 19 . Mercer (October 2009). All rights reserved. Mercer (2009). Global Compensation Planning Report.0% 15.0% 10.Remuneration in Asia Professional Non-Sales Employee  Lower wage environment  War for talent  Winning the fight for hot skills without Variance in Pay Growth (2009 Forecasts) China India Japan Singapore Vietnam 3.0% 5.5% bidding up the cost Remuneration Mix Typical Practice – Multinational and Leading Local Companies 0% China Hong Kong India Indonesia Japan Malaysia Philippines Singapore South Korea Taiwan Thailand Base Salary Variable Bonus and Commission Benefits Mercer Copyright 2010 Mercer LLC.

Mercer (2009). All rights reserved. Korea Taiwan Thailand Vietnam 20 40 60 80 100 DB Mercer Copyright 2010 Mercer LLC. DC Hybrid Source: Benefits and Compensation Plans Around the World.Retirement in Asia  Provident funds with lump sums common  Traditionally lower retirement age  Lump sum death and disability common Prevalence Among Multinational and Local Leading Companies (Approximate %) 0 China HK India Indonesia Japan Malaysia Pakistan Philippine Singapore S. 20 .

Medical in Asia  Provision of private medical coverage to staff is very common  Strong trend towards Flex programs Prevalence Among Multinational and Local Leading Companies (Approximate %) 0 China HK India Indonesia Japan Malaysia Pakistan Philippine Singapore S. 21 . All rights reserved. Korea Taiwan Thailand Vietnam Management or Higher Earners Only All Employees with Equal Benefit Level for All Employee Levels All Employees but Benefit Level Varies by Employee Level Source: Benefits and Compensation Plans Around the World. 20 40 60 80 100 Mercer Copyright 2010 Mercer LLC. Mercer (2009).

2. Eastern Europe .

0% 5. Mercer (October 2009). Greece Hungary Poland Russia Slovakia Slovenia Turkey Base Salary Variable Bonus and Commission Benefits Mercer Copyright 2010 Mercer LLC. 20% 40% 60% 80% 100% Guaranteed Allowances Long-term Incentives Sources: Benefits and Compensation Plans Around the World. Mercer (2009).Remuneration in Eastern Europe Professional Non-Sales Employee  Shortage of technically skilled local Variance in Pay Growth (2009 Forecasts) Czech Rep.0% 12. All rights reserved.0% 6. often organized by strong trade unions Remuneration Mix Typical Practice – Multinational and Leading Local Companies 0% Czech Rep. 23 . Global Compensation Planning Report.0% labor and local management  Pressure on salary increase.0% 10. Hungary Poland Russia Turkey 5.

All rights reserved. Mercer (2009).Retirement in Eastern Europe  Retirement provision is minority practice in many countries  Common to provide lump sum death and disability Prevalence Among Multinational and Local Leading Companies (Approximate %) 0 Czech Republic Greece Hungary Poland Russia Slovakia Turkey 20 40 60 80 100 DB Mercer Copyright 2010 Mercer LLC. DC Hybrid Source: Benefits and Compensation Plans Around the World. 24 .

Prevalence Among Multinational and Local Leading Companies (Approximate %) 0 Czech Republic Greece Hungary Poland Russia Slovakia Turkey Management or Higher Earners Only All Employees with Equal Benefit Level for All Employee Levels All Employees but Benefit Level Varies by Employee Level Source: Benefits and Compensation Plans Around the World. Mercer (2009).Medical in Eastern Europe  Private medical popular among staff  Czech Republic: Contract with private medical facilities – annual fee paid by employer directly to the private clinic. 25 . 20 40 60 80 100 Mercer Copyright 2010 Mercer LLC. All rights reserved.

Western Europe .3.

