An increasing trend for multinationals to centralise employee benefits decisions to Centres of Excellence (CoE) is having limited impact on operational realities, according Aon.
The 2015 Aon Global Benefits Survey shows that a lack of centrally held benefits information is blocking strategic priorities, while benefit administration is draining resources. In many areas of employee benefits management most organisations are adopting a ‘just enough is good enough’ attitude.
The research also shows that traditional multi-national polling is waning, while captive funding for insured benefits and other financing initiatives are increasing.
Aon’s 2015 Global Benefits Survey included respondents from 184 Global Benefits and Rewards specialists around Europe representing many of the largest multinational organisations in the world.
Carl Redondo, Leader of Aon’s Global Benefits practice in the UK, says,
“The survey results are striking. There is a clear trend of centralisation at multinationals, yet it isn’t yet flowing through to the way that employee benefits are managed. There appears to be an increase in the influence of Global Centres of Excellence but the vast majority of decisions are still being taken by local stakeholders. The data also shows us that the effectiveness of Centres of Excellence is generally is being restricted by a lack of up to date information and administration activities”.
Five clear conclusions can be drawn from the survey:
- The market trend of increasing centralisation of benefits management is ahead of the operational reality. Decision making at most multinationals has heavy involvement from local stakeholders. Aon’s survey shows that 40 percent make mainly local decisions, while 15 percent make total local decisions. At the other end of the scale, just seven percent make total global decisions.
- There are clear opportunities in all areas of benefit plan management to improve efficiencies and drive savings: the survey shows a lack of excellence in the management of plans and with most organisations using the ‘just enough is good enough’ approach, meaning opportunities are lost. Nearly 65 percent agree their plans are only fit for purpose.
- Benefit administration issues are a resource drain, which is likely to get worse as the trend of centralisation continues. As benefits expertise is removed locally, global Centres of Excellence are increasingly taking responsibility for all areas of plan management and administration. The Study highlighted benefits administration and a lack of information as key challenges for respondents.
- Most organisations report a lack of centrally held benefits information, which is a barrier to driving strategic priorities. Strikingly, 56 percent don’t have a global benefits database yet see reviewing benefits in key countries as one of the top ranking priorities for the next 12-24 months.
- The popularity of multinational pooling looks to have peaked as organisations move to Captives and other financing initiatives to improve efficiencies. The Study highlighted that less than 10 percent of participants without an existing pool are looking to implement a new pool and only one-third of those with a pool are actively keeping the structure under review.
“With such high participation, the study has given us some rich insight into how employee benefits are being managed globally as well as the priorities and challenges faced by these teams. The stand out message is that whilst organisations are building the infrastructure to manage employee benefits globally we are still in a transition to that model. As they go through this, Global Benefits teams are being hampered by a lack of data and administration, reducing overall effectiveness.
“The trend towards benefits Centres of Excellence is a positive step to improving the governance and effectiveness of benefit programmes around the world. However, the Study highlights that establishing one is only the start of the journey; significant change management is then needed to drive value from the new model.”