EEBB 2 Getting the Mix Right

8/8/2019 EEBB 2 Getting the Mix Right

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European Employee Bene ts Benchmark

Employee Bene ts:Getting the Mix Right

Aon HewittConsulting | Health & Bene ts


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Aon Hewitt is the global leader in human capital consulting and outsourcing solutions.The company partners with organizations to solve their most complex bene ts, talentand related nancial challenges, and improve business per ormance. Aon Hewitt designs,implements, communicates and administers a wide range o human capital, retirement,investment management, health care, compensation and talent management strategies.

With more than 29,000 pro essionals in 90 countries, Aon Hewitt makes the worlda better place to work or clients and their employees. For more in ormation on Aon Hewitt,please visit www.aonhewitt.com.


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1. Executive summary ...............................................................page . 4

2. Introduction ...........................................................................page . 5

3. Pensions: frst choice on the benefts menu .....................page . 6

4. The pension poverty trap ....................................................page . 8

5. Other benefts: income protection leads the feld ...........page . 9

6. Li e assurance: mixed results ..............................................page 10

7. Flexible benefts: some surprises ........................................page 10

8. Promoting a healthy work orce ..........................................page 12

9. The benefts communications gap ....................................page 14

10. Conclusion .............................................................................page 15

Contents


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Employee Bene ts: Getting the Mix Right4

As Europe emerges rom a recession, many employees are considering their next jobmove. Non-cash bene ts, including pensions and healthcare, will play a key role inhelping them decide.

The survey ndings show that an optimal mix of cash and bene ts, can vary amongnational groups. The cross-border variation suggests that, when it comes tobene ts planning, international companies would bene t rom o ering a degree o

fexibility in the menu o bene ts that they o er to their work orces.

While the popularity of different bene ts varied among employees in the 10 countries surveyed, pension provision was the number one choice when asked whatbene ts respondents might be willing to exchange or a proportion o salary.

Nearly one- fth of employees in the survey say that they have increased their private contributions to pension plans. This was especially the case in the UK and Germany.

A quarter of employees reported that they didnt have a pension plan.

Greater nancial protection was the second favourite bene t amongst employees, with more than one-third saying they would trade salary or an employer-sponsoredhealth insurance provision in the event o ilness/injury.

A high proportion of respondents didnt know if their employers provided healthbene ts. The survey ound similar levels o uncertainty with li e assurance bene ts.

With regard to other exible bene ts, the most popular are employer-sponsorededucation and childcare acilities.

The least favoured exible bene ts are mobile phones and sports/entertainment days,although the popularity o such bene ts varied widely among di erent country groups.

The prevalence of sick leave appeared to vary widely among countries. This was especiallytrue in countries that allow employees to take o social days to deal with personal and

amily issues.

As companies develop strategies to retain their staff or attract new employees, bene tsbecome an intrinsic part o the mix. However, across the ull range o bene ts, the surveysuggests that employers are not doing enough to communicate their bene t provisionsto employees. A high proportion o respondents in every country are unaware o employer bene t provisions and the value o bene ts received.

Executive summary


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Welcome to Aon Hewitts European Employee Bene ts Benchmark Survey (EEEB). This isthe second report based on our recent online survey o workers in ten leading economies.More than 7500 people took part, providing resh employees perspectives on company-sponsored bene ts in Belgium, Denmark, France, Germany, Ireland, The Netherlands,Norway, Spain, Switzerland, and the UK.

The report ocuses on how bene ts the services or products that companies provideto their workers apart from salariesmight in uence employees relationships with their employers. It is designed to help human resources directors and other senior managersimprove the design and scope o bene t packages to make them more attractiveto employees in a rapidly changing nancial and economic landscape.

The timing o the reportas Europe begins to emerge out o recessionunderlinesthe importance o well-tailored bene ts packages. In 8 o the 10 countries surveyed,over 30% o respondents intend to look or new jobs over the next 6-12 months

(See Chart 1). In the UK and Ireland, the proportion was close to 50%.