Remuneration in Western Europe Professional Non-Sales Employee Variance in Pay Growth (2009 Forecasts) France Germany 3. Global Compensation Planning Report. Mercer (2009). Mercer (October 2009).0%  Flat to moderate salary increases Norway  Labor challenges in the technology Switzerland sales and services sectors UK  Broader use of variable pay Remuneration Mix 0% Austria Belgium Denmark Finland France Germany Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland UK 20% 40% 60% Typical Practice – Multinational and Leading Local Companies 80% 100% Base Salary Variable Bonus and Commission Benefits Mercer Copyright 2010 Mercer LLC.5% 4. 27 .0% 2.3% 3.5% 5. All rights reserved. Guaranteed Allowances Long-term Incentives Sources: Benefits and Compensation Plans Around the World.

Retirement in Western Europe  Social security in decline  Rapid movement from DB to DC  Income protection for death/disability common Prevalence Among Multinational and Local Leading Companies (Approximate %) 0 Austria Belgium Denmark Finland France Germany Ireland Italy Luxembourg Netherlands Norway Portugal Spain Sweden Switzerland UK 20 40 60 80 100 DB Mercer Copyright 2010 Mercer LLC. Mercer (2009). DC Hybrid Source: Benefits and Compensation Plans Around the World. 28 . All rights reserved.

All rights reserved.Medical in Western Europe  Private medical plans not majority practice  Some countries provide private medical benefits only to their management Prevalence Among Multinational and Local Leading Companies (Approximate %) 0 Austria Belgium Denmark Finland France Germany Ireland Italy Luxembourg Netherlands Norway Portugal Spain Sweden Switzerland UK 20 40 60 80 100 Management or Higher Earners Only All Employees with Equal Benefit Level for All Employee Levels All Employees but Benefit Level Varies by Employee Level Source: Benefits and Compensation Plans Around the World. 29 . Mercer (2009). Mercer Copyright 2010 Mercer LLC.

4. Latin America .

0% 5.0% 28. 31 .6% 7. Mercer (October 2009). Typical Practice – Multinational and Leading Local Companies 20% 40% 60% 80% 100% Guaranteed Allowances Long-term Incentives Sources: Benefits and Compensation Plans Around the World. Mercer (2009).5% common.Remuneration in Latin America Professional Non-Sales Employee  Mandated additional salary payment is Variance in Pay Growth (2009 Forecasts) Argentina Brazil Colombia 8. For example: Mexico – 13th month salary payment. Venezuela – Christmas or vacation bonus. All rights reserved. Global Compensation Planning Report. or – Mandated profit sharing Remuneration Mix 0% Argentina Brazil Chile Colombia Mexico Puerto Rico Venezuela Base Salary Variable Bonus and Commission Benefits Mercer Copyright 2010 Mercer LLC.3% 21.

Mercer (2009).Retirement in Latin America  Real projected benefits are decreasing due to high inflation  Supplementary plan prevalence expected to increase  Trend from DB to Hybrid or DC Prevalence Among Multinational and Local Leading Companies (Approximate %) 0 Argentina Brazil Chile Colombia Mexico Venezuela 20 40 60 80 100 DB Mercer Copyright 2010 Mercer LLC. DC Hybrid Source: Benefits and Compensation Plans Around the World. 32 . All rights reserved.

20 40 60 80 100 Mercer Copyright 2010 Mercer LLC. All rights reserved. 33 .Medical in Latin America  Private medical coverage for all staff is very common  Trend towards wellness programs Prevalence Among Multinational and Local Leading Companies (Approximate %) 0 Argentina Brazil Chile Colombia Mexico Venezuela Management or Higher Earners Only All Employees with Equal Benefit Level for All Employee Levels All Employees but Benefit Level Varies by Employee Level Source: Benefits and Compensation Plans Around the World. Mercer (2009).

Canada and USA .5.

