2014 Current and Emerging Global Themes. Employee Benefits: An HQ Perspective

Transcription

1 2014 Current and Emerging Global Themes Employee Benefits: An HQ Perspective

2 At a Glance Each year, multinational organizations commit extensive resources to providing and fi nancing benefi ts for active and former employees, delivering benefi t plans and, increasingly, implementing frameworks to oversee, manage and govern benefi ts globally. Multinational companies annual benefi t costs are often hundreds of millions of dollars, with past commitments of several billions of dollars. This research provides insights into how leading companies seize the opportunities presented by benefi t provision to add business value. Key insights include: Opportunities to drive more value from employee benefits are ongoing. Some multinationals are just beginning to gather data, and others have evolved their global benefi t strategy and management practices over many years. In either case, companies need to continually refi ne or reengineer their organization, processes, programs and strategies to deliver more value for both employees and the business. Whatever their level of global experience, companies that benchmark against their peers and systematically review their activities move more quickly, avoid pitfalls and distractions, and achieve greater effi ciency and effectiveness. Multinationals have significant opportunities to raise their global game. Many opportunities are missed or fail to be realized when companies don t systematically manage global benefi ts as well as they could. To raise their success rate, leading companies have harnessed key fi nancial management information, benchmarking, local benefi t resources and the effective use of third parties to name a few game-raising opportunities. Benefit and pension focus is shifting. Some themes are current, or short term; others are more enduring, such as managing fi nancial risk, benefi t cost optimization, and effective handling of mergers and acquisitions. Organizational and operational models need to evolve alongside shifting priorities while meeting the relentless corporate mandate: Do more with less. Effective sequencing of priorities and thoughtful use of third-party support can help global and regional benefi t managers respond to these challenges. Our research fi ndings show that multinationals current or short-term priorities in 2014 are: Staying on top of benefi t and pension fi nancial risks Improving the return on investment (ROI) from benefi t spend Ensuring the fundamentals of global benefi t management are in place, effi cient and effective Looking Ahead Whether multinationals are just beginning to gather data, or their global benefi t strategy and management practices have evolved over many years, there is always opportunity for improvement. The more mature organizations draw from their global benefi t experience to adopt or adapt practices that fi t their circumstances. They customize what worked for other companies at similar or advanced positions along the global benefi t management continuum, and they also learn from what didn t work. They take advantage of the value of benchmarking against their peers to help their organization systematically harness these insights to become more effective and effi cient. 2 towerswatson.com

3 2014 Current and Emerging Global Themes Employee Benefits: An HQ Perspective Contents The Value of Benchmarking Against Your Peers 4 Global Results: Charting Your Position 6 The Global HR Context for Benefi ts 8 Global Benefi t and Pension Themes 9 Countries and Regions of Interest 10 Benefi t and Pension Priorities for Towers Watson Insights: Raising Your Global Game 14 Current and Emerging Global Benefi t Themes 16 Setting Priorities: Key Questions 17 Special Focus: Global Benefi t Management 20 Looking Ahead: Navigating the Complexities 21 Appendix I Global and Regional Results 22 Appendix II Special Focus: Global Benefit Management 28 Appendix III About the Survey Participants 40 About the 2014 Survey Our seventh annual Current and Emerging Global Themes research presented HR leadership at the global and regional headquarter (HQ) level of leading multinationals with questions about benefi t focus, themes, priorities, countries of interest and global benefi t management. The research was conducted by Towers Watson between November 2013 and February We compared 492 responses from professionals in reward, pension and benefi t roles with global or regional purview across four geographic regions: Asia Pacifi c; Europe, the Middle East and Africa (EMEA); Latin America; and North America. A detailed breakdown of global and regional results appears in Appendix I (page 22), and the special focus questions on global benefi t management are listed in Appendix II (page 28). You will fi nd information about the survey respondents in Appendix III (page 40). Current and Emerging Global Themes research is carried out by Towers Watson s International Consulting Group (ICG). Our 225 ICG associates worldwide advise the global and regional HQs of multinational companies on the global strategy, oversight, design, fi nancing, governance, management and operational aspects of their benefi t programs both for business as usual and through periods of change, such as corporate activity. Further Information If you have any questions on our research, or would like to hear more about any of the countries, topics or themes, please contact: Global and EMEA Mark O Brien mark.r.obrien@towerswatson.com North America Michael Broomhead michael.broomhead@towerswatson.com Asia Pacific Steven Yu steven.yu@towerswatson.com Latin America Marco Santana marco.santana@towerswatson.com 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 3

4 The Value of Benchmarking Against Your Peers HR leaders are active across several benefi t areas simultaneously. Benefi t teams face external forces at local, regional and global levels from political and economic uncertainties to global health risks, from changing regulations to market trends and from industry-specifi c developments to broad demographic trends. At the same time, organizations can be buffeted by internal infl uences due to business structure, workforce, fi nancing or other factors. Finally, HQ leadership must satisfy many stakeholders when designing benefi t approaches including the business, employees, HR, Finance, employee representatives and trustees. How do other multinationals address these challenges? How can your company position itself in the global benefi t and pension environment, and navigate the changes to come? Our research is designed to provide data and insights that inform companies overall global benefi t strategy and highlight the importance of each organization s own unique circumstances in defi ning its priorities. Our research and experience show that organizations willing to continuously improve their global benefi t strategy and management practices adopting or adapting what has worked for others are better able to manage risks and create opportunities that lead to improved competitive position against their peers. Our research and experience show that organizations willing to continuously improve their global benefit strategy and management practices and adopt or adapt what works for others are better able to manage risks and create opportunities that lead to improved competitive position against their peers. 4 towerswatson.com

5 Information is power, especially when organizations use experience to transform information into insights. Each organization needs to gather data about itself before it can determine its global benefi t strategy, ambitions and focus. Further, employers that also make themselves aware of the direction and context of their global peers can more accurately validate their own position and more confi dently chart their unique course to competitive success. Our Current and Emerging Global Themes research delivers this big-picture view of peer activities, including global HR context, global benefi t and pension themes, countries and regions of interest, and priorities for We also provide insights into how global and regional benefi t managers can raise their global game. Findings show that leading organizations have found new opportunities to add value for both employers and employees. This year s research included a special focus section on global benefi t management. Our intent is to help companies benchmark their global benefi t management position against peer organizations, and learn from each other how to raise their global game and drive more value for their businesses. Our results and insights can help you benchmark against peer organizations, test that your focus is right for your company s business strategy and learn what has worked for others. Assessing your organization s current global benefi t management position, defi ning or expanding your focus, and developing the agility to plan ahead effectively are all key components of global success in 2014 and beyond Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 5

6 Global Results: Charting Your Position For every company, whether more or less experienced in the global arena, the fi rst imperative is to chart your current position, that is, to review your current global benefi t strategy and management practices to fi nd areas of focus that will drive more business value from your benefi t programs. Our research and our experience working with clients demonstrate that understanding your strategic focus and properly sequencing your priorities are both critical to success. For example, some strategic focus areas are best engaged only after fundamental activities are fi rmly in place, while others can be managed in parallel. Our research results shed further light on the concept of assessing your current position. In the research, respondents fall into four distinct positions on a continuum of global benefi t strategy and management practice. No two companies are the same, and highly competitive organizations never stand still. But our results clearly indicate that an organization s selfdescribed current position on this continuum indicates where its benefi t focus is now. As companies grow more experienced in the art and science of global strategy, oversight and management, they begin to expand their focus areas from one to several at once, thus expanding their opportunities to add value. Our research and our experience working with clients demonstrate that understanding your strategic focus and properly sequencing your priorities are both critical to success. 6 towerswatson.com

