Global benefits centralisation ‘being held back’

The trend for global employers to centralise benefits is being held back by operational realities, according to Aon’s 2015 global benefits survey.

The research found decision-making at most multinationals has heavy involvement from local stakeholders, with 40 per cent making mainly local decisions, and 15 per cent making completely local decisions. Just 7 per cent of multi-nationals make total global decisions.

The survey found that a lack of centrally held benefits information is blocking strategic priorities, while benefit administration is draining resources. With most organisations adopting a ‘just enough is good enough’ attitude to most areas of employee benefits management.

The 2015 Aon Global Benefits Survey also shows that traditional multi-national pooling is on the wane, while captive funding for insured benefits and other financing initiatives are increasing. The research reflects responses from 184 global benefits and rewards specialists around Europe.

Aon says the survey shows a lack of excellence in the management of plans, with most organisations using the ‘just enough is good enough’ approach. Nearly 65 per cent of respondents agreed their plans are only fit for purpose.

The report finds that the trend of centralisation is increasing benefit administration issues. As benefits expertise is removed locally, global centres of excellence are increasingly taking responsibility for all areas of plan management and administration. It finds most organisations report a lack of centrally held benefits information, which is a barrier to driving strategic priorities. 56 per cent do not 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 study also found that less than 10 per cent of participants without an existing pool are looking to implement a new pool and only a third of those with a pool are actively keeping the structure under review.

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.

“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.”