Dealing with blurred boundaries

Country-specific benefits laws, practices not keeping pace with mobile workers

Increasingly, corporate management structures and areas of accountability no longer follow strict international boundaries that define countries. As the lines continue to blur, so too do the lines that define how employee populations are managed.

Mobile employees can be expected to land anywhere in the world in pursuit of new business or corporate goals, and employment arrangements need to be sufficiently flexible so national boundaries do not prevent the speedy and seamless transfer of skills between countries.

Unfortunately, domestic benefit laws and practices have not kept pace and continue to be country-specific, creating challenges for mobile employees.

Fewer employees willing to relocate

To further complicate issues, the supply of employees willing to relocate internationally is diminishing as baby boomers leave the workplace. The younger people replacing them are less enthusiastic about working abroad, have travelled widely as part of their education and, unlike their parents’ generation, are likely to leave far less to trust when it comes to details about employment arrangements.

Employers need to work harder to ensure robust benefit and safety net arrangements are in place, are globally competitive (as opposed to nationally or regionally competitive) and lifestyle-oriented rather than just catering to visits to medical facilities.

Despite the lessening of differences in tax regimes and costs of living, local government benefits — and the local competitive practices that supplement these — still have a long way to go before they’re similar among jurisdictions.

Employers should look to talent management strategies when deciding which approach is best in providing benefits to mobile employees. However, there are some basic principles that should guide thinking. (See sidebar.)

If an employer is sending employees abroad for the first time, and it does not have a local business or employees with accompanying local benefit arrangements, the only option is to purchase coverage through an international plan for short-term benefits and possibly retain the employee in home country plans for long-term coverage.

Home country plans are generally inadequate for medical and dental claims incurred in the host country, requiring an international plan. Further, in the event of a disablement or death, most employees (or their families) will return to their home country at the time of the claim. Having the appropriate plan providing these coverages avoids tax and banking challenges.

Medical coverage is the most challenging plan to replicate. Most inexperienced expatriates want a plan that replicates their home country plan, often even if the host country is better. This can be a challenge for an employer that, looking to minimize costs, may want to use the local government plan where services are deemed adequate and potentially even superior to the home location.

Make sure the combined plans provide similar levels of coverage, meet the expectations of the employee and her family, and the insurance provider can administer the plan to your exact specifications. No two companies want their benefit plans to operate in exactly the same way — all insurers, however, want their administrative processes to be as standard as possible.

This is where the majority of due diligence should be spent. Ensure there is a seamless process for submitting and administering claims to the two systems (if that is what you select), that there are no unforeseen banking charges and that an efficient protocol is in place for dealing with medical evacuations.

Include lifestyle benefits

In recent years, more lifestyle features have begun to appear in international medical plans that need to be considered:

• medical tourism — the ability to undergo elective treatment in a third country, which can reduce wait times for treatment and recovery

• help lines — medical advice in the first language of the employee

• employee assistance plans — designed for the international family

• non-traditional medical benefits (such as massage and naturopathy)

• legal and financial services — to assist employees in their new jurisdiction.

As the supply of employees who are willing to relocate diminishes and employers work harder to persuade their best people to relocate, these features will help employers stand out and differentiate their employment brands.

It will also be important to understand how the host country’s social security system works and the relationship between contributions and benefits in both the home and host locations.

Many countries have bilateral agreements that facilitate integration between the country’s plans. This affects not only medical plan integration but could also affect pension accrual, depending on whether the employee plans to return home for retirement or retire elsewhere.

Understanding how reciprocity works and whether contributions actually result in an accrued benefit is critical.

Other benefits commonly provided by government agencies (or legally mandated by governments), including workers’ compensation, unemployment and maternity benefits, may also work differently too.

If you have benefit plans in the host country and intend to enrol transferring employees, ensure that prior service with the company can be recognized to meet any waiting or vesting periods, as well as satisfying any possible pre-existing condition limitations.

Lastly, income tax impact should be examined. Generally speaking, most savings or pension plans that have a tax advantage in one country will not have the same advantage in the host country. Employee contributions may not be deductible and employer contributions and investment returns may even be taxable.

As the need for globally mobile employees continues to increase and the available supply of willing and capable candidates diminishes, employers need to be far more diligent in providing the right benefit plans to ensure they are able to attract, mobilize and reward the talent needed to grow their business.

While great strides have been made in terms of free trade and flow of capital across borders, much is still lacking when it comes to integrating and facilitating effective employee benefit arrangements across borders.

Paul Pittman is the senior partner and founder of The Human Well, a collaborative HR consulting practice located in Oakville, Ont., with clients globally. He can be reached at (905) 842-7916, or visit for more information.

On the move

Benefits for mobile employees

Talent management considerations

Short-term benefits (such as medical, dental, STD)

Long-term benefits
(such as life, pension, LTD)

Special considerations

Employee will travel to the new work location for short periods up to three months

Remain in home
country plan

Remain in home
country plan

Consider frequent

traveller plan (travel and accident)

Employee is likely to fulfill assignment and return home

Enrol in host country plan

Remain in home
country plan

An international plan for short-term benefits

would work equally well

Employee is likely to go on further assignments in several countries

Enrol in international plan distinct from home or local plan. Enrol in emergency medical and political evacuation plan

Enrol in international plan distinct from home or local plan

Consider integration with local medical plans, if acceptable, and with home country for family members located in a different country to the work site

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