7 Towers Watson s global benefit management continuum Getting started Defining focus Expanding focus Harnessing experience Initial data gathering, to know what we have and/or Initial expansion outside HQ country Accounting risk or Financial risk or Operational governance or Cost reduction/efficiency or Employee experience More sophistication on initial focus Building in additional focus(es) Business as usual Ready to move to the next level/phase Agility to anticipate and handle multiple challenges and focuses What s next? What are we missing? Global center of expertise for benefits Companies in the initial stages data gathering or expanding outside the HQ country for the fi rst time comprise a cluster of benefi t experience and practice at a starting position. Organizations that identify a specifi c focus for their current position (e.g., accounting or fi nancial risk, operational governance, cost reduction and effi ciency, the employee experience) make up a second set. Multinationals that have added more sophistication/complexity to their focus, or are building additional focus areas into their benefi t strategy, form a third cohort. A smaller segment generally companies with more experience and maturity in the global arena has expanded and integrated its benefi t focus areas to realize more opportunities. This group has developed the agility to plan for future challenges and handle multiple, even confl icting, changes at once. For example, some have implemented a global center of expertise for benefi ts to link these activities strategically. As organizations learn from experience and from what worked and what didn t at other companies they begin to adopt and adapt benefi t strategies to their own unique circumstances. There is no right or wrong direction, and no universal fi nal destination. But savvy multinationals try to continuously improve their external and internal understanding to forge ahead in a competitive global environment. As organizations learn from experience and from what worked and what didn t at other companies they begin to adopt and adapt benefit strategies to their own unique circumstances Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 7

8 Research respondents most frequently reported they were focusing on global talent optimization, getting a better grip on the total rewards spend or achieving sustainable employee engagement. The Global HR Context for Benefi ts Global organizations are benefi ting from a more positive economic environment recently, including the potential for merger and acquisition (M&A) activity. But multinationals will also be affected by residual HR headwinds, such as growing scrutiny of HQ governance and oversight activities, an emphasis on operational excellence the need to do more with less and the demand for added value. In particular, benefi t managers are expected to get a grip on their total rewards spend. In practice, we often observe benefi t managers with less access to local HR resources than in the past, necessitating more HQ precision on the activities to focus on to maximize business value. Research respondents most frequently reported a focus on global talent optimization, getting a better grip on their total rewards spend and achieving sustainable employee engagement. 1. Talent Optimization The number one HR context issue currently is talent optimization. Where will multinationals fi nd talent in the decade to come? How will companies develop, manage and retain talent at a reasonable cost? Getting the right people in the right place at the right time is a key objective for the majority of respondents. However, this is easier said than done. What role should total rewards, including benefi ts, play? We observe many companies looking to develop and deploy a comprehensive and fl exible talent strategy based on detailed workforce planning that refl ects their organization s business plan and global footprint. 2. Total Rewards Spend: Getting a Better Grip Benefi ts play a signifi cant role in the global total rewards portfolio of any organization. Annual spend on total rewards, including benefi ts, represents a very signifi cant expenditure for multinationals. Reasonably, investors expect companies to have accurate and up-to-date information on their largest investments, and this certainly applies to total rewards for human capital. However, all too often, HQ managers have insuffi cient timely fi nancial data to ensure and demonstrate that they have appropriate oversight of total rewards costs. The right data can pinpoint proactive opportunities to optimize that spend. Less experienced multinationals miss these opportunities when they lack the necessary information. We see the more mature organizations taking advantage of their fi nancial data to create more value for the business. 3. Sustainable Employee Engagement Many external and internal factors drive the overall fi nancial health of an organization, but employee engagement is one critical internal factor that management can infl uence. How do you do it at a reasonable cost? And what role can benefi ts play in sustainable engagement? The key to competitive success is to recognize that driving employee engagement is not a set it and forget it strategy. Developing and sustaining high engagement over the long term requires leadership commitment as well as continual and evolving adjustments to a company s business and reward strategies, including the role of benefi t programs. Global HR context themes for benefits Notable changes since the last survey UP Global talent: Developing, managing and retaining Total rewards: Differentiation, global perspective, optimizing spend Employee engagement Many talent and total rewards topics Understanding employee perspectives DOWN Towers Watson s interpretation of the top three global HR context themes 1. Talent optimization 2. Total rewards spend: Getting a better grip 3. Sustainable employee engagement 8 towerswatson.com

9 Global Benefi t and Pension Themes The top global benefi t and pension theme currently is ROI. However, operational effectiveness and effi ciency also compete for attention, as do HQ focus and priorities. 1. ROI ROI in the form of optimized spend and judicious use of third parties is a key focus among multinationals. While recently the top focus was austerity, global benefi t managers are now zeroing in on their benefi t spend to ensure that it produces ROI for the business. Although ROI is often diffi cult to measure, a good place to start is to understand what you are spending today and how it breaks down across benefi ts, countries and regions, as well as direct (e.g., benefi t accrual) and indirect (e.g., operational) costs. The right information can reveal many business opportunities and help embed ROI as a key factor in making benefi t spend decisions. 2. Operational Effectiveness and Efficiency Doing what you have always done is often the easiest choice, but sometimes HQ management needs to take a step back and assess current activities. Are you deriving maximum value from current benefi t activities and programs? Does your review suggest that some need to be added, adjusted or dropped? With resources limited and global benefi t team remits often expanding, it is imperative that business as usual is as operationally effi cient and effective as possible. We are seeing companies deploy a range of organizational and operational models including various third-party support approaches to get things done more effi ciently and effectively. 3. HQ Focus and Priorities Global benefi t managers are often faced with a wide range of potential projects and opportunities. Then the unexpected happens: a merger, acquisition or regulatory change. How do you best refl ect the change in priorities while still moving in the desired overall direction? Can you make a plan that allows for contingencies as they arise? The key to success is to develop a multiyear, coherent and sequenced global plan. It should cover country, strategic and operational priorities and activities to handle and resource contingencies. Once made, the plan needs to be reviewed and refi ned periodically as the business and regulatory environment develops. Global benefit and pension themes Notable changes since the last survey UP Spend optimization: Employee experience versus cost Vendor optimization Design trends and benchmarking Benefi t function/ management Global benefi t governance/oversight Accounting developments DOWN Towers Watson s interpretation of the top three global benefit/ pension themes 1. ROI 2. Operational effectiveness/ efficiency 3. Focus/Prioritization 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 9

10 Countries and Regions of Interest China now leads the top 10 countries of interest because of its scale as a market. The countries making up the top 10 continue to refl ect key business locations and the signifi cance of pensions/benefi ts. Top 10 countries of interest % of participants indicating interest in the following countries 0% 10% 20% 30% 40% 50% 60% 70% 80% China United States United Kingdom Germany Brazil India Japan Singapore Hong Kong Australia towerswatson.com

11 Regional Focus North America and Western Europe remain key regions of interest for multinationals. In contrast, interest in the Middle East has decreased due to its regional challenges. We also note that interest in Africa is increasing. In Central/Eastern Europe, Poland, Russia and Turkey stand out. In the Asia Pacifi c region, China, India and Japan get the most attention. In Latin America, both Brazil and Mexico receive high focus. South Africa and the U.A.E. lead the way in Africa and the Middle East, respectively. U.S./Canada Still a key focus for most Western Europe Still a key focus for most Central/Eastern Europe Broad interest, but Poland, Russia and Turkey stand out Latin America Broad interest, but Brazil and Mexico stand out Africa Broadening interest, although still low levels Middle East Decrease in interest, owing to regional challenges Asia Pacific Broad interest, but China, India and Japan stand out 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 11

12 Benefi t and Pension Priorities for 2014 Benefi t and pension topics of concern are the same as last year, but the priorities have changed priorities, including some sample focus areas Benefit and pension financial risks Defi ned benefi t to defi ned contribution Health care Governance/Oversight Metrics Financing strategies Business intelligence Benefits provided Global strategy Employee value proposition (EVP) alignment Benchmarking Employee experience versus cost Role of choice Employee communication Benefit function Operating model Process optimization Internal/external resource requirements Identifi cation of local risks/opportunities and prioritization Regulatory and business environment Low interest rates Improving growth expectations Increasing M&A activity Patient Protection and Affordable Care Act FATCA Netherlands IORP II 2013 priorities Benefit and pension financial risks Regulatory and business environment Benefits provided Benefit function What s up and what s down? Benefi t and pension fi nancial risks remains the top issue, given the often signifi cant risk exposures, costs and related volatility of benefi t programs. Regulatory and business environment slipped from number two to number four this year, refl ecting an easing of some of the business pressures from prior years. Benefi ts provided has become more important, moving from number three to number two, refl ecting emerging optimism. Benefi t function moved up from fourth to third on the list, with the increased focus this year on ROI and operational excellence of global benefi t management activities. 1. Benefit and Pension Financial Risks It is imperative for global and regional leaders to stay on top of the fi nancial risks related to benefi ts and pensions. In 2014, many multinational companies continue to focus on converting defi ned benefi t plans to defi ned contribution plans. Organizations are also focusing on: Controlling health care costs Enhancing governance and oversight of fi nancial risks Determining key metrics to improve decision making Finding optimal ways to fi nance benefi ts, in particular, pensions and risk benefi ts Developing business intelligence from fi nancial information to more quickly identify opportunities 12 towerswatson.com

