tandardizing employment benefits globally may be a good idea, but it can be tricky.

     Just ask Dena Regan, senior manager of global benefits at communications technology company JDS Uniphase Corp.

    A couple years ago, Ms. Regan's team noticed that the firm’s French operations provided differing levels of benefits to employees. But Ms. Regan’s group ran into resistance when it sought to consolidate five medical plans.

    Eventually, JDS Uniphase, with headquarters in Milpitas, Calif., coordinated the plans last year, making benefits to all French employees consistent. But it took the government to move things along. Ms. Regan said French officials required that the plans be harmonized when the firm consolidated different legal entities for tax purposes.

    "This helped open the door with our French colleagues," Ms. Regan said, "where we were perceived as helpful instead of intrusive."

    Multinational employers these days are pushing to standardize employment benefits around the globe. A more centralized approach to health, welfare and retirement benefits can help ensure that firms comply with regulations. Companies also are keen to align benefits with overall corporate goals. Risk management and cost cutting also play a role, especially in retirement and health benefits.

    But global standardization of employment benefits has its limits, including cultural and legal roadblocks. And in the future, employers may have to offer more personalized fringe benefits to employees wherever they are.

    "A one-size-fits-all set of benefits isn’t going to work," said Gareth Williams, partner with consulting firm Mercer in Chicago.

Importance of benefits emerging
    Employment benefits continue to be a major part of compensation around the world, and are growing in importance. Some emerging economies are revising their tax codes to make employer-provided benefits attractive, in part because public retirement systems face insolvency, said Robert Wesselkamper, practice director of international consulting at advisory firm Watson Wyatt Worldwide, Washington.

     And employees around the world are calling for employer-provided health insurance that provides better services than the government-sponsored plans present in many nations.

     "Supplemental medical benefits are fast becoming the most-valued supplemental employment benefit provided in the world," Mr. Wesselkamper said.

    As benefits expand, companies are seeking to design and standardize them globally. "The trend is much more of a centralized approach” compared with five or 10 years ago, said Mauro Canori, a divisional human resources leader at pharmaceutical firm Merck & Co. Inc., Whitehouse Station, N.J., and executive committee member of the Brookfield, Wis.-based International Foundation of Employee Benefit Plans education group.

    Nearly 50% of organizations have a centralized approach to global benefits management, according to a study published last year by the Corporate Executive Board research group. Just 13% have a decentralized structure, and 38% use a hybrid method. What's more, 38% of organizations expect to become more centralized in their global benefits management, but the remaining 62% anticipate no change in structure.

    Larger employers want “greater transparency," said Chris Burns, head of the global employee benefits practice at insurance broker Willis Group Holdings Ltd., New York. One reason, Mr. Burns said, is compliance. The Sarbanes-Oxley Act in the United States, for example, has pushed companies to have a tight grip on their financial reporting, including expenses. But large companies can struggle for insight into the costs of their employment benefits around the globe, he said. Thanks in part to acquisitions and mergers, organizations may not know all of the benefits their various country units provide.

    The quest for a more coherent corporate strategy also is behind the benefits-standardization trend. As the information age erodes barriers between countries, many firms are seeking to create a more consistent brand experience globally. And that extends to the employment brand. Mr. Canori said companies frequently pick their ideal level of global benefits, such as the 70th percentile—meaning that in each country they operate, they will aim to offer benefits better than those offered by 70% of employers in that nation.

Centralizing benefits
    Cost savings and risk reduction also help explain the shift to central management of global employment benefits.

     On the pensions side, the switch to defined contribution plans from defined benefit programs is continuing on a global scale. In the past several years, a company’s ability to conduct business transactions—and therefore, its competitiveness—is increasingly affected by the risks linked to operating a defined benefit plan, consultants say. As a result, more multinational companies are trying to find ways to reduce their defined benefit pension liabilities.

     "In the long term, it’s inevitable that employers will continue to look for ways to shift more of the [pension] cost to employees," said Christopher Mayo, senior consultant at Watson Wyatt Worldwide.

     Even in countries such as the Netherlands, where more than 90% of all pension assets are still defined benefit plans, defined contribution approaches are beginning to appear, usually as “hybrid” plans that combine elements of both schemes.

    Some companies are going further by paying insurance companies to take the defined benefit plans off their hands, either in part or in whole. Known as a buyout or a buy-in, depending on the structure of the insurance-based agreement, such transactions allow companies to effectively remove the risks associated with their DB pension assets and liabilities from their balance sheets.

     In the realm of health-care benefits, paring expenses has emerged as a priority for firms, given the growing demand for medical benefits combined with rising health-care costs around the globe. To combat those costs, larger companies are starting to launch employee wellness programs in countries beyond the United States, said Willis Group’s Mr. Burns.

    Companies also are turning to health insurance providers with an international reach. One is Maxis, which offers coverage in 74 countries and is a partnership of insurance company MetLife Inc., New York, and financial services firm AXA Group, New York. Rudy Bethea, vice president of multinational solutions at MetLife, said tapping a multinational network like Maxis can save a company 2% to 3% in medical costs.

    Yet another factor fueling the centralization of employee benefits is the growth in cross-national assignments. “Employers have to come up with ways to lock in standards for mobile employees,” Mr. Bethea said.

Hurdling obstacles
    But global companies can go only so far in normalizing their employee benefits. Cultural differences set limits. So do government regulations, which vary around the globe. Ms. Regan said that in China the length of a marriage-leave benefit depends on the age of the bride, with older women getting a longer leave.

     Uneven labor-market conditions also get in the way of a uniform benefits policy. Battles for talent in a particular country may call for a higher level of benefits than that set by the overall company strategy. "There may be circumstances where you need to de-link from the global standard in order to meet the hot market's challenges," said Mr. Wesselkamper of Watson Wyatt.

    If anything, companies need to prepare to let employees select highly personal combinations of benefits. Mr. Williams of Mercer said workers at different stages of life may want to select varying benefits, such as tuition reimbursement for a business degree early in their careers and elder care when they are tending to aging parents.

    Even if companies succeed in creating more centralized benefit policies, the global approach has a potential catch if the benefits are not uniform around the world: higher employee expectations everywhere. Ms. Regan said workers in one country may clamor for the best benefits offered in another, such as longer vacations. "Be careful what you wish for," she said.

—Crain's Benefits Outlook Online,  November 2008