Mercer (2009). potentially. Mercer Copyright 2010 Mercer LLC. All rights reserved.5% 3. by shareholders – “say on pay” Remuneration Mix Typical Practice – Multinational and Leading Local Companies 0% Canada USA 20% 40% 60% 80% 100% Base Salary Variable Bonus and Commission Benefits Guaranteed Allowances Long-term Incentives Sources: Benefits and Compensation Plans Around the World. Global Compensation Planning Report.7% oversight by boards and. 35 . Mercer (October 2009).Remuneration in Canada and USA Professional Non-Sales Employee  Flat to moderate salary increases  Executive compensation levels: increased Variance in Pay Growth (2009 Forecasts) Canada USA 3.

Prevalence Among Multinational and Local Leading Companies (Approximate %) 0 Canada USA 20 40 60 80 100 DB DC Hybrid Source: Benefits and Compensation Plans Around the World. Recent legislation has eased but not removed the litigation threat. Mercer (2009). All rights reserved.Retirement in Canada and USA  Canada & USA: Trend to DC continues  Canada: Improving retention features and reducing costs in DB plans  USA: Government regulation of pension plans and litigation opposing Hybrid plans both threaten long-term viability of DB plans. 36 . Mercer Copyright 2010 Mercer LLC.

Mercer (2009). 37 . All rights reserved. Mercer Copyright 2010 Mercer LLC.Medical in Canada and USA  Private medical coverage for all staff is very common  Canada and USA: Some employers continue to provide retiree medical benefits but are considering changes to ensure financial sustainability  USA: Employers are considering potential impact of USA health system reforms Prevalence Among Multinational and Local Leading Companies (Approximate %) 0 Canada USA 20 40 60 80 100 Management or Higher Earners Only All Employees with Equal Benefit Level for All Employee Levels All Employees but Benefit Level Varies by Employee Level Source: Benefits and Compensation Plans Around the World.

An approach to managing compensation and benefits across countries .

Dimensions of International Complexity One size does not fit all DIMENSION 1: How rewards differ by country DIMENSION 2: Global driving forces Mercer Copyright 2010 Mercer LLC. DIMENSION 3: Regional differences 39 . All rights reserved.

40 . All rights reserved.Managing International Complexity The spectrum of approaches LOCAL CENTRAL Hands off Approval required for major items Approval required for all items HQ initiate changes Mercer Copyright 2010 Mercer LLC.

41 . All rights reserved.The Global/Local Tension Creates consistent culture and employer brand Leverages internal resources Improves financial management Recognizes local business requirements Supports unique local workforce requirements Leverages value of local practices Benefits of Global Consistency Benefits of Local Flexibility Mercer Copyright 2010 Mercer LLC.

competencies. All rights reserved. and do not crowd out other profitable investments Employee Perspective My rewards are part of a compelling value proposition that I understand and support Global governance connects the two Cost Perspective Our rewards are affordable. and do not crowd out other profitable investments Employee Perspective My rewards are part of a compelling value proposition that I understand and support Employer Perspective Our reward programs foster the knowledge. and behaviors necessary for business success Mercer Copyright 2010 Mercer LLC. 42 . and behaviors necessary for business success Employer Perspective Our reward programs foster the knowledge. competencies.Balancing the Global/Local Tension Creates consistent culture and employer brand Leverages internal resources Improves financial management Recognizes local business requirements Supports unique local workforce requirements Leverages value of local practices Benefits of Global Consistency Benefits of Local Flexibility Guiding principles which create the desired employer brand and overall efficiencies are best set globally Program designs which create desired results are best set locally Cost Perspective Our rewards are affordable.

43 . and do not crowd out other profitable investments Global Consistency Mercer Copyright 2010 Mercer LLC. competencies. competencies. and do not crowd out other profitable investments Global Governance connects the two Guiding Principles which create the desired employer brand and overall efficiencies are best set globally Employer Perspective Our reward programs foster the knowledge. and behaviors necessary for business success Employee Perspective My rewards are part of a compelling value proposition that I understand and support Cost Perspective Our rewards are affordable.Balancing the Global/Local Tension Program Designs which create desired results are best set locally Employer Perspective Our reward programs foster the knowledge. All rights reserved. and behaviors necessary for business success Employee Perspective My rewards are part of a compelling value proposition that I understand and support Local Flexibility Cost Perspective Our rewards are affordable.