13 2. Benefits Provided Multinationals need a global benefi t strategy that aligns with the company s talent strategy and EVP. Benchmarking keeping track of competitors benefi t packages is also an issue. And, recognizing that the employee experience is affected by more than the level of benefi ts provided, there is always a delicate balance between the desire to enhance employee experience on one hand, and the cost and ROI of doing so on the other. Approaches to harnessing employee benefi t choice are becoming more common as a way to help balance these competing objectives while responding to employee diversity. Global companies are learning that communication with employees and potential recruits about their benefi t portfolio is a key element in attracting and retaining talent. When a company communicates its benefi t package in a less-than-optimal way, employees tend to value it less. 3. Benefit Function Many leading companies ask themselves how their global benefi t function can best support the business: What is the best operating model to manage our benefi ts globally? What organizational model would work best for this organization? What activities are missing or needed, and how do we make them effi cient and effective? What are our internal and external resource requirements? How do we identify local risks and opportunities, and then prioritize them? 4. Regulatory and Business Environment The regulatory and business environment is constantly changing around the world, which makes it an area of enduring focus. A low interest rate environment, improving growth expectations, and the increasing likelihood of mergers, acquisitions and other corporate transactions appear on the 2014 agenda of most global companies. On the regulatory front, legislative developments with local, regional and global reach require a continuing focus. For example, developments in pension reform in the Netherlands, budget announcements in the U.K., the IORP II directive in the EU and FATCA, relevant globally, are ongoing. For further results and regional comparisons, see Appendix I on page 22. The answers to these questions will help inform your decision about whether refi nements are needed and, if so, how to sequence them based on business priorities and constraints Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 13

14 Towers Watson Insights: Raising Your Global Game In talking and working with HQ managers around the world, we have found that the term global benefi t management takes on different meanings at multinationals just starting out than at companies at a more experienced stage. The starting point of the continuum for most organizations is an initial data-gathering exercise. After that, most tend to focus on a particular risk or employee outcome. Some companies remain at that position. However, as multinationals gain global experience, many move on. Broadening to multiple focus areas helps them fi nd new ways to improve global benefi t strategy and management. Leading organizations keep asking themselves these questions: What s next? What are we missing? There is no right or wrong answer here. All companies are unique, and some have reached a position that satisfi es them they haven t yet seen value in going further. On the other hand, other organizations have reached for a broader focus in order to reap greater value. These decisions must be made on a companyby-company basis. Our experience suggests that opportunities to drive more value from benefi ts are readily available, irrespective of your position on the global benefi t management continuum. However, your current position infl uences which of the opportunities you can feasibly pursue now, and in what order. For example, if you are in the early stages of data gathering, your organization is unlikely to be able to take full advantage of some of the emerging global benefi t themes presented later. Realization of some of these themes is predicated on having certain global management practices or fundamentals in place. However, if your company has reached one of the later points on the continuum, it s likely you have already looked at or beyond some of the current global benefi t themes. 14 towerswatson.com

15 The Global Benefit Management Continuum: Know Your Position Our experience indicates and the research confi rms that an organization s position on the continuum of global benefi t management practices accurately predicts where its focus will be. The four clusters of global benefi t management practices we see in the research results refl ect the following activities: The largest segment of research respondents (more than one-third) is getting started with initial data gathering analyzing what they have and determining what they will need. Or they are learning by doing, by expanding for the fi rst time into a region outside their HQ country. The second-largest group has a primary focus for global benefi t activities. Choices include accounting or fi nancial risk, operational governance, cost reduction and effi ciency, competitiveness and the employee experience. The more experienced multinationals of the third-largest cohort are able to turn their attention to new benefi t topics and focuses. At this position on the continuum, business as usual is established and involves maintaining several focuses at once. The fourth cluster of companies is the smallest. These leading multinationals draw upon the experience of their own and similar companies in the art and science of global strategy, oversight and management. They accelerate business growth by adding entirely new focus areas and geographies. They constantly ask themselves: What s next? What are we missing? And they incorporate advance planning to increase their ability to handle unexpected challenges. To facilitate coherence and integration of broader activities, many of these organizations implement a global center of expertise for benefi ts. Our research indicates that distribution of multinational companies along the continuum of global benefi t management practices varies by HQ region. And the research also reveals the great potential for organizations to learn from both peers and experience to make their own strategies and activities more effi cient and effective. HQ region: Significant improvement opportunities exist for all % of participants indicating their current position Getting started Defining focus Expanding focus Harnessing experience 50% 40% 30% 20% 10% % 40% 30% 20% 10% % 40% 30% 20% 10% % 40% 30% 20% 10% % 0% 0% 0% 5 Global Asia Pacific EMEA Latin America North America 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 15

16 Current and Emerging Global Benefi t Themes Drivers We fi nd it valuable to understand the underlying drivers infl uencing global benefi t focus and activities. Benefi t leaders are currently focused on operational effectiveness and effi ciency, and the growing scrutiny of benefi t governance and oversight from various internal and external stakeholders. But respondents focus on ROI has increased most of all since the last survey. Corporate mandates to drive value from all activities, including benefi ts, and ensure that HQ leadership has a grip on spend are driving decisions and priorities. For example, multinationals are weighing the ROI of enhancing the employee experience against the cost of doing so. They are also considering judicious use of third parties to optimize effectiveness and effi ciency, i.e., to accomplish more with fewer internal resources, and control cost. With a more positive economic environment, the near-term outlook on the business front should be better for many. However, the increased likelihood of corporate buying, selling and merging can present severe challenges to companies with no prepared strategy for getting the most value from such transactions. Drivers 1. More positive economic environment, but still some headwinds 2. Operational excellence: Needing to do more with less 3. Requirement for value for money and getting a grip on benefi t spend 4. Growing audit/risk scrutiny of benefi t governance/oversight 5. M&A reemergence Benefit Themes Our fi ndings break down global benefi t themes into two general types: Current. Many multinationals are already focusing on these themes. Emerging. The more experienced multinationals those at the right half of the global benefi t management continuum are beginning to focus on these themes in order to raise their game. Global benefi t managers need to be ready to jump into action to handle emerging issues effectively while continuing to move their current initiatives forward. Corporate transactions, legislative changes and key market developments are examples of emerging issues. Current themes 1. Strategic direction on managing pension/benefi t fi nancial risks 2. Employee experience versus cost/risk 3. Employee health: Ensuring a win-win situation 4. Getting the right third-party support model and mix of delivery and strategic advice Emerging themes 1. Governance and oversight: Using business intelligence to drive business value 2. Benefi t management: Process reengineering to create capacity for strategic focus 3. Benchmarking: Systematic identifi cation of opportunities across strategic and operational aspects 4. Improving employee outcomes: Including health and well-being, defi ned contribution plans, use of choice and communication + + Effectively handling emerging issues, e.g., M&A, legislative change 16 towerswatson.com

