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Employee Benefits Trends


2009
Asia Pacific Benefits Trends
Survey Report

Employee Benefits Trends


2009 Asia Pacific Benefits Trends Survey Report

Table of Contents
Executive summary..............................................................2
Key findings .........................................................................3
About the survey ..................................................................3
Top HR challenges ..............................................................4
Benefits strategy ..................................................................5
Benefits provision.................................................................7
Key drivers of benefits provision ..........................................8
Is higher benefits spending by an employer valued more
by employees? .....................................................................9
Reporting to employees on their benefits ..........................10
Administration of benefits ..................................................11
Benefits design - flexible or traditional? .............................12
Conclusion .........................................................................13

Featured Figures
Figure 1: Top HR challenges .............................................................. 4
Figure 2: Corporate benefits strategy ................................................. 5
Figure 3: Last review of benefits strategy .......................................... 6
Figure 4: Type of benefits design........................................................ 7
Figure 5: Most popular benefits .......................................................... 7
Figure 6: Top drivers of benefits provision .......................................... 8
Figure 7: Spending on benefits as a percentage of payroll................. 9
Figure 8: Spending on benefits versus value ...................................... 9
Figure 9: Benefits communication to employees .............................. 10
Figure 10: Value attached by type of reporting................................. 10
Figure 11: Administration of benefits ................................................ 11
Figure 12: Flexible versus traditional benefits .................................. 12

Executive summary
The economic turbulence of the past year has driven organisations across
the globe to make short and long term cut-backs in almost every aspect of
their operating costs. In many cases, the single biggest business cost is
people: salaries and benefits. Most organisations have responded by
implementing salary freezes or containing salary growth. On the other
hand, growth in benefit costs remains in the double digits and shows no
signs of easing, particularly with medical costs continuing to rise. Despite
the investment made by organisations in benefits programmes, Watson
Wyatts research shows that a large number of employees still do not
understand or fully value their benefits programmes.

Our clients have told us they need help


in both getting a better return on their
investment in benefits programmes and
developing strategies to contain future
cost increases. Through our global
research, we are able to identify the
direction that companies are taking
with their employee benefits programs,
so they can position themselves to
retain key workers both through the
recession and to better position
themselves for the increased war-fortalent when the recession passes.
We recently conducted a region-wide
research project to identify benefits
trends across Asia. Our key findings
were:
Despite economic changes many
organisations have not implemented
or reviewed their benefits strategy
Despite the high spend on benefits
across the region, about half the
organisations do not communicate
the total reward value to employees,
and one-third of employees do not
value the benefits investment made
by organisations

2 | Asia Pacific Benefits Trends Survey Report 2009

There is an increasing trend to


provide flexible benefits
programmes for employees where
they can choose the benefits that
they value the most. Where flexible
benefits programmes have been
implemented, it is more common for
firms that provide flexible benefits to
have a well defined corporate
benefit strategy in place and
communicate information on
benefits to their employees.
Additionally, a greater proportion of
these organisations have reviewed
their benefits strategy in the last six
months and are more positive about
the effectiveness of benefits
provided.
Based on the findings of both our
global and Asia Pacific research, we
believe that organisations who have a
clearly defined benefits strategy,
effective employee communication
programmes around total rewards, and
who provide employee choice through
flexible benefits are better positioned to
manage costs and have greater
success in the attraction, retention and
engagement of key talent the most
important factor for competitive
success.

Key findings
Controlling cost is the biggest and most widely cited HR
challenge.
One-third of firms surveyed do not have a benefits strategy in
place, but 83 percent of those who have feel that the benefits
provided are effective in meeting the needs of their
employees.
Despite a tough economic environment, more than one-third of
the companies have not reviewed their benefits strategy in the
last 12 months
Traditional benefits dominate but one-third are exploring
flexible benefits.
40 percent of the respondents spend over 20 percent of their
payroll on employee benefits. However, the variation across
countries surveyed is significant.
Over one-third of the employees do not value benefits
sufficiently, irrespective of what employers spend.
Only half the respondents have a benefit communication
programme in place.

About the survey


Watson Wyatt recently conducted an Employee Benefits Trends survey across 12 countries in
the Asia Pacific region - China, Hong Kong, India, Korea, Malaysia, Philippines, Singapore,
Taiwan, Thailand, Japan, Indonesia and Vietnam. The survey took place in June/July 2009.
The participants were asked to answer over 15 questions on various aspects of employee
benefits including key HR challenges, key drivers of benefits design, benefits strategy, benefits
provisions, benefits spend, benefits communication and effectiveness.
The results are based on 278 responses, primarily from HR executives. 42 percent of
respondents belong to companies with less than 500 employees, one third are from companies
with over 500 but less than 2,500 employees and about one quarter are those with over 2,500
employees.