Bene ts are an intrinsic part o the mix when companies consider how they can retainexisting sta or attract new employees. However, it is clear rom the survey ndings thatemployees do not perceive certain fexible bene ts and pensions as an add-on to salaries.Many regard some bene ts as a substitute or cash rewards.

The optimal mix o cash and bene ts also varies among national groups. This suggests thatwhile companies should pursue consistent bene ts policies across their European businesses,employees would welcome a degree o fexibility as to the menu o bene ts on o er.

The rst report based on the EEBB entitled Expectations vs. Reality: Meeting Europes

Retirement Challenge, examined employees expectations from retirement across a widerange o subjects, including general attitudes towards retirement saving, where they ex-pected to retire, how they elt about government policies to raise o cial retirement ages,and how much money they expected to receive (and expected to need) in retirement.

Taken together, the reports o er both macro and micro perspectives on sound bene tsplanning.

Table 1: Number o respondents in each country Chart 1: Do you think you will look or a new job

in the next 6-12 months?

Introduction

GermanyUKFranceSpainNetherlandsBelgiumNorwayIrelandDenmarkSwitzerland

1,0191,0051,0001,000752800500502501500

Employees looking for new jobs

10

0

20

30

40

50

60

% o f e m p l o y e e s

U K I r e

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G e r m

a n y

S p a i n

F r a n c

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N o r w

a y

D e n m

a r k S w i t z

B e l g i

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Chart 2: I you were starting a new job, which o the ollowing bene ts would you be interested in i they were available

as part o your pay package: that is, you would sacri ce some pay but gain the bene ts at a avorable rate?

Employee bene ts come in all shapes and sizes, rom traditional items such as pensions,holidays, childcare and healthcare, to less conventional o erings such as education andhome cleaning services. We asked employees which bene ts they value su ciently enoughto exchange or salary when considering a new job.

Perhaps unsurprisingly, pensions rank as the single most important bene t that employeeswould swap or cash in their pay packets. Over 50% o employees in Belgium, Denmark,France, Ireland, and the UK would be willing to orego salary or improved pensionprovision when considering a new job. Only Dutch employees saw limited attraction

to this bene t, with ewer than 27% saying they would be willing to exchange better pensions or salary.

On average, 30% o employees in the countries surveyed receive pension contributions from employers that exceed 6% of their salaries. Such generosity was especially notable inDenmark and Switzerland, with the UK also just above the average. In Spain, where statepension provision is relatively generous, employees were least likely to see such high levelso contribution.

Chart 3: How much do you think your company spends on your primary pension plan

(those answering over 6% o salary)?

Pensions: rst choice on the bene ts menu

What benefits would you swap for pay?

0

10

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40

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60

% o

f E m p l o y e e s

P e n s i

o n c o n t r

i b u t i o

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I l l n e

s s / i n j u

r y b e n

e f i t

E x t e n d

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u a l l e a

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S a v i n g

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C h i l d c

a r e

A l t e r n

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P u r c h a s

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M o b i l e

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e

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a i n m e

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Workers who perceive their employers to spend

more than 6% of their salaries on pension plans

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Pensions were su ciently important or 18% o employees to have increased their ownpersonal contributions to retirement savings in the last year. Employees in the UK andGermany are the most likely to have increased the level o such savings over the past year,whilst a higher-than-survey-average proportion o employees increased retirement savingsin Denmark, Ireland, and Switzerland. These ndings re ect those of the rst EEBB report,which ound that more than hal o employees in Germany, Ireland, and the UK wereconcerned about inadequate savings in their pensions. A low proportion of employees just over 6%increased their retirement savings in the Netherlands.

Chart 4: Over the last year, have you changed the amount you contribute to your pension plan (savings plan)

or retirement? (Employees saying yes)

% of employees increasing retirement savingsover the past year

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E U a v e r a

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Less than 25% o employees surveyed had no pension plan in place. This was mostprevalent in France and Spain, where state earnings-related pension provision is stillrelatively generous. Taking these two countries out o the calculation reveals an averageacross the 8 remaining countries o just over 18%. Employees in the UK and Ireland,which have the lowest state pension provision, are the most in danger o poverty in oldage, with 24% and 25% o employees respectively reporting no pension arrangements.

