36713962 Benefits Power Point 1 | Pension | Employment

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

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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

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

DIMENSION 2: Global driving forces
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DIMENSION 3: Regional differences
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How rewards differ by country

 Salary ranges increase in less defined markets  Employee protections – contracts. 6 . etc. base salary  Variable pay – really based on performance?  Remuneration mix varies by country  US – more “at risk” compensation than Europe. etc.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. Works Councils. All rights reserved. Mercer Copyright 2010 Mercer LLC.

Mercer (2009). All rights reserved.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. 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.

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. All rights reserved. wellness programs Mercer Copyright 2010 Mercer LLC. employee consultation  Severance: sometimes payable upon retirement  Financing systems  Absenteeism. 8 .

How rewards are changing because of global driving forces .

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. All rights reserved. 10 .

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

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

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

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

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. .

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. 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. within limits. All rights reserved. .

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. • Pay for Performance • Increasing Role of Variable Pay • Employee Differentiation • Increasing Top Line Growth Mercer Copyright 2010 Mercer LLC. 17 . All rights reserved.

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

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. 19 .0% 12.0% 5. 20% 40% 60% 80% 100% Guaranteed Allowances Long-term Incentives Sources: Benefits and Compensation Plans Around the World. All rights reserved. Mercer (October 2009).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. Global Compensation Planning Report.0% 15. Mercer (2009).

Mercer (2009). 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. All rights reserved. 20 .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.

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. 21 . Mercer (2009).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. All rights reserved. 20 40 60 80 100 Mercer Copyright 2010 Mercer LLC.

2. Eastern Europe .

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

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. All rights reserved. Mercer (2009). 24 . DC Hybrid Source: Benefits and Compensation Plans Around the World.

20 40 60 80 100 Mercer Copyright 2010 Mercer LLC.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 . 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. All rights reserved. Mercer (2009).

Western Europe .3.

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. Guaranteed Allowances Long-term Incentives Sources: Benefits and Compensation Plans Around the World. 27 .3% 3. Global Compensation Planning Report.Remuneration in Western Europe Professional Non-Sales Employee Variance in Pay Growth (2009 Forecasts) France Germany 3. Mercer (October 2009).5% 5. All rights reserved.0% 2. Mercer (2009).

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. DC Hybrid Source: Benefits and Compensation Plans Around the World. 28 . All rights reserved. Mercer (2009).

29 .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. All rights reserved. Mercer (2009). Mercer Copyright 2010 Mercer LLC.

Latin America .4.

All rights reserved.6% 7. For example: Mexico – 13th month salary payment. 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.5% common.0% 5. 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. Venezuela – Christmas or vacation bonus.0% 28.Remuneration in Latin America Professional Non-Sales Employee  Mandated additional salary payment is Variance in Pay Growth (2009 Forecasts) Argentina Brazil Colombia 8.3% 21. Global Compensation Planning Report. Mercer (2009). Mercer (October 2009). 31 .

DC Hybrid Source: Benefits and Compensation Plans Around the World.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. Mercer (2009). All rights reserved. 32 .

33 . Mercer (2009). All rights reserved.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. 20 40 60 80 100 Mercer Copyright 2010 Mercer LLC.

Canada and USA .5.

Mercer (October 2009).5% 3. Mercer (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 3.7% oversight by boards and. potentially. 35 . All rights reserved. Mercer Copyright 2010 Mercer LLC. 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.

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. 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. Mercer (2009). Recent legislation has eased but not removed the litigation threat. All rights reserved. 36 . Mercer Copyright 2010 Mercer LLC.

Mercer Copyright 2010 Mercer LLC. All rights reserved.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. 37 . Mercer (2009).

An approach to managing compensation and benefits across countries .

DIMENSION 3: Regional differences 39 . All rights reserved.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.

All rights reserved. 40 .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 .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. All rights reserved.

and behaviors necessary for business success Employer Perspective Our reward programs foster the knowledge. competencies. 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. 42 . 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. 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. All rights reserved. and behaviors necessary for business success Mercer Copyright 2010 Mercer LLC.

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 do not crowd out other profitable investments Global Consistency Mercer Copyright 2010 Mercer LLC.Balancing the Global/Local Tension Program Designs which create desired results are best set locally Employer Perspective Our reward programs foster the knowledge. 43 . competencies. 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. 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. competencies.

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

culture. 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. cultural.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. Communication. prioritize and develop implementation timeline Identify cross country synergies: Financial. 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. Administrative Mercer Copyright 2010 Mercer LLC. 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. All rights reserved. tax/legal. 45 . managerial etc).

etc. recognition Mercer Copyright 2010 Mercer LLC.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. All rights reserved.  Life insurance  Disability (short. 46 .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.

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

Resources .

Middle East & Africa Czech Rep. 49 . 20 40 60 80 100 Greece Hungary Poland Russia Slovakia South Africa Turkey Prevalence among multinational and leading local companies.All Regions DC plans are common. % 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.5 57 9. All rights reserved.5 Eastern Europe. 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.

equal benefit level for all All employees. benefit level varies by employee level Prevalence among multinational and leading local companies. % 0 20 40 60 80 100 USA 100 Eastern Europe. Middle East & Africa Czech Rep. 50 . All rights reserved. 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.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.

DC: Defined contribution retirement plan. Examples include: – –        A defined contribution plan that provides a guaranteed minimum defined benefit payment upon retirement. or Company provides DB plan for existing employees and DC plan for new hires (in effect. Dependent Coverage: Describes whether the plan provides coverage for dependents. two separate plans). Sickness. 51 . GP: General practitioner. A defined contribution plan with benefit at retirement age equal to accumulated contributions plus interest or a fixed formula benefit. sometimes including much relevant background material and a complete breakdown of current costs. DB: Defined benefit retirement plan. 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. Medical. Dependent category typically includes the spouse and dependent children. HQ: Headquarters of a multinational company. Hybrid: Mixture of defined benefit and defined contribution features in a single plan. whichever benefit is higher. All rights reserved. Disability & Death Benefits   AD&D: Accidental death and dismemberment. 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. unless otherwise stated in documentation. Some countries in Asia include elderly parents in the definition.Glossary of Key Terms Retirement. – Mercer Copyright 2010 Mercer LLC.

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

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

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

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

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

hr-training.Copyright 2010 Mercer LLC.mercer. More information: www.com . 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. All rights reserved. with optional certification and worldwide peer networking.

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