Asia Pacific Benefits Trends Survey Report 2009 | 3

Top HR challenges
The survey showed that Controlling
Cost is the key HR challenge as cited
by HR professionals. This can be
understood in the light of tighter
corporate budgets brought about by
the financial crisis. Amongst the
eleven challenges outlined in the
survey which included challenges
like attraction and retention,
organisational transformation,
improving communication,
implementing flexible benefits, risk
management etc Controlling Cost
emerged the most widely cited
challenge 64 percent of the
respondents cite it as one of their top
three challenges - with 37 percent of
those respondents naming it biggest.

Besides costs, the second most


important concern among HR
professionals in Asia seems to be
attraction and retention: 55 percent of
the respondents cited it among the top
three key challenges. Improving
performance management and
organisational transformation also
stand out as big issues that companies
are expecting to face in the next 12 to
18 months.
Though the top three HR challenges
faced by companies are similar across
countries, there are some differences
too. Controlling Costs is the most
widely cited challenge in Hong Kong,
India, Malaysia and Philippines.
Attraction and Retention is the most
important issue in China and Vietnam
while Improving performance
management is the most important
issue in Thailand.

% of responses

Figure 1 | Top HR challenges


70%
60%

13%

50%
40%

14%

15%
3rd Biggest

30%
20%

16%

2nd Biggest

20%
22%
37%

10%

19%

13%

0%
Controlling Cost

4 | Asia Pacific Benefits Trends Survey Report 2009

Attraction & Retention

Improving Performance
Management

Biggest

Benefits strategy
An employee benefits programme has three key objectives: to
attract, retain and engage an organisations employees. It is thus
important for companies to have a good understanding of the
objectives that benefits provision should meet. A well-laid out
benefits strategy can play an instrumental role in achieving these
objectives.
The benefits trends survey results show that 34 percent of the
respondents do not yet have a corporate benefits strategy in
place. This is an alarming result especially in the aftermath of the
recent economic crisis. The survey also finds that of the
employers who have a benefits strategy in place, 83 percent
believe that their benefits strategy is effective in meeting the
needs of the employees. Looking at variations across countries,
the survey reveals that China and India stand out as countries
with the highest percentage of respondents having a corporate
benefits strategy in place - 84 and 79 percent respectively. In
contrast to this, almost 45 percent of the firms in the sample in
Thailand and Vietnam do not have a benefits strategy.
According to the results, 54 percent of the respondents say that
their benefits strategy is determined locally or with local inputs,
while 33 percent say that it is determined globally or with global
inputs. However, the proportion of companies where benefits
strategies are determined globally is slightly higher in India, China
and the Philippines, for about 40 percent of the companies. Our
survey also suggests that the effectiveness of the benefits
strategy does not seem to be affected by where it is determined.

Figure 2 | Corporate benefits strategy

No 34%

Yes 66%

Asia Pacific Benefits Trends Survey Report 2009 | 5

Despite the tough economic climate,


38 percent of the companies surveyed
have not reviewed their benefits
strategy in the last 12 months. There
are significant differences across
countries in the region though. While
almost half the companies in Hong
Kong have not reviewed their strategy
in the last one year, 84 percent of the
companies in Vietnam have done so.

38 percent of companies
surveyed have not
reviewed their benefits
strategy in last 12 months.

The survey shows that the majority of


firms - 74 percent in the sample provide benefits at the average market
benefits level. However, about 21
percent of the companies in the region
provide benefits at or above the 75th
percentile. Here too, country
differences are apparent with fewer
Hong Kong companies benchmarking
above median (only 7 percent) and
more Indian and Thai companies
benchmarking above median (about
33 percent). We also find that
companies, across the region, typically
benchmark their benefits against local
competitors.

Figure 3 | Last review of benefits strategy in Asia Pacific

Less than 6 months

27%

6-12 months

35%
25%

12-24 months
More than 24 months

13%
0%

10%

20%

30%

40%
% of responses

6 | Asia Pacific Benefits Trends Survey Report 2009

Benefits provision
Traditional benefits dominate but flexible benefits schemes are
also gaining favour. This holds true for employers across all
countries. Organisations generally offer a wide range of benefits
to meet the needs of their employees. Medical screening, life
insurance provision, additional annual leave, pension schemes
and dental checkups are among the most common benefits
provided in the region. Our survey respondents suggest that
private medical insurance and additional annual leave are the
most popular benefits with employees.
As different benefits provisions serve different needs of
employees, employers are taking steps to make sure that there
are enough benefits available to cater to the needs of a diverse
workforce. Employers across the region are planning to
implement or further increase the provision of benefits.
Retirement schemes, medical screening, additional annual leave,
life insurance and company car feature among the benefits that
companies plan to introduce in the near future.