Not all o these individuals are headed or the pension poverty trap, given that there areother ways or individuals to save or retirement. However, the proportion is high enoughto generate concern.

Chart 5: Over the last year, have you changed the amount you contribute to your pension plan (savings plan)

or retirement? (Employees stating that they didnt have a pension plan)

The pension poverty trap

Employees not having a pension plan

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% o

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The second most attractive bene t is nancial protection, with over one-third o employees willing to exchange pay or improved levels o protection against illness andinjury. This was most noticeable in Ireland, where nearly 54% o employees said theywould be attracted by such a bene t, and in Belgium where the percentage was 43%.

About 28% o employees surveyed believe that their current employers would continuepaying them or a year or more in the event that they contracted a long-term illness.However, there was a wide discrepancy among countries, with less than 9% o Germanemployees saying this was likely, compared to 52% of Dutch employees and 46% of Swissworkers.

More worrying perhaps, is the high proportion o employees who did not know whether their employers provided long-term illness cover. A full 70% of Spanish employees did notknow, together with over 50% o employees in France, Norway, and Denmark. In every

country covered in the survey, the proportion exceeded 30%.

While no one likes to think about long-term illness, the survey suggests that employeesneed to be made aware o their options in the event they become seriously ill.Given employees enthusiasm for this bene t, employers might be well advised to consider it a key strategic weapon in their bene ts armory.

Chart 6: I you ell sick with a serious or long-term illness, how long would your employer continue to provide income?

(Employees saying one year or more)

Chart 7: I you ell sick with a serious or long-term illness, how long would your employer continue to provide income?

(Employees saying dont know)

Other bene ts: income protection leads the eld

Long term illness cover (more than one year)

0

10

20

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40

5060

% o

f e m p

l o y e e s

U K I r e

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a n y

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Long term illness cover (dont know)

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D o n

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French employees appear to be the most likely to enjoy li e assurance cover provided bytheir employers, with Swiss employees least likely to enjoy this bene t. As with other employer-provided bene ts, there is also a signi cant minority o employees in most o thecountry groupsmost notably the Netherlands (31%) and Norway (30%)who didntknow whether this bene t was available or them and their amilies.(See also the bene ts communication gap page 14)

Chart 8: Does your company provide li e assurance cover? (Employees saying yes)

Aside rom pensions, healthcare, and li e assurance, employers can o er a wide rangeof additional exible bene ts to attract and retain employees. Some of these are morepopular than others. In all but two of the countries surveyed (Denmark and France),20% or more o the respondents said they would be attracted by the ability to negotiateextended periods (between 3 and 6 months) of paid or unpaid leave. Over one-third ofemployees in Ireland, Norway, and the UK cited this as an attractive bene t. Relatively ew(13% across all respondents) expressed an interest in purchasing additional vacation days,however, suggesting that employees are attracted more by the reedom and fexibilityo a long period o leave rather than additional short breaks.

It is interesting to note that over a quarter of employees said they would be willing to exchange salary or a company-sponsored savings plan, making this the ourth mostpopular bene t. This may refect increasing levels o dissatis action with the globalbanking industry after the nancial crisis, a willingness to participate in employers equity,or perhaps recognition that companies might enjoy better deposit rates than individualsand could pass this bene t on to sta .

Employers purchasing power also enables them to acquire products and services for theiremployees at a bulk, pre erential rate, contributing to the ull remuneration package.The survey asked respondents their views on a wide range o bene ts, including homecleaning/ironing services, attendance at sporting events, and education opportunities.Responses varied among national groups on whether there were attractive alternatives

to cash.

Li e assurance: mixed results

Flexible bene ts: some surprises

Employees with employers' life assurance

05

101520253035

404550

% o

f e m p l o y e e s s a y

i n g

Y e s

U K I r e

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r l a n d

s

G e r m

a n y

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Across the survey sample, over 22% o employees would sacri ce some pay in exchange or an educational course o their choice, ranking above childcare services. Over 30%of employees in Germany, Ireland, Switzerland, and the UK found this an attractive proposition. It was least attractive in France, the Netherlands, and Norway.