Medical  “Constructive obligations” Mercer Copyright 2010 Mercer LLC. Italy)  Guarantees (e. Switzerland)  Jubilee payments  Early retirement programs  Disability. 44 . All rights reserved.g.Key Risks Around The Globe  Defined benefit pension plans  Post retirement medical plans  Executives  Stock option plans  Termination benefits (e.g.

regional and local strategies     Where are they consistent? Where are the differences? To what extent do countries operate independently / need to collaborate?  Local Subsidiary Responsibility 4 Implement   Identify barriers to change (legal. tax/legal. labor environment) Identify desirable changes in rewards strategy to ensure purpose of programs is met in a local context Only make changes that will have a measurable impact. culture. Administrative Mercer Copyright 2010 Mercer LLC. cultural. 45 . Communication. managerial etc). Look for global / regional consistency Conduct gap analysis against current internal and external practices 5 On Going Governance Put processes in place to regularly measure the success of rewards strategy against its purpose Modify rewards strategy as needed Review global. All rights reserved.Process for Developing a Global Guiding Principles Involving the right levels of the organization at the right time is crucial to success Global / HQ Responsibility 2 Develop an “Ideal World” Guiding Principles Template Template development following standard process Modify for differences and collaboration needs identified in Step 1 Clearly articulate purpose of the rewards program and its individual components Without consideration for local country implications:    1 Joint Responsibility Understand the Business Strategy 3 Review Template Against Local Environments Understand local context (social programs. prioritize and develop implementation timeline Identify cross country synergies: Financial.

and long-term)  Accident coverage  Perquisites Careers  Performance management  Learning and development  Career opportunity and pathing  Tuition reimbursement  Mobility opportunities Work Lifestyle  Time off  Wellness programs  Dependent care  Workplace flexibility  Commuter programs  Experiential rewards  Non-financial.  Life insurance  Disability (short. 46 . All rights reserved.Communicating the total employee value proposition with scarcer resources Current economic conditions are compelling companies to manage employee remuneration more strategically and globally Compensation  Base pay  Guaranteed “bonuses”  Short term incentives  Long term incentives  Financial allowances  Financial recognition programs  Deferred compensation Benefits  Retirement  Savings and other wealth creation programs  Medical / Dental / Vision / Prescription Drug. etc. recognition Mercer Copyright 2010 Mercer LLC.

How is Mercer + Oxford different from other training? 1. Asia Pacific 6. Certification 5.hr-training. Online training 3.Further Learning Opportunities Additional sessions will be available in April 2010. All rights reserved. Flexible modular program 4. Global Growth & Performance Drivers 3. Gold standard content 2.mercer. Global Mobility 4. We encourage you to register to participate via this link on your screen: www. Europe & Middle East 5. Worldwide peer networking 47 . Americas Mercer Copyright 2010 Mercer LLC.com 30 Online Training Sessions Our 30 sessions are organized into 6 topic modules (with 5 sessions per module): 1. Global Policy Setting & Governance 2.

Resources .

Middle East & Africa Czech Rep. 20 40 60 80 100 Greece Hungary Poland Russia Slovakia South Africa Turkey Prevalence among multinational and leading local companies. but DB plans may still represent significant liabilities 0 20 40 60 80 100 Retirement – Prevalence of supplementary benefits Defined benefit Defined contribution Hybrid USA 0 28. All rights reserved.5 57 9.5 Eastern Europe. 49 . % 0 20 40 60 80 100 Western Europe Austria Belgium Denmark Finland France Germany Asia-Pacific Australia China Hong Kong India Indonesia UAE Ireland Japan Italy Americas Malaysia Luxembourg Argentina Netherlands Norw ay Portugal Spain Sw eden Sw itzerland UK New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Brazil Canada Chile Colombia Mexico USA Venezuela Source: Mercer (2009) Benefit Plans Around the World Mercer Copyright 2010 Mercer LLC.All Regions DC plans are common.