Figure 4 | Type of benefits design


Traditional

73%

Flexible Benefits

17%

Considering Flex

15%

Statutory Benefits only

10%

Implementing Flex

6%
0%

10%

20%

30%

40%

50%

60%

70%

80%

% of responses

Figure 5 | Most popular benefits

Asia Pacific Benefits Trends Survey Report 2009 | 7

Key drivers of benefits


provision
According to the survey, cost is the
most important factor driving decisions
on the level and range of benefits to
be offered to employees. Most
respondents say it is either cost of
implementation or ongoing costs that
drive the decision. Gaining buy-in from
the board and employee opinion are
among the other major drivers.

Figure 6 | Top drivers of benefits provision

Employee Opinion

10%

Gaining buy-in from the Board

12%

Costs (implementation)

16%

14%

15%

14%

28%

Costs (Ongoing)

13%

6%

37%

0%

25%

20%

40%

13%

60%

80%
% of responses

Biggest

2nd Biggest

3rd Biggest

Cost, besides being a key HR challenge, is also the


most important factor driving benefits provision.

8 | Asia Pacific Benefits Trends Survey Report 2009

Is higher benefits spending by an


employer valued more by employees?
It is easy to understand why cost emerges as both a
key HR challenge and a driver of benefits provision.
Companies in Asia seem to be spending a significant
proportion of their payroll on benefits. 40 percent of
the respondents spend over 20 percent of the payroll
on benefits, 35 percent spend 10 20 percent while
25 percent of companies spend less than 10 percent
on benefits. However, as shown in the figure below,
there are significant differences between countries.
While only 9 percent of firms in Vietnam spend over
20 percent of payroll on benefits, the figure is as high
as 80 percent for the Philippines.

Figure 7 | Spending on benefits as a percentage


of payroll

However, as shown in Figure 8, irrespective of what


employers spend, over 40 percent of them think that
employees undervalue benefits provided to them
(cases where employees either value them a bit or
dont value them enough or at all). More than 55
percent of the employers in China think that
employees undervalue the benefits provided by
them. This is in contrast to India, Malaysia and
Thailand where employers are more positive about
the value that employees associate with benefits
only about one-fourth think that employees
undervalue the benefits given to them.

Over 20%

10-20%

Less
than 10%

Asia Pacific

40

35

25

Philippines

80

16

China

56

20

24

Malaysia

42

47

11

Thailand

40

27

33

India

35

26

39

Hong Kong

22

49

30

Vietnam

61

30

*The figures above may not total to 100 due to rounding off

Figure 8 | Spending on benefits versus value


% of responses

60%

54%
48%

48%
40%

33%

33%
26%
21%

20%

10%

8%

7%

6%

5%

0%
Over 20%

10-20%

< 10%

Spending on Benefits as a % of payroll


Highly value

Value them quite a lot

Value them a bit

Don't value them enough/at all

Asia Pacific Benefits Trends Survey Report 2009 | 9

Reporting to employees on
their benefits
Watson Wyatts WorkAsiaTM research
reveals that the provision of benefitsrelated information boosts overall
employee satisfaction with the benefits
package. Benefits satisfaction itself is
positively correlated with employee
engagement. Thus, it is important for
firms to create an environment that
includes a clear dissemination of
information and clarity around the
benefits provided.

Figure 9 | Benefits communication to employees

As can be seen in Figure 9, only half


of the employers surveyed report to
employees on their benefits package,
and that reporting is mainly paper
based.
Also, the survey reveals that a greater
proportion of employers with a webbased reporting system say that their
employees value their benefits
arrangement (Figure 10).

% resp o n ses

Figure 10 | Value attached by type of reporting


67%

70%
60%
50%

36%

40%
30%

33%

21%

20%
10%

49%

44%

10%

10%

9%

2%

14%
4%

0%
Yes, web-based
Highly value them

Yes, paper based


Value them quite a lot

10 | Asia Pacific Benefits Trends Survey Report 2009

Value them a bit

No
Don't Value

Administration of benefits
There is still significant opportunity for organisations to improve
the efficiency of benefit administration and reduce the overall
administrative burden and cost. 70 percent of the companies in
the survey administer benefits in-house and the administration is
mostly paper-based. 19 percent use third party administrators.
Use of outsourced HR support is much lower with only 7 percent
of employers using it.

Figure 11 | Administration of benefits


In-House

Third Party/
Outsourced

Vietnam

92

Malaysia

76

20

Thailand

74

17

Hong Kong

66

26

China

55

41

Philippines

54

30

India

50

42

Asia Pacific Benefits Trends Survey Report 2009 | 11

Despite the advantages that a flexible


benefits scheme has, only 17 percent
of the companies in our sample
currently provide flexible benefits,
however it is becoming more popular
with 6 percent of the companies in the
process of implementing it and 15
percent considering implementing it.