Chart 9: I you were starting a new job, which o the ollowing bene ts would you be interested in i they were available

as part o your pay package: that is, you would sacri ce some pay but gain the bene ts at a avourable rate?

(Employees saying an educational course)

The second avourite non-conventional bene t was surprising. Across the survey group,nearly 15% o employees said that they would swap pay or alternative health therapies.This was especially pronounced in Norway and Spain, where over 20% of employees

would welcome such an o ering.

Chart: I you were starting a new job, which o the ollowing bene ts would you be interested in i they were available

as part o your pay package: that is, you would sacri ce some pay but gain the bene ts at a avourable rate?

(Employees saying alternative health treatments)

Survey-wide, the least favoured options were company-supplied mobile phones, provision o sporting/entertainment days twice a year, and home cleaning/ironing services.Even amongst these least avoured choices, there was a wide discrepancy amongdi erent national groups: 18% o the respondents in Belgium, or example, would swap

pay or home cleaning services, while 15% o UK employees would do the same or sportsand entertainment days.

If you were starting a new job would you sacrificesome pay in exchange for an educational course

of your choice?

05

1015202530

3540

% o

f e m p l o y e e s s a y i n g

Y e s

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If you were starting a new job would you sacrificesome pay in exchange for alternative health

treatments?

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% o

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Y e s

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Employee wellness is an important ocal point or all European employers. Aon Hewittde nes employee wellness as a combination o health actors, personal actors, andworkplace factors affecting employees ability to perform in a safe and productive manner. It is the main driver in an employees decision to go to work when a health issue arises.

Common sense suggests that, or most people, taking a day o o work or health reasonswould be because o illness. While the survey ndings bore this out, in some countriesnotably Germany, Denmark, and Switzerlandthere were more complex reasons. InIreland, the UK, and Norway, only 50% or so o employees cited this as the reason or their last sicky. In Spain and France, the gure falls below 40%.

Across the survey, 42% o respondents cited reasons other than genuine illness or their absence. These included personal issues (15%), a combination of health, personal andworkplace factors (10%), caring for other family members (10%) and workplace issues (2%).

It is interesting to note that in Spain and France, where the highest proportion of respondents cited other reasons or taking a day o o work, there was also a notablyhigh proportion o respondents declaring that they had not been sick rom work inthe previous year.

This may be due to some employers practice of allowing social days as a condition ofemployment. These allow employees to miss work or a variety o reasons, including care

or sick relatives. In France, conditions o employment in some sectors commonly allow1 social day every month and at least 6 social days per annum. Many employees will optto take a social day, rather than report in sick.

Chart 11: What was the real reason or you last day o rom work? (Employees saying a genuine illness)

Promoting a healthy work orce

What was the real reason for your last day off work?

0102030405060708090

% o

f e m p l o y e e s c l a i m

i n g a

g e n u

i n e p h y s

i c a l o r m e n

t a l i l l n e s s

U K I r e

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a n y S p a i n F r a n c e

N o r w a y

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l g i u m


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Chart 12: How many sick days do you normally take every year? (Employees saying none)

We asked respondents what they thought employers might do to reduce the number o employee sick days. In every country, three suggested solutions were chosen over theothers: namely provision o fexible work hours, cash incentives to reduce sick days and,most popular o all, provision o a social days bene t, through which employees couldtake time o or non-medical reasons. Remarkably, there were no signi cant nationalvariations on the order o pre erence expressed. This suggests that provision o social days,combined with more fexible working hours, may be the most e ective route or employersto promote employee wellness.

Chart 13: Which o the ollowing do you believe would help you to reduce your time o work sick?

How many sick days in the past year?

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What could your employer do to reduce your number of sick days?

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The bene ts communication gap

We asked employees how much they believed their company spent on secondary/fexiblebene ts such as childcare, extensive annual leave, company phone, etc. as a percentageo salary, as well as their primary pension plan as a percentage o salary. The most startling nding was that, for pension spend, the biggest response category was dont know.This underscores the need or many employers to increase communication about non-salarybene ts, especially or pensions in which communication may be dominated by complexactuarial terms and concepts.