17 Setting Priorities: Key Questions As we know, managing benefi t programs globally is not easy. HQ managers must oversee activity on multiple fronts local, regional and global while weighing competing internal and external priorities and pressures. To help global and regional managers identify and sequence their benefi t priorities, we have developed a series of key questions based on our years of experience working with major multinational clients. These questions can help you define priorities based on an understanding of where your company is positioned today on each of these key questions and on the global benefi t management continuum and then set a direction based on your organization s unique circumstances. These key questions cover four key categories related to benefi ts: the employee experience; financing employee benefi ts; global strategy, oversight and management; and acquisitions, divestitures and mergers. Global benefits: Key questions What are your organization s current priorities? Are they well defi ned? Do you have more than one, and how will your priorities change over time? Answers to these questions can help you determine where to deploy your limited resources and where additional internal or external support can help you meet your priorities. Employee experience How do we maximize the employee experience while optimizing our reward spend? What benefi ts (types, levels, etc.) should we provide and how? How do we improve our employees health to improve our business performance? How do we improve employees outcomes from defi ned contribution plans and manage related risks? Financing employee benefits How do we best manage our pension/postretirement medical risks? How do we fi nance health and risk benefi ts most effi ciently, taking advantage of our global scale? How do we achieve the right balance of cross-border and local delivery vehicles? Global strategy, oversight and management How do we ensure systematic oversight of risks and opportunities both fi nancial and nonfi nancial? How do we effi ciently organize/operate at global, regional and local levels to execute our benefi t strategy? How do we best meet our fi nancial management information needs relating to pensions, postretirement medical and other benefi ts? How do we reduce/control benefi t costs around the world? Mergers, acquisitions and divestitures How do we handle mergers, acquisitions and divestitures effectively? Several of our multinational clients have found it helpful to use the outcome of their review of where they stand on these key questions to sequence priorities and create a common understanding among key stakeholders. Certain questions are often best addressed before others. For example, some governance and operational aspects may need to be addressed before your organization can make progress on the more strategic aspects of the employee experience. Priorities: Sequencing and interactions are important Employee experience Global strategy, oversight and management Acquisitions, divestitures and mergers Financing employee benefits 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 17

18 In the research, we asked respondents in global or regional roles to select up to three questions they would prioritize over the short, medium and longer terms. Aggregated global results confi rm that some areas are benefi t priorities in the current or short term, but that priorities are changing. Another group of priorities requires a more enduring focus over time. We show the key priorities in the three categories below. Global benefit key questions: Where is the focus? % of participants indicating focus Employee experience How do we maximize the employee experience while optimizing our reward spend? What benefi ts (types, levels, etc.) should we provide and how? How do we improve our employees health to improve our business performance? How do we improve employees outcomes from defi ned contribution plans and manage related risks? Financing employee benefits How do we best manage our pension/postretirement medical risks? How do we fi nance health and risk benefi ts most effi ciently, taking advantage of our global scale? How do we achieve the right balance of cross-border and local delivery vehicles? Global strategy, oversight and management How do we ensure systematic oversight of risks and opportunities both fi nancial and nonfi nancial? How do we effi ciently organize/operate at global, regional and local levels to execute our benefi t strategy? How do we best meet our fi nancial management information needs relating to pensions, postretirement medical and other benefi ts? How do we reduce/control benefi t costs around the world? Mergers, acquisitions and divestitures How do we handle mergers, acquisitions and divestitures effectively? Current priorities Longer-term focus Enduring focus One year Three years Five years Current Priorities The employee experience. In the short term, companies appear to be focusing predominantly on ensuring that they maximize the employee experience while optimizing benefi t spend. Organizations are thinking about what benefi ts to provide and how to do it. Global strategy, oversight and management. Much of the current focus is on ensuring systematic oversight and governance of both fi nancial and nonfi nancial risks. Companies are also focusing on organizing and operating effi ciently at global, regional and local levels to execute their benefi t strategy effectively. 18 towerswatson.com

19 Aggregated global results confirm that some areas are benefit priorities in the current or short term, but that priorities are changing. Another group of priorities requires a more enduring focus over time. Longer-Term Focus The employee experience. In the medium and longer terms, organizations increasingly expect to be focusing on improving outcomes specifi cally related to employee health and defi ned contribution plans. Financing employee benefits. According to the research, a long-term goal for many is how to most effi ciently fi nance benefi t provision, taking advantage of the organization s global scale. They are also looking to achieve the right balance of cross-border and local delivery vehicles. Enduring Focus Financing employee benefits. Financing pension and postretirement medical risks is a perpetual focus for many companies. Global strategy, oversight and management. Reducing, controlling and monitoring benefi t costs around the world is an enduring focus for most multinationals. Planning for mergers, acquisitions and divestitures. M&A planning remains an important and continuing priority for many multinationals. They are focusing on preparing their benefi t team to optimize potential transactions and support new entities Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 19

20 Special Focus: Global Benefi t Management From the special focus section of this year s research, we learn that the HQ benefi t management remit is broadening. Programs such as wellness and global stock or share incentives have been added to the traditional focus on retirement, risk benefi ts and health care. Benefi t managers also reported that multinationals are pressing them to do more with the same number of internal resources or, in some cases, fewer. Most managers (seven in 10) said they have either no access to fi nancial information related to their benefi t spend or only limited timely data. This is a key weakness in global governance and oversight, for which global and regional HQ managers need to fi nd a solution. To successfully gain a tighter grip on the global benefi t spend, managers need more timely fi nancial data to help them identify and assess both benefi t risks and opportunities. Many global and regional benefi t teams could also take advantage of local information to help them identify risks and accelerate the realization of opportunities as some mature multinationals do already. Global benefit management: Key findings and Towers Watson insights Area Finding Towers Watson insights Remit Internal resources Stable Timely fi nancial information Streamlined benefi t inventory Regular Sarbanes-Oxley (SOx) process, including benefi t controls/processes Global approval process Regular benchmarking Primary focus on pensions/retirement Only 22% of respondents Around 40% of respondents Around 50% of respondents Around 60% of respondents Around 60% of respondents Use of third parties Broad usage Structured annual reporting process Only 21% of respondents Broadening to less traditional benefits Desire to do more with less Significant risk/ opportunity Oversight risk; opportunity to refocus Opportunity to enhance/ streamline Potential governance risk for 40% Opportunity to streamline/refocus Many investigating different models, e.g., cosourcing/insourcing/ outsourcing Significant missed opportunity Other fi ndings from our special focus section include: Streamlined benefit inventory is in place in the HQ benefi t teams of only four in 10 participants. An annual process helps multinationals understand what benefi t programs are provided globally and also helps in transaction situations. However, the process can lead to signifi cant frustration at both local and global levels if the data set is too broad or the data collected are of poor quality. An annual attestation process to ensure compliance with local laws and regulations as well as adherence to global policies is in place at half of the participants. An effective annual process presents an opportunity to embed global policies and to help ensure that the company is globally on top of potential compliance risks. A global approval process is an excellent though not perfect hedge to protect company interests; about 60% of participants have one in place. Regular benchmarking of benefi t programs is conducted by about six in 10 participants. Those that benchmark take various approaches from annual to occasional (e.g., during benefi t redesign). Benchmarking is a key management technique to ensure value is being derived for both the business and employees. However, we observe that many multinationals are less effi cient and effective than they could be because they fail to deploy a consistent framework and global approach to benchmarking. Third-party support is broadly used by HQ benefi t managers in areas such as benchmarking, optimal risk/benefi t fi nancing, governance in practice and managing benefi t costs. We see organizations exploring different models such as cosourcing, insourcing and outsourcing to best support their needs. Their choices refl ect the type and nature of the activity, and the company s internal resources and capabilities. Participants said that third parties help them develop stronger governance processes, save time and allow them to deploy limited internal resources more strategically. 20 towerswatson.com