Benefit design - flexible or


traditional?
Provision of traditional benefits, under
which a similar set of benefits are
offered to all employees, is dominant
in the region. However, such a
benefits design has a limitation
employees cannot select the benefits
they value the most and are provided
with a one-size-fits-all solution. In
view of the fact that employers spend
a substantial amount of money on
benefits provision, there is increasing
pressure on HR managers to deliver a
more value-effective benefits design.
Flexible benefits is an approach that
has the potential to overcome the
limitations of traditional benefits
design. It provides a better control
over costs, improves employee
perception of benefits and thus
contributes towards furthering
employees total reward satisfaction
and engagement.

Clients reported that where flexible


benefits plans were in place, the
benefits programmes were reviewed
more frequently and have a greater
level of employee communication.
They were thus regarded as more
effective.

Figure 12 | Flexible versus traditional benefits


Flexible benefits

Traditional benefits

Corporate benefit strategy

68%

62%

Reviewed benefits in last


six months

40%

23%

Spending over 1/5th as a %


of payroll

32%

42%

Regard benefits as
'effective' or 'very effective'

88%

79%

Report to employees

55%

37%

12 | Asia Pacific Benefits Trends Survey Report 2009

Conclusion
Despite the significant spend on benefits across Asia Pacific, not
all organisations have a benefits strategy and many have not
reviewed their strategy for some time. About half the
organisations surveyed do not provide communication
programmes around the total employee reward; few allow
employees to choose the benefits that they value the most and
therefore, not surprisingly, the total investment is still not well
appreciated by employees.
If we compare firms that are providing a flexible benefits scheme
with those that are providing traditional benefits, we find that it is
more common for firms that provide flexible benefits to have a
well defined corporate benefits strategy in place and
communicate information on benefits to their employees.
Additionally, a greater proportion of these firms have reviewed
their benefits strategy in the last six months and are more positive
about the effectiveness of benefits provided. The organisations
that have taken this action, and made adjustments to suit the
2009 and 2010 business climate will fare better, both in cost
savings and employee attraction, retention and engagement
leading to a better competitive edge.

About Watson Wyatt Worldwide


Watson Wyatt is the trusted business partner to the worlds
leading organisations on people and financial issues.
Our client relationships, many spanning decades, define who we
are. They are shaped by a deep understanding of our clients
needs, a collaborative working style and a firm-wide commitment
to service excellence.
Our consultants bring fresh thinking to client issues, along with
the experience and research to know what really works. They
deliver practical, evidence-based solutions that are tailored to
your organisations culture and goals.
With 7,700 associates in 32 countries, our global services
include:
Managing the cost and effectiveness of employee benefits
programmes
Developing attraction, retention and reward strategies that help
create competitive advantage
Advising pension plan sponsors and other institutions on
optimal investment strategies
Providing strategic and financial advice to insurance and
financial services companies
Delivering related technology, outsourcing and data services

For more information, please


contact your nearest Watson Wyatt
consultant or visit watsonwyatt.com.

Asia Pacific Benefits Trends Survey Report 2009 | 13

locations
ASIA-PACIFIC Bangkok Beijing Bengaluru Delhi Guangzhou
Hanoi Ho Chi Minh Hong Kong Jakarta Kolkata Kuala Lumpur
Manila Melbourne Mumbai Seoul Shanghai Shenzen
Singapore Sydney Taipei Tokyo Wuhan
EUROPE Amsterdam Apeldoorn Birmingham Bristol Brussels
Budapest Dublin Dsseldorf Edinburgh Eindhoven Frankfurt
Leeds Levallois-Perret Lisbon London Madrid Manchester
Milan Munich Nieuwegein Paris Purmerend Ratingen Redhill
Reigate Rome Rotterdam Stockholm Vienna Welwyn
Wiesbaden Woerden Zrich
LATIN AMERICA Bogot Buenos Aires Mexico City
Montevideo San Juan Santiago So Paolo
NORTH AMERICA Atlanta Berwyn, Pa Boston Calgary
Charlotte Chicago Cincinnati Cleveland Columbus Dallas
Denver Detroit Grand Rapids Honolulu Houston Irvine
Kitchener-Waterloo Los Angeles Memphis Miami Minneapolis
Montral New York Paramus, N.J. Philadelphia Phoenix
Portland Rochelle Park, N.J. St. Louis San Diego San Francisco
Santa Clara Seattle Stamford Tampa Toronto Vancouver
Washington, D.C.

watsonwyatt.com

Watson Wyatt Limited

September 2009

Ref: AP Flex Ben Report

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