We know rom the earlier ndings that approximately hal o the work orce considerspension provision to be something that they would willingly exchange or lower salary, yet across the survey over 35% of respondents didnt know what the value of their pensionbene t was as a percentage of pay. The proportion of Dont Knows was highest in Franceand Germany at 50% and 51% respectively. A similar pattern was seen with the employerscost o fexible bene ts. European employers spend substantial amounts o money each

year on fexible bene ts and pension bene ts or their employees, chiefy as a means toattract, motivate, and retain their work orces. The survey suggests that many o them arenot doing enough to maximise their return on this investment.

Chart 14: How much do you think your company spends on your primary pension plan (as a percentage o salary)?

(Employees saying dont know)

Chart 15: How much do you think your company spends on your fexible bene ts, excluding pension

(as a percentage o salary)? (Employees saying dont know)

What proportion of your salary does your employer pay into your pension scheme?

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What proportion of your salary does your employer spend on your flexible benefits, such as

childcare, mobile phone etc?

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t K n o w

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Conclusion

Chart 16: Does your company provide li e assurance cover? (Employees saying dont know)

The European Employee Bene ts Benchmark is a use ul indicator or employersas they consider how to tackle the task o maximising their return on human capitalinvestments.

Simply paying higher salaries than competitors is a blunt and inef cient instrument in the battle to attract and retain a talented work orce.

It is clear that employees place signi cant value on their pension, healthcare, and other bene ts. The challenge or companies is how to optimise the combination o bene ts ina way that enhances perceptions o the employment package as a whole.

Work orces in di erent countries will respond more avourably to some bene ts thanwork orces in others. Employers can recognise this by o ering a fexible menu o bene tsto refect di erent tastes in di erent countries.

The most immediate task or all employers, however, is to ensure that their workers areclear on the bene ts they already receive and their overall value. From a corporate strategicperspective, there is little point in delivering bene ts to employees i the recipients are lessthan ully aware o their worth and their ull array o options.

Does your company provide life assurance cover?

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D o n

t K n o w


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Belgium Werner KeerisRue Jules Cockx 8-10BE 1160 BrusselBelgium+32 (0)2 730 98 91

Denmark Mogens DamgaardStrandgade 4CCopenhagen, DK-1401Denmark+45 3269 7272

FranceBertrand PitavyD ense Ouest420 Rue dEstienne dOrves92700 ColombesFrance+33 1 58 756 346

GermanyFrank TietjenLuxemburger Alle

45481 Mlheim an der Ruhr Germany+49 30 340 0042767

Ireland Andrew KrawczykThe Metropolitan BuildingJames Joyce StreetDublin 1Ireland+353 (0) 1 2666 627

The NetherlandsBoy Sluiter Admiraliteitskade 623063 ED RotterdamThe Netherlands+31 (0)10 448 78 98

NorwayDag Erik Aspaas

Vollsveien 4Postboks 141324 Lysaker Norway+47 67 11 22 92

SpainJorge Garcia PerroteRosario Pino 14-16Madrid, 28020Spain+34 913 405 584

SwitzerlandCathy Course

Avenue Edouard Rod 4

1260 NyonSwitzerland+41 (0) 22 363 65 11

United Kingdom / EMEAIan Hinton6 More London PlaceLondon, SE1 2DAUnited Kingdom+44 (0)20 7939 4441

Contact details

No part o this publication may be reproduced or stored in a retrieval system, or transmitted inany way or by any means, including photocopying or recording, without written permissiono the copyrightholder, application or which should be addressed to the copyrightholder.

Whilst care has been taken in the production o this report and the in ormation contained within, Aon Hewitt does not make any representation as to the accuracy o the report and accepts noliability or any loss incurred by any person who may rely on it. In any case, the recipient shall beentirely responsible or their use o the report.

Copyright Aon Hewitt 2010

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EEBB 2 Getting the Mix Right