International employee benefit programmes involve all of the issues and considerations that are present in any single jurisdiction. By definition, however, they are inherently more complex, as management of international benefits requires an understanding of legislation and practice differences among multiple jurisdictions. In addition, local culture and labour market conditions must also be considered.

An employer needs to take account of many issues in attempting to devise a comprehensive and coherent pensions and benefits programme, across borders, including provision for its internationally mobile employees. Some of the issues facing the international employee benefits specialist today include:

• Methods of financing retirement plans, including book reserves, trusts and insured arrangements, and pay-as-you-go systems. Invariably, the use of a particular type of financing vehicle will depend upon local laws and regulations, taxes, and employer/employee objectives
• Multinational pooling, a special type of financing arrangement that is available to companies with insurance coverage in more than one country
• Labour laws, tax laws and other legal factors that impact on employee benefit programmes. Included in the list of topics covered are termination indemnities, mandatory profitsharing, pension legislation and court decisions
• Social security and mandatory employer-sponsored pension plans. The type of coverage, especially the extent of social security coverage, has a major impact on the provision of employer-sponsored plans. Today, an increasing number of countries are introducing supplementary pension plans – often mandatory plans that require employer involvement
• Recent surveys have indicated that an increasing number of expatriates are being sent by multinationals to work abroad for several years. Will the expatriate continue to be covered under the home country pension plan? Or the home country medical plan? Or, perhaps, a special plan specifically designed for expatriates? Will allowances be granted for educating the expatriate’s children? For special housing and other living expenses?

An international benefits policy cannot be developed in a vacuum. Neither can it be developed successfully with reference only to the business environment of the parent entity’s home jurisdiction. It must relate to the characteristics of the company and must take into account the differences in legislation, practice and labour market competition that are encountered in a variety of jurisdictions. Cultural differences should not be forgotten; they are important in devising an attractive package.

On the other hand, the benefits programme may have a part to play in strengthening the company's own culture, and bringing together employees in separate jurisdictions rather than emphasising their differences.

Global employee benefit programme
A key objective for many corporate employers today is to adopt a coherent human resource strategy worldwide, thereby achieving the following objectives:

Competitive benefits
One objective is to confirm that the benefits and compensation package for all employees, taken as a whole, is competitive within the local jurisdiction and that parity is maintained when these individuals are employed in other jurisdictions.

“Keeping the employee whole”
The employer will also want to make certain that the employee does not suffer as a result of moves from one jurisdiction to another. The goal is to “keep the employee whole” and this is particularly important in pensions as fragmentation of an employee’s pension entitlements may have a severe effect upon his or her total benefit. In some cases the employee may not spend enough time in a jurisdiction for his or her benefits to vest.

The relevance of the jurisdiction in which the employee will retire
Employers also recognise that the employee should receive his or her pension in the currency of the jurisdiction in which he or she will retire. From the employer’s perspective, this usually means monitoring and ensuring that the pension assets, and pension liabilities and risk, are kept in balance, so that the employer is not unduly exposed to currency risks on top of the other risks that are often present in sponsoring pension arrangements.

The significance of taxation
The tax position is another area of importance to both the employer and the employee. In some jurisdictions, it is not tax effective for an employer to provide certain benefits to the employee, for example if it does not receive a corporate tax deduction on the expenditure incurred in providing the arrangement. Also, in certain cases, the employee is put at a tax disadvantage if the employer does provide certain benefits.

The significance of social security
Pension provision also needs to be evaluated against varying national social security systems. In many cases, an internationally mobile employee will be unable to accumulate significant state pension provision and the employer will need to contemplate providing alternative options to the employee to cover this deficiency.

Clearly, some of these objectives may not necessarily be consistent with each other and it is important for the corporation to identify its primary objectives and design an employee benefit programme to achieve one or more of these to objectives.

Cross border pension schemes
Within the European Union, attempts are being made to facilitate the operation of cross border schemes that incorporate some, but not all of these key features. The EU Pensions Directive proposes that all EU member states be obliged to harmonise the regulatory framework governing pension plans and to adopt a system of regulation. It also aims to liberalise the national restrictions on investment.

Tax is another important issue in the operation of cross border pension schemes in Europe. The fact is that until tax relief is definitively provided by member states on cross border pension contributions, employers will not offer cross border scheme membership to their employees. Although the timetable for the resolution of these issues is impossible to predict, when it is resolved it will lead to:
• Multinational companies having the choice of operating national or Pan European pension arrangements
• Pension plans having a choice of location
• Pension plan members having fewer cross-border pension problems
• Greater cross-border investment flow

The following is a list of critical decisions individuals within HR departments would be handling in the formulation and implementation of an effective international human resource strategy:

• Review and analyse current EU Employment/Pension/Tax Committees and Agencies, Law and Initiatives for relevance
• Determine the goals of each international operation in the organisation
• Evaluate whether HR policies and practices should be standardised or localised in accordance with overall organisational goals of the corporation
• Evaluate the local, cultural, social, political and legal factors that will impact attempts to incorporate standard HR policies
• Work with senior management to identify what the goals are to achieve the international organisational objectives
• Work with national HR managers to formulate International Human Resource policies and practices

Hammonds International Benefits Practice
We provide a complete range of legal services relating to the design, structure, implementation, administration and termination of all types of tax-qualified retirement, executive compensation and welfare benefit plans. We work with multinational clients to develop coherent employee benefit strategies, cross border, and to effectively apply employee benefits law to their operations. We advise employers on the employee benefit aspects of key business transactions like mergers, acquisitions and affiliations. We are closely involved in the legislative thrust towards Pan European Pension funds.

The members of the International Benefits Practice have significant experience in the development of suitable plans and programmes. Building on the firm's significant UK pensions/ benefits/employment capability and its experience of the needs of US employees in the European marketplace, which includes specific US legal expertise and counsel from the major EU jurisdictions. We work closely with clients and where appropriate foreign counsel to identify and implement solutions that help cross-border firms maintain their competitive employment positions. Services include:
• Transfers of executives and other employees to foreign affiliates
• Transfers of foreign executives and other employees to US affiliates
• Extension of US retirement plans and executive plans to employees of foreign affiliates
• Extension of US stock plans, including option plans, employee stock purchase plans, and restricted stock plans, to employees of foreign affiliates
• Benefits issues involved in cross-border mergers and acquisitions.
• Fiduciary issues involved in foreign investment by US employee benefit plans
• Specific US/UK issues, such as immigration compliance

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