21 A structured annual local reporting process is cited by only one-fi fth of participants, representing a signifi cant missed opportunity for many multinationals. Global companies often have resources on the ground in local operations however limited that they could use more strategically to help identify risks and opportunities. Internal resources are often weighed down with administrative tasks (e.g., extensive global benefi t inventories) and could be allocated to more strategic, value-added work. Process reengineering and effective use of third-party support can also be effective tools to help local resources drive more value for the business. Even if you have implemented one or more of the global benefi t management practices above, ensuring your processes remain effi cient and effective requires regular reexamination or reengineering. As your focus develops, you can drive even more value for your business and its employees. For further details about the special focus section results, see Appendix II on page 28. Looking Ahead: Navigating the Complexities No two companies are alike, and no one global benefi t strategy or management approach fi ts all business plans. Charting your organization s global benefi t management position and direction are key components of competitive success. From our experience working through priorities with major multinationals all with unique circumstances we ve observed three steps that help companies navigate global benefi t and pension complexities, and also accelerate their progress. These three steps are: Understand: Know what success looks like. The most successful companies perceive the global benefi t context in terms of potential risks and opportunities. They also understand the value HQ can add to making a global organization worth more than the sum of its local parts. Just as important, global and regional benefi t managers must navigate the change process while considering local and global perspectives and priorities, and engaging effectively with all stakeholders. Manage: Ensure a sound business case. To clearly demonstrate value for the business through reduced cost or risk, or enhanced employee experience and engagement you need the right fi nancial metrics to monitor progress and outcomes. Just as important, develop a multiyear plan that properly sequences activities and explains how they fi t into your overall global benefi t strategy. Achieve: Adopt a continuous improvement mindset. Recognize that change will be incremental and, realistically, will take time to embed deeply enough to become the new routine. While it is critical to focus on what s truly important, it s equally vital not to be distracted by irrelevant or unimportant developments. A Final Word Understanding your company s position on the global benefi t management continuum is critical. Your organization s unique circumstances and level of ambition will inform how you set your focus and priorities over various time periods. More than two-thirds of our global research participants position themselves either as just getting started or having one specifi c global benefi t management focus. Multinationals that have moved on from these two positions are more likely to be taking advantage of broader potential opportunities and fi nding the value of directing resources to address them. The multinationals that ask themselves the most challenging and strategic questions are typically the ones that also achieve the greatest value from their employee benefi t programs. The multinationals that ask themselves the most challenging and strategic questions are typically the ones that also achieve the greatest value from their employee benefit programs Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 21

22 Appendix I Global and Regional Results Global HR context for benefit strategy Figure 1. % of participants indicating interest in the following broader HR global topics, broken down into key categories Total rewards Global Ranking Asia Pacific Ranking EMEA Ranking Latin America Ranking North America Ranking Benchmarking total rewards globally 66% 1 64% 1 63% 1 63% 1 73% 1 Developing/Updating global reward strategies 49% 2 52% = 3 39% 5 53% 2 54% 3 Global governance/oversight of total rewards 48% 3 36% 8 52% 3 40% = 7 63% 2 Communicating total rewards globally 45% = 4 33% 9 58% 2 42% = 4 49% 4 Global perspectives on current and upcoming reward challenges 45% = 4 50% 7 42% 4 42% = 4 42% 6 Evaluating and analyzing global remuneration spend 45% = 4 52% = 3 34% 6 34% 9 48% 5 Customizing/Differentiating/ Segmenting rewards on a global 45% = 4 57% 2 32% 7 40% = 7 41% 7 basis Globalizing compensation structures 38% = 8 52% = 3 22% 9 42% = 4 30% = 8 Incentive pay: Striking the global balance 38% = 8 51% 6 26% 8 50% 3 30% = 8 Talent management Global talent: Developing, managing and retaining 54% 1 66% 1 48% 1 66% 1 42% 2 Achieving sustainable engagement of a diverse global 44% 2 48% 3 46% 2 32% 11 38% = 4 workforce over the longer term Global HR governance and operating models 41% 3 38% 7 40% 3 50% = 3 44% 1 EVP: Defi ning, developing and deploying 38% 4 37% 8 37% 4 47% 5 40% 3 Optimizing the HR and reward functions globally 37% 5 39% 6 31% 5 40% 9 38% = 4 Optimizing performance management globally 36% 6 50% 2 28% = 7 50% = 3 22% = 13 Global workforce planning 34% = 7 41% 5 26% 11 34% 10 30% 8 Sourcing global talent 34% = 7 44% 4 28% = 7 45% 6 22% = 13 Standardizing global HR processes 33% 9 32% 11 27% = 9 53% 2 38% = 4 HR technology solutions: A global perspective 32% 10 31% 12 29% 6 42% = 7 34% 7 Global job evaluation 31% 11 35% = 9 27% = 9 42% = 7 25% 11 Cross-border mergers, acquisitions and divestitures: Optimizing the people and HR 29% 12 35% = 9 22% 12 29% 12 28% 10 aspects Understanding employees perspectives globally 23% = 13 23% 14 19% 14 18% 13 29% 9 Risk management globally: An HR perspective 23% = 13 27% 13 21% 13 13% 14 23% 12 Equal sign (=) indicates a tie. 22 towerswatson.com

23 Global benefit and pension strategy Figure 2. % of participants indicating interest in the following topics, broken down into key categories Employee experience Global Ranking Asia Pacific (ranking) EMEA (ranking) Latin America (ranking) North America (ranking) Benefi t design trends around the world 61% 1 55% (3) 63% (= 1) 50% (3) 73% (1) Benefi ts for internationally mobile employees: Pensions, medical, life 59% 2 62% (1) 60% (3) 61% (= 1) 55% (6) Benchmarking pensions/benefi ts around the world 57% 3 48% (4) 63% (= 1) 61% (= 1) 66% (2) Optimizing spend on benefi ts: Addressing the trade-off between cost and the employee experience 55% 4 56% (2) 55% (4) 47% (4) 56% (= 4) Flexible benefi t approaches globally/across regions 46% 5 47% (5) 52% (5) 34% (= 8) 43% (7) Global health and well-being: Deployment of a coherent and sustainable global strategy 42% 6 29% (8) 44% (7) 40% (= 5) 57% (3) Pensions/Benefi ts in context (e.g., rewards, talent, engagement, employee value propostion: A global perspective) 40% 7 41% (6) 43% (8) 34% (= 8) 38% (8) Defi ned contribution pensions: Improving employee experience around the world 39% 8 21% (9) 49% (6) 40% (= 5) 56% (= 4) Executive pensions: A global perspective 31% 9 32% (7) 35% (9) 40% (= 5) 22% (9) Financing/Delivery Multinational pooling/insurance: Best practices, trends and developments 41% 1 25% (7) 55% (1) 37% (= 3) 52% (1) Optimizing vendors globally: How best to achieve in practice 39% 2 36% (1) 38% (5) 40% (2) 45% (2) Assessing fi nancial risks for pensions (e.g., metrics, tolerance, priorities) 35% 3 31% (= 4) 40% (= 2) 37% (= 3) 37% (4) Accounting for pensions/employee benefi ts globally: Update on developments 34% = 4 31% (= 4) 34% (6) 21% (= 7) 39% (3) Optimizing pension risks and solutions globally 34% = 4 33% (3) 39% (4) 21% (= 7) 34% (5) Optimizing risk benefi t fi nancing globally 34% = 4 35% (2) 33% (7) 47% (1) 31% (7) Cross-border asset pooling: Update on developments 29% 7 30% (6) 28% (8) 16% (= 9) 32% (6) Cross-border/pan-European pensions: Update on developments, international pension plans, etc. 26% 8 16% (10) 40% (= 2) 37% (= 3) 23% (9) Captives for employee benefi t risks: Leading-edge trends and developments 24% 9 19% (9) 26% (9) 16% (= 9) 30% (8) Pensions and capital: Emerging challenges for global companies 23% 10 23% (8) 22% (10) 29% (6) 21% (10) Governance/Oversight and management Benefi t management optimization: A global perspective 59% 1 55% (1) 56% (1) 50% (1) 72% (1) Global oversight/governance of pensions/benefi ts: Best practices, trends and developments 47% 2 40% (2) 53% (2) 24% (= 7) 58% (2) Global operating models for pensions/employee benefi ts 41% 3 36% (3) 49% (3) 32% (= 3) 44% (3) Financial and nonfi nancial risks in employee benefi ts: A global perspective 37% 4 32% (5) 39% (6) 45% (2) 39% (4) Cross-border mergers, acquisitions and divestitures: Handling employee benefi t/pension aspects 32% 5 34% (4) 27% (8) 32% (= 3) 36% (5) Improving management information for pensions/benefits globally 30% 6 24% (= 6) 43% (4) 13% (9) 32% (= 7) Optimizing the global pension/benefi t function (e.g., center of expertise) 29% 7 18% (= 8) 40% (5) 24% (= 7) 34% (6) Global pension/benefi t committees: Improving effectiveness 27% 8 18% (= 8) 34% (7) 29% (5) 32% (= 7) Handling confl icts when managing pensions and employee benefi ts globally 22% 9 24% (= 6) 18% (10) 26% (6) 21% (10) Working with trustees/fi duciaries around the world 18% 10 13% (10) 22% (9) 3% (10) 26% (9) Equal sign (=) indicates a tie Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 23

