Why a Global Benefits Policy Builds Strong Employee Engagement
Alex Margolin| Nov 26, 2020
Creating a benefits package for prospective employees is not just about competing for top talent. It’s also about building corporate values and showing employees that the company truly cares about their wellbeing, in and out of work.
In the past, global companies provided different benefits packages for every country in order to meet the local standards.
Today, the best global companies are embracing a holistic vision. They are moving beyond local differences and building a global company culture – and offering a global benefits package that makes a powerful statement that all employees are equal, regardless of where they are located.
Since global teams are inherently distributed teams, it is essential to communicate that all employees are part of One Company and One Culture. When everyone is treated the same, everyone feels they are part of the same team, company-wide.
The choice of benefits themselves is part of that message. What the company includes in its global package can demonstrate that the company genuinely understands the larger needs and challenges of its employees and is looking for ways to ensure they feel embraced and supported. Showing employees that their needs are covered is a corporate value in itself, and demonstrating it goes a long way to building employee loyalty – not to mention recruitment attractiveness in a highly competitive global market.
A good benefits plan can help a company attract top talent, motivate its workforce, and create an atmosphere that breeds success. With planning and support from local partners, it can be a powerful tool in building brand awareness.
Hyper-growth period is ideal for launching a global benefits program
The best time to implement a global benefits policy is during the period of hyper-growth when the company is building its culture and putting into practice the values that will define the company for years to come.
An effective benefits package will increase employee productivity, align practices with shared objectives, and foster a sense of teamwork. They can help employees deal with work/life balance issues – which can be acute for companies with a distributed workforce – and reduces instances of burnout.
Studies show that benefits increase employees’ sense of well-being, which in turn allows them to focus on their work and feel less anxiety about their future. That’s why many companies offer comprehensive health insurance policies and pensions. When that security is shared among the entire workforce, people are more inclined to cooperate and to look out for the interests of their teammates, and ultimately the success of the company. On the other hand, when people feel that others are shown preferential treatment in important matters such as pensions, they may feel a psychological barrier to cooperation and less invested in the success of their co-workers.
The benefits package can be a major tool for communicating those values to all new employees. They will begin their careers at the company with the sense of mission those values inspire them, including a sense of community and common purpose.
Papaya’s suggested benefits
The challenge of creating an effective global benefits package is finding the balance between global strategy and the individual needs of people in each local area. Benefits providers in different countries will be different, so even the most well-intentioned global plan will still have to be highly localized and require flexibility.
As a general guideline, Papaya Global recommends the following elements to cover the overall well-being of each employee and provide perks that employees can use on an ongoing basis. In countries where the local law is above the indicated standard, employees must receive at least the minimum required by law.
Creating space for parents to bond with their newborns is essential to empowering healthy, thriving families. Maternity should be at least three months (unless the law requires more). In many countries, maternity leave is paid by social security.
Paternity leave should be at least 10 days covered by the company unless the social security in the country covers paternity leave as well.
Papaya has seen a growing trend of longer maternity and paternity periods – in many cases as high as six months fully-paid – in recognition of the vital importance of bonding and caring for a newborn as a family. It is highly advisable to supplement the period paid by local social security so that the employee can lengthen the maternity or paternity period. This brings peace of mind to the families and cultivates loyalty on the part of the employee.
One of the greatest stress points for employees is worry about getting sick or injured and not being able to afford medical care.
Many countries have some level of state coverage for all residents. However, in some countries, the state covered is limited.
Papaya recommends ensuring that all employees have sufficient coverage, whether it is provided by the state, privately by the employer, or through a combination of the two so that each employee receives proper medical care in all circumstances. We recommend spending up to $200 USD to ensure each employee is covered.
We also recommend providing the coverage itself, not simply giving an allowance to the employees, because the coverage they receive will be inferior to what a company can purchase collectively for its workforce.
In many countries, providing life insurance and long-term and short-term disability insurance for all employees is mandatory. For those countries where it is not a statutory requirement, Papaya strongly recommends providing private coverage in each of those areas to make sure every employee is covered.
Life insurance provides a designated beneficiary with financial support in case the employee dies. It removes concerns that their dependents will be left on their own with no means for support.
Short-term plans protect an employee from loss of income in the event of illness or injury. While standard health coverage covers the costs of medical care, short-term disability insurance covers a significant portion of the income lost if the employee is unable to work. Most short-term plans cover periods of 3-6 months.
Long-term plans continue to protect the employee when the short-term plan runs out, providing peace of mind that in the evidence of a serious illness or injury, the employee will continue to receive an income no matter what.
Retirement planning plays a huge role in financial security. Most corporate pension plans consist of a monthly contribution from the employer and the employee. The payments go into an investment fund that earns money for the employee during the period of work and is available upon retirement.
If there is no mandatory requirement for employer pension contributions, Papaya recommends offering a private pension with a contribution of a minimum 3% of the employee’s monthly pay. Many countries offer tax relief on pension contributions, allowing the employee to benefit more from the employer’s contribution.