All rights reserved. equal benefit level for all All employees. 0 20 40 60 80 100 Greece Hungary Poland Russia Slovakia South Africa Western Europe Austria Belgium Denmark Finland France Asia-Pacific Australia China Hong Kong India Indonesia Japan Turkey Germany UAE Ireland Italy Americas Malaysia Luxembourg Argentina Netherlands New Zealand Pakistan Philippines Singapore South Korea Taiwan Thailand Vietnam Norway Portugal Spain Sweden Switzerland UK Brazil Canada Chile Colombia Mexico USA Venezuela Source: Mercer (2009) Benefit Plans Around the World Mercer Copyright 2010 Mercer LLC. benefit level varies by employee level Prevalence among multinational and leading local companies.All Regions Prevalence of employer-sponsored medical benefits 0 20 40 60 80 100 Medical – Prevalence of supplementary benefits Management or higher earners only eligible All employees. % 0 20 40 60 80 100 USA 100 Eastern Europe. Middle East & Africa Czech Rep. 50 .

unless otherwise stated in documentation. Some countries in Asia include elderly parents in the definition. DC: Defined contribution retirement plan. Dependent category typically includes the spouse and dependent children. A defined contribution plan with benefit at retirement age equal to accumulated contributions plus interest or a fixed formula benefit. whichever benefit is higher. Disability & Death Benefits   AD&D: Accidental death and dismemberment. Dependent Coverage: Describes whether the plan provides coverage for dependents. sometimes including much relevant background material and a complete breakdown of current costs. 51 . GP: General practitioner. Hybrid: Mixture of defined benefit and defined contribution features in a single plan. Sickness. DB: Defined benefit retirement plan. two separate plans). HQ: Headquarters of a multinational company.Glossary of Key Terms Retirement. Audits can be of varying elaboration. Benefits Audit or Inventory: A detailed catalogue of the benefit plans of a multinational employer in force on a specified date. or Company provides DB plan for existing employees and DC plan for new hires (in effect. – Mercer Copyright 2010 Mercer LLC. Medical. Executive-only Plans: Either a retirement plan exclusively for higher-earning employees or plan under which a higher contribution or defined benefit is provided to this group through the same retirement plan as for other employees. Examples include: – –        A defined contribution plan that provides a guaranteed minimum defined benefit payment upon retirement. All rights reserved.

Glossary of Key Terms Retirement. Multinational Pooling: A way for multinational companies to achieve global economies of scale in the purchase of insured employee benefits (life insurance. Longevity risk management: Pertains to measuring and understanding longevity risk. Typical source is a government agency. medical. Pan European Pensions (PEP): Multinationals can now manage pension plans across EU borders.           Mercer 52 . and advising on and assisting with ways to mitigate or transfer it between parties. shown as percent change over the previous year. Copyright 2010 Mercer LLC. accident and sometimes pension) around the world. putting it in context alongside other risks. Potential cost savings and more efficient governance structures are causing many multinationals to consider implementing pan-European plans. MFR/MFS: Minimum funding requirement/minimum funding standard. Mandatory Practice: Benefits provided by social security or mandatory employer-sponsored plan. disability. Outpatient: Services provided to an individual who is admitted to a hospital or clinic for treatment that does not require an overnight stay. Medical. Medical Inflation: National average rate of increase in medical care costs. possibly through an outside agency other than social security) when an employee retires. Disability & Death Benefits  Inpatient: Services provided under direction of a physician for at least 24 hours to an individual who is admitted to a hospital as a registered bed patient. Not all countries report this statistic. LTD: Long-term disability. Sickness. following a number of recent European Court rulings and the passing of various directives (most notably the 2003 Pensions Directive). Mandatory Termination Indemnity: Lump-sum payment that must be made by the company (or that has been prefunded by the company. NRA – M/F: Normal retirement age: male (age)/female (age). All rights reserved.