24 Countries and regions of interest Figure 3a. Africa % of participants indicating interest in the following countries Global Asia Pacific Ranking EMEA Ranking Latin America Ranking North America Ranking South Africa 43% 37% 1 59% 1 8% = 5 46% 1 Egypt 22% 19% = 3 33% 2 3% = 9 22% 2 Nigeria 19% 21% 2 24% = 3 5% 8 16% 3 Kenya 16% 15% 6 24% = 3 8% = 5 13% 4 Morocco 11% 7% = 12 20% 5 11% = 3 8% = 6 Algeria 14% 19% = 3 16% 6 11% = 3 6% = 8 Ghana 11% 12% 7 14% = 7 0% = 13 9% 5 Angola 11% 17% 5 8% = 16 13% 2 4% = 14 Tunisia 8% 6% = 14 14% = 7 8% = 5 4% = 14 Zambia 9% 11% 8 10% = 9 0% = 13 8% = 6 Mozambique 8% 7% = 12 9% = 13 16% 1 6% = 8 Democratic Republic of the Congo 8% 10% = 9 10% = 9 3% = 9 6% = 8 Tanzania 8% 10% = 9 9% = 13 3% = 9 5% = 12 Ethiopia 8% 10% = 9 10% = 9 0% = 13 5% = 12 Senegal 6% 5% = 16 10% = 9 0% = 13 6% = 8 Uganda 5% 5% = 16 9% = 13 0% = 13 3% = 16 Cameroon 6% 6% = 14 8% = 16 0% = 13 3% = 16 Botswana 4% 4% 19 7% = 18 0% = 13 2% = 18 Cote d Ivoire 5% 5% = 16 7% = 18 3% = 9 2% = 18 Other countries in Africa 3% 1% 20 7% = 18 0% = 13 2% = 18 For global results Greater or equal to 50% Greater or equal to 33% Greater or equal to 25% Less than 25% Equal sign (=) indicates a tie. Figure 3b. Americas % of participants indicating interest in the following countries Global Asia Pacific Ranking EMEA Ranking Latin America Ranking North America Ranking United States 69% 68% 1 72% 1 24% 12 78% 1 Brazil 59% 38% 2 65% 2 92% = 1 75% 2 Canada 46% 36% 3 45% 4 16% 13 67% 4 Mexico 44% 21% 4 46% 3 53% = 7 71% 3 Argentina 31% 13% = 6 27% 5 92% = 1 40% 5 Chile 24% 14% 5 21% 6 71% 5 29% 7 Colombia 23% 9% 9 19% 7 82% 3 30% 6 Venezuela 19% 13% = 6 11% 9 53% = 7 23% 8 Puerto Rico 15% 4% 12 12% 8 55% 6 22% 9 Peru 15% 12% 8 10% 10 34% = 9 19% 10 Panama 13% 6% 11 8% 12 79% 4 11% 11 Uruguay 10% 7% 10 9% 11 34% = 9 6% 13 Other countries in the Americas 6% 1% 13 2% 13 26% 11 10% 12 For global results Greater or equal to 50% Greater or equal to 33% Greater or equal to 25% Less than 25% Equal sign (=) indicates a tie. 24 towerswatson.com

25 Figure 3c. Asia Pacific % of participants indicating interest in the following countries Global Asia Pacific Ranking EMEA Ranking Latin America Ranking North America Ranking China 72% 74% 1 73% 1 21% = 1 81% 1 India 57% 49% = 7 60% = 2 21% = 1 76% 2 Japan 55% 60% = 2 52% = 5 13% = 3 64% 4 Singapore 55% 58% 4 60% = 2 11% = 6 60% 5 Hong Kong 53% 60% = 2 52% = 5 13% = 3 54% 6 Australia 52% 49% = 7 55% 4 11% = 6 65% 3 Korea 42% 50% 6 37% 8 13% = 3 44% 8 Thailand 40% 42% = 11 40% 7 3% = 12 48% 7 Taiwan 38% 56% 5 28% = 11 3% = 12 34% 12 Malaysia 37% 43% 10 34% 9 11% = 6 38% 10 Indonesia 36% 46% 9 31% 10 11% = 6 36% 11 Philippines 31% 30% 13 28% = 11 8% 11 41% 9 Vietnam 31% 42% = 11 23% 14 3% = 12 31% 13 New Zealand 22% 20% 14 24% 13 11% = 6 26% 14 Cambodia 10% 19% 15 5% = 15 0% = 16 6% 16 Sri Lanka 8% 12% 16 5% = 15 3% = 12 7% 15 Other countries in Asia Pacifi c 5% 8% 17 4% 17 0% = 16 2% 17 For global results Greater or equal to 50% Greater or equal to 33% Greater or equal to 25% Less than 25% Equal sign (=) indicates a tie. Figure 3d. Central/Eastern Europe % of participants indicating interest in the following countries Global Asia Pacific Ranking EMEA Ranking Latin America Ranking North America Ranking Russia 43% 36% 1 60% = 1 5% = 2 46% 2 Poland 36% 16% 4 60% = 1 5% = 2 50% 1 Turkey 35% 30% 2 52% 3 8% 1 34% 3 Czech Republic 24% 12% 5 43% 4 0% = 14 31% 4 Hungary 19% 6% 9 38% 5 5% = 2 20% 5 Ukraine 19% 19% 3 26% 7 5% = 2 12% = 7 Greece 17% 9% = 6 32% 6 0% = 14 18% 6 Romania 13% 9% = 6 24% 8 5% = 2 10% = 9 Slovakia 11% 5% = 10 21% 9 5% = 2 12% = 7 Bulgaria 9% 7% 8 14% = 10 3% = 10 10% = 9 Croatia 8% 4% = 13 13% 12 3% = 10 9% 11 Serbia 8% 5% = 10 14% = 10 5% = 2 6% 12 Lithuania 6% 5% = 10 11% = 13 0% = 14 4% 15 Slovenia 5% 2% = 16 11% = 13 3% = 10 5% = 13 Latvia 5% 3% 15 9% 15 5% = 2 5% = 13 Bosnia 4% 4% = 13 5% 16 3% = 10 3% 16 Other countries in Central and Eastern Europe 2% 2% = 16 3% 17 0% = 14 1% 17 For global results Greater or equal to 50% Greater or equal to 33% Greater or equal to 25% Less than 25% Equal sign (=) indicates a tie Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 25

26 Figure 3e. Middle East % of participants indicating interest in the following countries Global Asia Pacific Ranking EMEA Ranking Latin America Ranking North America Ranking U.A.E. 40% 32% 2 52% 1 11% = 1 50% 1 Saudi Arabia 30% 33% 1 32% 2 5% = 4 28% 2 Israel 22% 19% 3 28% 3 5% = 4 24% 3 Qatar 14% 12% = 4 22% 4 5% = 4 14% 4 Kuwait 12% 12% = 4 15% = 5 5% = 4 11% 5 Bahrain 10% 10% 6 15% = 5 11% = 1 6% 7 Jordan 9% 9% 7 11% 7 11% = 1 4% 8 Oman 8% 8% 8 10% 8 5% = 4 8% 6 Other countries in the Middle East 3% 3% 9 5% 9 0% 9 2% 9 For global results Greater or equal to 50% Greater or equal to 33% Greater or equal to 25% Less than 25% Equal sign (=) indicates a tie. Figure 3f. Western Europe % of participants indicating interest in the following countries Global Asia Pacific Ranking EMEA Ranking Latin America Ranking North America Ranking United Kingdom 63% 44% 2 84% 1 13% = 3 85% 1 Germany 59% 48% 1 78% 2 3% = 13 74% 2 France 51% 33% 3 77% 3 29% 1 58% 3 Netherlands 39% 20% 4 69% 4 11% = 6 46% = 4 Spain 37% 16% = 6 66% 5 16% 2 46% = 4 Italy 37% 19% 5 63% = 6 11% = 6 44% 7 Belgium 34% 11% 10 63% = 6 8% = 10 46% = 4 Switzerland 32% 13% = 8 61% 8 5% 12 37% 8 Sweden 28% 16% = 6 46% = 9 11% = 6 30% 10 Ireland 25% 8% = 13 46% = 9 13% = 3 34% 9 Austria 22% 13% = 8 41% 11 11% = 6 18% = 13 Denmark 18% 8% = 13 33% 12 8% = 10 20% 12 Portugal 17% 6% = 15 29% = 14 13% = 3 21% 11 Norway 17% 10% = 11 32% 13 0% = 16 18% = 13 Finland 15% 10% = 11 24% 16 3% = 13 18% = 13 Luxembourg 14% 6% = 15 29% = 14 3% = 13 12% 16 Other countries in Western Europe * 0% 17 * 17 0% = 16 0% 17 *Less than 0.5% For global results Greater or equal to 50% Greater or equal to 33% Greater or equal to 25% Less than 25% Equal sign (=) indicates a tie. 26 towerswatson.com