Paid time off policy
Time off helps employees recharge their batteries and plays a key role in a healthy work-life balance. PTO often consists of a transparent and uniform policy of 20 days per year (unless more is required by law), with up to 7 days that can be carried over to the following year.
Encouraging employees to develop their talents and interests outside of work build employee trust. Second language courses or other forms of study paid for by the company (based on company policy) demonstrate support for the value of self-improvement.
Offering an extra day off on birthdays and a monetary gift card can help employees feel the company wants to share in making the day special.
A monthly allowance for meal vouchers is an effective way to reduce employee stress and increase productivity.
Offering a gym on-site or $550 annual (equivalent budget for all locations) reimbursement for gym membership or other fitness activities can help establish physical health as a company value, increase employee energy levels, and reduce the number of sick days taken.
Allowances are no substitute for actual benefits. The buying power of an individual employee is far lower than that of a company, especially when it negotiates with a local vendor on behalf of all its employees in a particular country. Collective spending reduces costs for the company and for the employees.
Most importantly, allowances do not communicate that the company truly cares about the employee, which is one of the most important objectives behind offering a set of global benefits.
Implementation will be highly localized
Creating an effective global benefits policy is one thing. Supporting it is another matter entirely. There is a great deal of administrative work necessary to launch the program, and it starts with understanding local labor and tax laws.
Labor laws in many countries can help your company deliver a higher level of benefits across the entire global operation. For example, most European countries offer comprehensive health care for all of its citizens, paid for through the social contributions that are withheld from their paychecks along with their taxes. Some countries, such as Japan and Canada, provide for paid maternity leave through their social security services.
In the US, in contrast, there is no paid maternity leave, and employers are required to provide health care for their employees. American companies with more than 50 employees also have to provide health care for their employees’ families as well.
In short, government subsidies can make it easier to deliver benefits in some places. But companies that believe that something is important – that new mothers at the company get appropriate leave, for example – will find ways to bridge the gap globally.
Tax ramifications – benefits in kind
It is also important to consider the tax ramifications to the employee that go with certain benefits.
Taxes on perks such as meal vouchers and gym membership are different in every country. Some countries only tax the employer while others tax both the employee and the employer. Another group of countries (including Germany) provides a tax deduction to companies that offer meal vouchers.
Many countries classify food vouchers and similar types of perks as Benefits in Kind (BiK), which are benefits not included in an employee’s income. Other types of BiKs include company cars or counseling services. Some BiKs are taxed in certain countries and not in others. When taxes are levied, it is usually for the amount it costs the company to provide the benefit.
The same is true for gym membership. The taxes vary widely, and the way the benefit is delivered can make all the difference. In Canada, gym membership for employees is taxable. However, if the company has a business arrangement with a gym allowing employee access, the employees might not be taxed – if the company can prove that the business is the main beneficiary, not the employees.
Whether or not a benefit is taxed, it typically lowers the overall social security contribution from both the employer and the employee because the perk substitutes for money that would otherwise be part of an employee’s salary, which serves as the basis for calculating social security payments.
Comparing benefits in the US, UK, and France
In order to illustrate how global benefits may differ from one country to another, we compared the US, UK, and France in some of the most popular benefits.
|Parental leave||12 weeks minimum||52 weeks||16 weeks for 1st and 2nd child. 26 weeks for 3rd child|
|Medical Insurance||52 weeks||Complete coverage||Coverage up to 80% of costs|
|Pensions||Various optional private pension plans available, most commonly 401(K) plans||Optional pensions with both employer and employee contributions,||Employers must set up and contribute to an occupational pension plan for employees|
|Paid Time Off||No requirement||28 days per year||25 days|
|Meal Vouchers||Meals are excluded from taxes if they are provided on-premises.||Free meals of meal vouchers are exempt from taxes if they are served in a workplace canteen.||Vouchers are tax-free if they are below a certain threshold and if the employer contributes 50-60% of its value.|
Papaya supports global benefits in over 160 countries
Benefits are a powerful tool to build brand awareness around the message of employee empowerment. When they are well-communicated and reflect the true values of the company, prospective employees can look through the list of benefits and feel a sense of belonging.
With numerous locations across the globe, keeping track of benefits in each country can be daunting. Papaya’s in-house experts guide you through the maze of benefits, help you figure out what is possible, and connect you with local benefits vendors in each country.
Papaya can help your company navigate the complexity of benefits, payroll, and payments for a remote workforce, whether within the US or overseas. Papaya’s end-to-end solution supports all types of global workers (payroll, EoR, and contractors) in over 160 countries. The automated, cloud-based SaaS payroll software provides an end-to-end solution, from onboarding to ongoing management to payments across state or national borders.
The automated platform ensures payroll compliance, provides benefits management, and ensures data privacy in compliance with GDPR. Papaya’s knowledge center provides updated information on salary benchmarks, mandatory benefits, tax rates, and more – everything you need to know before hiring in the US or abroad.
Contact us for a strategic consultation.