Rider: Indicates whether a benefit is financed as part of another policy.Glossary of Key Terms Retirement. non-industry-specific. Prevalence percentages are based on Mercer’s Total Remuneration Surveys and on senior Mercer consultants’ experience working with these companies in the local market. Vesting: Acquisition by a plan member of an absolute right to an immediate or deferred benefit by fulfilling prescribed conditions. Self-funded/Self-insured: When a company finances the benefit internally (as opposed to using an external insurance policy). Professionals are individual contributors without supervisory responsibility. but may provide coaching/mentoring to less experienced staff. Does not describe any subgroup differences in practice that may exist. Disability & Death Benefits  Prevalence: Indicates how commonly the plan is provided by multinational and local leading companies. Medical. Professional non-sales employee: Employees in a technical function or typically in non-sales professional role.         Mercer Copyright 2010 Mercer LLC. 53 . Typical Market Practice: Describes typical (half or more than half of companies). All rights reserved. SSCC: Social security contribution ceiling. especially service requirements. STD: Short-term disability. the dental benefit may be a rider to the medical plan. Sickness. For instance. This level of employees typically holds a university degree or full-trade equivalent. general market practice for supplementary benefits provision by employers that include multinational and local leading companies. TPD: Total permanent disability.

Prevalence Categories: Indicate how commonly the compensation element is provided by multinational companies. either in the form of public transportation reimbursement or car allowances for business use of personal autos.or 14th-month salary practice.).Glossary of Key Terms Compensation programs     Short-term Incentives: Incentives provided to employees for a performance period of one year or less. Christmas or holiday/vacation bonuses. and mandated profit sharing.or 14th-month salaries.). Examples include 13th. Supplemental Discretionary Vacation Allowance (on top of legal requirement): Not legally required paid time off provided to employees in addition to annual salary. 13 or 14 payments corresponding to a 13th. Frequency of Payments: Intended to reflect the number of payments provided in an annual pay cycle (12 monthly payments. Mercer 54 . Transportation Allowance: Payments made for transit purposes. etc. Car Benefit: Company-provided cars offered to employees. – – – – –       Not Prevalent: Small minority of companies Mandated: Required by law Occasional: Less than half of companies Common: Approximately half of companies Prevalent: More than half of companies Copyright 2010 Mercer LLC.). cafeteria meals. 12 months’ salary paid in biweekly installments. Meals Allowance: Meal benefit provided to employees (lunch vouchers. Additional Salary Payment: Payments provided to employees in addition to salary but independent of performance (not performance-based incentives). etc. Prevalence information is based on Mercer’s global compensation surveys and Mercer consultant experience working with these companies in the local market. Other Cash Allowances: Any other cash allowance provided (housing allowance. school allowance. All rights reserved. Mandated Vacation Allowance: Legally required paid time off provided to employees in addition to annual salary. etc.

 Worldwide Benefit and Employment Guidelines. World Economic Forum and Mercer (2009). Mercer (2009).  Pan European Employer Health Benefits Issues.  Middle East Employee Benefits Survey.Related Resources  The future of pensions and health care in a rapidly ageing world. World Economic Forum and Mercer (2008). 55 . Mercer (2007/2008).  Transforming pensions and health care in a rapidly ageing world. All rights reserved. Mercer (2008). Mercer Copyright 2010 Mercer LLC.

56 . World Bank.  Health policies. Mercer Copyright 2010 Mercer LLC. US Social Security Administration.  International Social Security Association.  International Update. All rights reserved.  Pensions. OECD.Related Resources  BBC Country Profiles. OECD.  Data & Statistics.

com .hr-training. This session is part of an exclusive program called Mercer + Oxford Academics: Global Online Training which offers global human resource professionals three complimentary sample training sessions plus 30 paid online training sessions.mercer. with optional certification and worldwide peer networking. More information: www.Copyright 2010 Mercer LLC. All rights reserved.