27 How is the focus changing over time? Figure 4. % of participants indicating focus Employee experience Global Asia Pacific EMEA Latin America North America How do we maximize the employee experience while optimizing our reward spend? What benefi ts (types, levels, etc.) should we provide and how? How do we improve our employees health to improve our business performance? Short 49% 51% 39% 47% 56% Medium 34% 37% 35% 29% 30% Long 16% 13% 17% 13% 19% Short 14% 14% 10% 16% 19% Medium 28% 19% 34% 29% 35% Long 26% 21% 28% 24% 32% How do we improve employees outcomes from DC plans and manage related risks? Short 11% 11% 15% 11% 8% Medium 24% 24% 22% 29% 26% Long 29% 24% 36% 29% 29% Financing employee benefits How do we best manage our pension/ postretirement medical risks? Short 21% 13% 28% 13% 29% Medium 23% 24% 18% 29% 26% Long 22% 23% 22% 34% 17% How do we fi nance health and risk benefi ts most effi ciently, taking advantage of our global scale? How do we achieve the right balance of cross-border and local delivery vehicles? Short 20% 21% 22% 26% 14% Medium 29% 26% 34% 18% 31% Long 17% 16% 16% 29% 18% Short 15% 20% 11% 8% 12% Medium 21% 23% 16% 24% 23% Long 24% 19% 28% 37% 25% Global strategy, oversight and management How do we ensure systematic oversight of risks and opportunities both fi nancial and nonfi nancial? How do we effi ciently organize/operate at global, regional and local levels to execute our benefi t strategy? How do we best meet our fi nancial management information needs relating to pensions, postretirement medical and other benefi ts? How do we reduce/control benefi t costs around the world? Short 29% 24% 31% 26% 36% Medium 25% 27% 24% 29% 21% Long 20% 23% 19% 16% 18% Short 32% 23% 40% 50% 32% Medium 33% 32% 34% 34% 33% Long 12% 15% 10% 5% 12% Short 9% 5% 14% 11% 10% Medium 15% 17% 13% 21% 13% Long 15% 18% 12% 16% 12% Short 26% 21% 28% 34% 29% Medium 20% 13% 25% 18% 25% Long 22% 23% 19% 24% 23% Mergers, acquisitions and divestitures How do we handle mergers, acquisitions and divestitures effectively? Short 22% 20% 16% 26% 28% Medium 15% 13% 14% 18% 17% Long 21% 23% 16% 16% 23% 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 27

28 Appendix II Special Focus: Global Benefit Management Which of the following benefits fall within the scope of the global benefit team s remit? Figure 5. % of participants, ranked by global results 0% 20% 40% 60% 80% 100% Pension/Retirement benefits Active health care benefits Risk benefits (e.g., life, disability/illness, accident) Internationally mobile employees Postretirement medical benefits Share/Equity/Stock plans Other benefits Well-being programs (e.g., financial benefits/incentives, health programs) Other long-term benefits (e.g., savings plans, jubilee) Other noncash remuneration Other remuneration, except base pay Global Asia Pacific EMEA Latin America North America 28 towerswatson.com

29 Have internal resources for managing global benefit programs increased, decreased or remained unchanged over the last 12 months? % of participants Figure 6a. Global 28% 56% 28% Increased 16% Decreased 56% No change 16% Figure 6b. Asia Pacific Figure 6c. EMEA 22% 51% 37% 37% Increased 12% Decreased 51% No change 59% 19% 22% Increased 19% Decreased 59% No change 12% Figure 6d. Latin America Figure 6e. North America 26% 22% 53% 21% 26% Increased 21% Decreased 53% No change 63% 15% 22% Increased 15% Decreased 63% No change 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 29

30 How are they expected to change, if at all, over the next 12 months? % of participants Figure 7a. Global 31% 58% 31% Increase 11% Decrease 58% No change 11% Figure 7b. Asia Pacific Figure 7c. EMEA 19% 43% 46% Increase 19% Increase 46% 11% Decrease 13% 13% Decrease 43% No change 68% No change 68% 11% Figure 7d. Latin America Figure 7e. North America 23% 50% 32% 32% Increase 18% Decrease 50% No change 7% 23% Increase 7% Decrease 70% No change 70% 18% 30 towerswatson.com

31 Are you able to obtain comprehensive and timely financial data on the cost of all benefit programs? % of participants Figure 8a. Global 23% 22% 22% Yes 55% No 23% Don t know 55% Figure 8b. Asia Pacific Figure 8c. EMEA 14% 15% 30% 28% 14% Yes 56% No 30% Don t know 28% Yes 57% No 15% Don t know 56% 57% Figure 8d. Latin America Figure 8e. North America 26% 34% 34% Yes 40% No 26% Don t know 20% 25% 25% Yes 55% No 20% Don t know 40% 55% 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 31

32 Do you maintain a structured inventory of benefit programs offered to employees on a global basis? % of participants Figure 9a. Global 15% 42% 42% Yes 43% No 15% Don t know 43% Figure 9b. Asia Pacific Figure 9c. EMEA 28% 22% 6% 22% Yes 50% No 28% Don t know 42% 52% 52% Yes 42% No 6% Don t know 50% Figure 9d. Latin America Figure 9e. North America 3% 21% 47% 47% Yes 32% No 21% Don t know 38% 59% 59% Yes 38% No 3% Don t know 32% 32 towerswatson.com

33 Does your company have to fulfill some form of regular SOx or equivalent attestation requirement related to adequate global controls and processes? % of participants Figure 10a. Global Are there defined sign-offs related to benefits that feed into the overall SOx attestation? Is this process also used to support the oversight of (i) compliance with local laws/regulations and (ii) adherence with company policies/guidelines? 67% Yes to both 53% 47% 47% Yes 53% No 75% Yes 25% No 3% Yes to (i) but not (ii) 14% Yes to (ii) but not (i) 16% No to both Figure 10b. Asia Pacific 26% 85% Yes to both 26% Yes 74% No 69% Yes 31% No 0% Yes to (i) but not (ii) 9% Yes to (ii) but not (i) 6% No to both 74% Figure 10c. EMEA 41% 59% 59% Yes 41% No 72% Yes 28% No 61% Yes to both 2% Yes to (i) but not (ii) 12% Yes to (ii) but not (i) 25% No to both Figure 10d. Latin America 69% Yes to both 45% 55% 55% Yes 45% No 62% Yes 38% No 8% Yes to (i) but not (ii) 15% Yes to (ii) but not (i) 8% No to both Figure 10e. North America 38% 62% 62% Yes 38% No 83% Yes 17% No 63% Yes to both 3% Yes to (i) but not (ii) 20% Yes to (ii) but not (i) 14% No to both 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 33

34 Does your company have a defined global approval process related to setting up new plans and/or making modifications to existing plans? % of participants Figure 11a. Global 18% 23% 59% 59% Yes 23% No 18% Don t know Figure 11b. Asia Pacific Figure 11c. EMEA 7% 33% 43% 43% Yes 24% No 33% Don t know 21% 72% Yes 21% No 7% Don t know 72% 24% Figure 11d. Latin America Figure 11e. North America 10% 8% 22% 66% Yes 70% Yes 24% 24% No 22% No 10% Don t know 8% Don t know 66% 70% 34 towerswatson.com

