Employee benefits: How to offer a subsidy-based program internationally
Learn how to structure and manage subsidy-based employee benefits programs for team members residing or working internationally.
Why take subsidy-based employee benefits global?
Internationally-based employees are great company assets as they provide an extra layer of diversity and bring in different perspectives to the workplace.
Amid an increasingly globalized workforce — diversity, equity, and inclusion are no longer optional traits for companies to incorporate. These traits have become an integral requirement as part of a modern company’s culture.
An inclusive company culture fosters commitment and deeper trust from employees by respecting the needs, perspectives, and potential of team members across the globe, This also enhances a company’s reputation allowing organizations to attract top talent. A wider perspective on various cultural and demographic needs enables entities to gain beneficial insights into consumer needs and have a broader global impact.
Research shows that companies who embrace and implement cultural diversity measures are 36% more profitable than non-inclusive businesses.
Offering international employees inclusive subsidy-based employee benefits is an effective way to structure a global workforce employee benefits program.
In this article, we discuss three ways in which international subsidy-based employee benefits programs can be structured and how to simplify international employee subsidy management.
Offering subsidy-based employee benefits programs internationally may seem complicated at first due to the various currencies and cost-of-living indexes from country to country. And providing subsidy assistance to employees will certainly vary according to their location and local cost of living.
The cost-of-living adjustment (COLA) method is the most widely used strategy that companies use to determine global employee benefits allocations.
Multinational companies use the globally recognized cost of living index to calculate salaries and subsidies for international employees that seek to level the playing field and preserve each employee’s purchasing power so that they are no better or worse off regardless of where they are located.
A cost of living index determines the difference in living expenses between a company’s head-office location and other countries, creating an aggregate measure that workforce entrants can use as a benchmark.
In determining employee benefits packages, employers must also consider the COLA annually so payments align with inflation.
Forma simplifies the cost-of-living adjustment strategy to ensure equitable and inclusive benefits as well as how to maximize your benefits budget with increased purchasing power. The Forma platform supports conventional benefit accounts, lifestyle and wellness employee benefits, remote and hybrid workforces, family support, and more.
Cost-of-Living Direct Conversion
Offering subsidy-based programs calculated by direct conversion can allow employees in low-cost locations to benefit a lot more than those who live in expensive cities.
Companies with a global workforce of less than 10% may want to opt for this type of system. However, providing employee subsidies through direct conversion when the base is calculated in a high-cost location may result in excessive and unnecessary spending. Therefore, this route is the least recommended method of structuring a global employee benefits model.
It is more beneficial for U.S.-based companies that have an international workforce higher than 10% to determine benefit amounts via the cost-of-living index to ensure everyone gets equal benefits.
This will depend on the type of benefits offered.
Cash Incentives Options
Most employees, when given a choice, will choose cash incentives over non-cash options. Cash incentives are generally used for practical or immediate needs and are a quick and simple way to motivate employees to perform better. Cash incentives are also easy for companies to manage and distribute since they can be added to a paycheck. The downside to cash incentives is that they are often quickly spent and quickly forgotten.
However, not every country responds in the same way to all reward practices. As opposed to cash rewards, employees in some parts of the globe may prefer a model that places other types of benefits above cash bonuses, as some cultures frown upon aggressive competitiveness.
Allowing employees to choose benefits according to their needs offers the perfect middle ground. This solution avoids offering benefits that employees do not want nor need. It encourages workers to stay engaged, keeps employees accountable for using their employee benefits in a responsible manner, and evens out the gap between high-cost and low-cost locations.
Regional or Program-Based Subsidy
Companies with an extensive global employee workforce may consider another employee benefits strategy that is program-based.
Categories can be allocated according to regions or based on program and departmental needs. Some benefits, such as home office stipends could be rolled out globally (program-based needs), while others, such as retirement provision or commuting subsidies will vary depending on location.
Employees working from home or another remote location may therefore be categorized accordingly and receive benefits in relation to their home office setup or co-working membership fees that are generally similar worldwide. Other internationally offered employee benefits options might also encompass food delivery, transportation, rental costs, and travel insurance, among so many more.
Although this strategy can be highly effective and simple once set up, it does require some extensive research, continual updating, and a dedicated team to manage the system.
Build an international Employee Benefits Program plan with Forma.
Designing and delivering a customized benefits program isn’t easy, especially on a global level. However, there has never been a more necessary time to offer equitable employee benefits programs that cater to global and hybrid workforces. Diverse needs, cultures, and values should be at the forefront of your employee benefits planning.
Forma helps you to strategically meet the demands of a diverse modern workforce, taking key components into account including internal pay structures, performance rewards, and external market data.
Turn your employee benefits scheme into a cohesive strategy with all your employee-driven benefits accounts included under one modern and intuitive interface.