Employees in Hong Kong and mainland China are bucking a global trend by choosing benefits with potentially longer-term value, while those in other locations prefer to reap rewards as soon as possible. For HR, the on-going pressure to ensure that employees understand the importance of finding a balance between short- and long-term benefit choices looks set to increase.
Given the choice, employees worldwide tend to select benefits that offer immediate gratification rather than those that potentially deliver value over the long term, according to a recent Mercer Marsh survey of 10,400 employees in ten key markets around the world: Making Smart Benefit Choices.
Guiding smart choices
Employees surveyed selected a salary increase over all benefit offerings listed in the Survey—except in Canada where paid holiday just overtook a salary increase in terms of preference. An extra week of paid holiday also made it to the top-three employee choices in seven of the ten markets surveyed.
These preferences underscore the challenge faced by employers worldwide in empowering employees to make more of their own benefit choices while encouraging them to strike the right balance between the shorter and longer-term value of the benefits they choose.
David Rahill, President, Health & Benefits, Mercer said, “Employers worldwide are asking their employees to make more and more decisions for themselves when it comes to their benefit programmes. Employees valuing more time off and increased pay in the current stress-filled economic environment may be understandable, but there are other benefits that have the potential to create more income protection…This challenge puts even more pressure on employers to deeply understand and communicate the value of various benefits to their employees so they can make smart choices.”
Employee voluntary benefits
The survey also asked employees to rank the kind of benefits they are willing to pay for themselves, often referred to as ‘voluntary’ or ‘flexible’ benefits. These benefits are usually paid for by the employee out of his or her pocket or through an employer’s flexible benefits plan. These company-run programmes can offer employees discounted prices compared to the open market.
Responses reflected a broad split between markets in which a wider range of health benefits are provided publicly and/or by employers and those where health benefits are not as accessible. In the former, benefits that provide additional insurance are the most popular—US, UK, Ireland and Canada—while in the latter—mainland China, Hong Kong, and Brazil—offerings like additional retirement/savings rank highly. In some markets where the government is the primary provider of healthcare—Ireland, Spain and Italy—supplemental private medical insurance is popular as a voluntary or flexible benefits.
Benefits-lifestyle best fit
Amy Laverock, Leader, Global Health & Benefits Strategic Solutions, Mercer explained, “More and more employers are under pressure to offer a broader range of benefits to their employees. Reasons range from gaps in the public health care systems to competing firms making creative and innovative benefits available. However, it is increasingly difficult for employers to simply add core benefits with the costs of these benefits outpacing inflation. Voluntary or flexible benefit offerings can often bridge this gap while empowering employees to choose benefits that match their particular needs and lifestyles.”
Retirement readiness
With concerns about successful retirement a global issue, the Survey also included questions on perceived retirement readiness among employees. In most markets, the percentage of respondents who feel very or fairly concerned about retirement ranged between two-thirds and three-quarters. This concern is well founded; in markets outside of Asia approximately 75% are saving less than 10% of their total compensation towards retirement.
Fergal McGuiness, Leader, Global Defined Contribution, Mercer suggested, "Employers need to enhance the perceived value of the benefits they offer to employees to ensure the investments they make in these programmes generate more strategic, long-term advantages.”
He advised HR, “In this respect, the Survey results illustrating the high levels of anxiety that exist around retirement readiness are particularly important. Employers taking simple steps to help employees understand and plan for their retirement needs can expect a return in the form of enhanced engagement, loyalty and motivation."
The survey revealed that employees in mainland China and Hong Kong markets are no different than those in other countries surveyed when asked to rank benefits in terms of perceived value, generally choosing benefits they can enjoy now. Those in mainland China selected daily commuter subsidies and housing plan increases as most preferred benefits, while employees in Hong Kong viewed an additional week of paid holiday, contribution towards their flexible spending account and savings on public transportation to be of greatest significance.
Forward thinking Asia
However, the Survey revealed several important differences between global trends and those in Asia, particularly in the area of voluntary benefits. When invited to contribute directly from their own pockets, employees in both markets showed that they are also thinking about their future. In mainland China the top three voluntary benefits were supplemental retirement, an additional contribution towards housing, and supplemental savings, with additional retirement savings and dependent critical illness ranked next highest. Employees in Hong Kong would also put their own money towards longer-term programmes and their health with the top three benefits employees are willing to pay for being supplemental savings, lump sum payment for a serious illness and extra medical. Additional retirement savings options and supplemental programmes ranked very closely behind, even though Hong Kong employees already contribute to mandatory retirement schemes under the Mandatory Provident Fund/Occupational Retirement Schemes Ordinance.
No size fits all
Looking at these results more closely, however, it is clear that one size does not fit all. The top seven benefits in Hong Kong and the top three benefits in mainland China are closely ranked in percentage with employees choosing very different benefits as their first preference. From this comes the observation that different benefits appeal to different employee segments. Supplemental retirement and supplemental savings, both in the top three ranked benefits in mainland China, appealed most to those in media or telecommunications industries and those willing to spend just 1%-5% of total annual compensation saving for retirement. Additional contributions towards housing funds in particular drew those living in east China second or third-tier cities. Supplemental savings are of most interest to those aged 18-34 in Hong Kong, including those at smaller firms of 51-100 headcount; lump-sum payment for a serious illness and extra medical insurance ranked most highly among young singles and couples without children.
Retirement scares
Employees in both markets indicated they are not confident they are saving enough for retirement, with 81% in China and 71% in Hong Kong expressing concern. Employees in both markets, however, should not be hard on themselves as—relatively speaking—they are saving more than employees in any of the other markets surveyed across the globe. 55% of employees in mainland China and 45% in Hong Kong indicated they are saving more than 10% of their salaries for retirement.
Understand perceived values
Royston Tan, Greater China Leader, Employee Health & Benefits, Mercer explained that voluntary benefits are perhaps the best example across all types of benefits that perceived value differs across industries, ages, lifestyles and role. He concluded, “Employers will want to understand these perceived values as they redesign, or add to, their existing plans in order to provide benefits programmes that are not only competitive in the marketplace and enable cost control, but are valued by their employees. It is only when we strike this balance between what’s sustainable and what’s effective will both employers and employees benefit from the true value of their benefits.”
Paul Arkwright
Publisher