35 Does your company conduct regular benefit plan benchmarking? % of participants Figure 12a. Global How often is this conducted? 30% 12% 58% 58% Yes 30% No 12% Don t know 26% 14% 31% 29% 29% Annual benchmarking of all benefits 31% Only when conducting local benefit changes 26% Regular cycle of different updates each year 14% Other Figure 12b. Asia Pacific 23% 37% 40% 40% Yes 37% No 23% Don t know 24% 8% 32% 36% 36% Annual benchmarking of all benefits 32% Only when conducting local benefit changes 24% Regular cycle of different updates each year 8% Other Figure 12c. EMEA 29% 6% 65% 65% Yes 29% No 6% Don t know 21% 15% 23% 41% 23% Annual benchmarking of all benefits 41% Only when conducting local benefit changes 21% Regular cycle of different updates each year 15% Other Figure 12d. Latin America 3% 10% 87% 87% Yes 10% No 3% Don t know 18% 18% 12% 52% 52% Annual benchmarking of all benefits 18% Only when conducting local benefit changes 18% Regular cycle of different updates each year 12% Other Figure 12e. North America 27% 6% 67% 67% Yes 27% No 6% Don t know 35% 19% 21% 25% 21% Annual benchmarking of all benefits 25% Only when conducting local benefit changes 35% Regular cycle of different updates each year 19% Other 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 35

36 In what areas related to ongoing support of benefit management activities globally do third-party provider(s) assist? Figure 13. % of participants, ranked by global results 0% 20% 40% 60% 80% Benchmarking benefit provision Global advisor on risk benefits Maintaining an inventory of benefit plans Coordinated global/local broking Overseeing compliance with laws/regulations Supporting governance in practice Managing benefit costs Other None of these/not applicable Global Asia Pacific EMEA Latin America North America 36 towerswatson.com

37 What benefits have you seen from this structure of support? Figure 14. % of participants, ranked by global results 0% 20% 40% 60% Reduced company resources to manage programs Stronger governance processes Savings in benefit costs More time to focus on strategic issues Improved employee experience Other No benefits derived Global Asia Pacific EMEA Latin America North America 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 37

38 Please rate your experience of this support. Figure 15. % of participants, ranked by global results 0% 20% 40% 60% 80% Well above expectations Above expectations In line with expectations Below expectations Well below expectations Don t know Global Asia Pacific EMEA Latin America North America 38 towerswatson.com

39 Do you conduct a structured annual reporting process from local benefit managers to aid in the identification of local benefit risks and opportunities? % of participants Figure 16a. Global 17% 21% 21% Yes 62% No 17% Don t know 62% Figure 16b. Asia Pacific Figure 16c. EMEA 25% 21% 12% 24% 21% Yes 54% No 25% Don t know 24% Yes 64% No 12% Don t know 54% 64% Figure 16d. Latin America Figure 16e. North America 18% 13% 10% 20% 13% Yes 69% No 18% Don t know 20% Yes 70% No 10% Don t know 69% 70% 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 39

40 Appendix III About the Survey Participants Figure 17. Location of the 492 survey participants by region % of participants 2% 25% 8% 38% 38% Asia Pacific 27% EMEA 8% Latin America 25% North America 2% Not specified 27% 40 towerswatson.com

41 How many employees does your organization have worldwide? % of participants Figure 18a. Global 11% 16% 19% 5% 14% 23% 12% 23% Fewer than 5,000 12% 5,000 to 9,999 14% 10,000 to 19,999 19% 20,000 to 49,999 11% 50,000 to 99,999 16% 100,000 or more 5% Not specified Figure 18b. Asia Pacific Figure 18c. EMEA 1% 6% 12% 17% 8% 8% 8% 41% 41% Fewer than 5,000 8% 5,000 to 9,999 8% 10,000 to 19,999 17% 20,000 to 49,999 6% 50,000 to 99,999 12% 100,000 or more 8% Not specified 29% 17% 10% 17% 11% 15% 10% Fewer than 5,000 11% 5,000 to 9,999 15% 10,000 to 19,999 17% 20,000 to 49,999 17% 50,000 to 99,999 29% 100,000 or more 1% Not specified Figure 18d. Latin America Figure 18e. North America 1% 13% 24% 13% 10% 24% 16% 24% Fewer than 5,000 16% 5,000 to 9,999 10% 10,000 to 19,999 24% 20,000 to 49,999 13% 50,000 to 99,999 13% 100,000 or more 12% 23% 13% 10% 23% 18% 10% Fewer than 5,000 18% 5,000 to 9,999 23% 10,000 to 19,999 23% 20,000 to 49,999 12% 50,000 to 99,999 13% 100,000 or more 1% Not specified 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 41

42 How many employees does your organization have outside your HQ country? % of participants Figure 19a. Global 8% 8% 14% 11% 5% 14% 40% 40% Fewer than 5,000 14% 5,000 to 9,999 11% 10,000 to 19,999 14% 20,000 to 49,999 8% 50,000 to 99,999 8% 100,000 or more 5% Not specified Figure 19b. Asia Pacific Figure 19c. EMEA 1% 3% 7% 6% 59% Fewer than 5,000 16% 23% Fewer than 5,000 23% 10% 5,000 to 9,999 13% 5,000 to 9,999 6% 9% 10,000 to 19,999 10% 10,000 to 19,999 6% 20,000 to 49,999 14% 23% 20,000 to 49,999 9% 59% 3% 50,000 to 99,999 13% 14% 50,000 to 99,999 6% 100,000 or more 16% 100,000 or more 10% 7% Not specified 23% 10% 1% Not specified Figure 19d. Latin America 3% Figure 19e. North America 1% 13% 18% 13% 13% 40% 40% Fewer than 5,000 13% 5,000 to 9,999 13% 10,000 to 19,999 13% 20,000 to 49,999 18% 50,000 to 99,999 3% 100,000 or more 17% 6% 16% 6% 24% 30% 30% Fewer than 5,000 24% 5,000 to 9,999 16% 10,000 to 19,999 17% 20,000 to 49,999 6% 50,000 to 99,999 6% 100,000 or more 1% Not specified 42 towerswatson.com

43 What best describes your organization s primary business/industry? Figure 20. % of participants, ranked by global results 0% 10% 20% High Tech/Telecom Financial Services Manufacturing Energy/Oil and Gas Consumer Goods/Food Pharmaceuticals Automotive Chemical Professional Services/Business Support Services Retail Transportation Media Other Not specified Global Asia Pacific EMEA Latin America North America 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 43

44 Which best describes your functional responsibility? Figure 21. % of participants, ranked by global results 0% 10% 20% 30% 40% 50% Pensions/Benefits Compensation Rewards Other HR Talent development/management Other (non-hr) Corporate strategy Health/Wellness Risk management Accounting/Controlling Corporate finance Treasury * 1 * 0 1 Not specified Global Asia Pacific EMEA Latin America *Less than 0.5% North America 44 towerswatson.com

45 Which best describes your scope of responsibility? % of participants Figure 22a. Global 21% 10% 8% 6% 55% 55% Global 8% Regional Americas 21% Regional Asia Pacific 10% Regional EMEA 6% Other Figure 22b. Asia Pacific 5% 2% Figure 22c. EMEA 8% 54% 38% 38% Global 1% Regional Americas 54% Regional Asia Pacific 5% Regional EMEA 2% Other 29% 62% 62% Global 0% Regional Americas 1% Regional Asia Pacific 29% Regional EMEA 8% Other 1% 1% 0% Figure 22d. Latin America Figure 22e. North America 0% 5% 1% 16% 21% 3% 13% 0% 21% Global 81% Global 60% Regional Americas 13% Regional Americas 0% Regional Asia Pacific 1% Regional Asia Pacific 3% Regional EMEA 0% Regional EMEA 16% Other 5% Other 81% 60% 2014 Current and Emerging Global Themes Employee Benefi ts: An HQ Perspective 45

46 46 towerswatson.com