More than a third of pay spent on medical benefits

MORE THAN a third of companies in the Philippines are spending “upwards of 30%” of employee salaries on “generous medical and retirement benefits,” a New York-headquartered professional services company said.

High benefit costs in the Philippines “are driven by a significant spend on medical benefits which often extend to parents of employees as well as retirement benefits,” Towers Watson said in a statement, citing Susan La Chica, director, Health and Group Benefits of Towers Watson in the Philippines.

“Costs are particularly high in the Philippines and Indonesia, where generous medical and retirement benefits are prevalent, leading to 38% and 29% of employers respectively, spending upwards of 30% of payroll on benefits,” the statement said.

“Employers in the Philippines listed increasing their efforts in communicating benefits to their employees as the top action planned for the next 12 months,” said Soraya Manaloto, Lead Benefits Optimization, Philippines.

“Taking employee opinion into account is essential to creating an effective benefits program that has relevance across a multigenerational and diverse work force. Employees, and especially young workers who are just entering the work force, are changing the definition of what constitutes health — it no longer means simply avoiding illness, but is a more holistic concept that encompasses well-being. It includes good nutrition, regular exercise, managing stress and achieving work/ life balance,” Ms. Manaloto added.

The finding about the Philippines fits right in with the company’s new research covering 1,145 organizations across 20 countries in the Asia Pacific.

Based on its 2015 Asia Pacific Benefit Trends survey, 41% of employers in the Asia Pacific said they spend more than 20% of payroll on benefits, “although some variability exists.”

Benefit costs, which already represent a significant percentage of payroll costs, continue to rise, the statement said.

“More than four in 10 employ- ers said they spend more than 20% of payroll on benefits. However, despite the material spend on benefits, only 16% think they are highly valued by employees,” Towers Watson said.

However, just over a fifth (22%) of employers across the region said they didn’t know how much they are spending on benefits.

“This apparent lack of awareness about their benefits spend suggests that employers are struggling with benefits governance, whilst juggling multiple systems, vendors and administrative platforms,” said Andrew Heard, managing director — Benefits, Asia Pacific at Towers Watson. “If employers are finding it hard to put a number on their benefits spend, then it is perhaps no surprise that employees have low awareness of the value of their program. A benefits program that is aligned with employee needs, communicated clearly, and delivered on one platform, is likely to see better value attached from employees.”

“Employers across Asia Pacific spend significant amounts of money on their employee benefit programs. But many struggle to derive full value from that spend,” said Chris Mayes, Director — Benefits Optimization Consulting, Asia Pacific at Towers Watson. “From our experience working with clients, we find that those employers who regularly engage their employees in their benefits — either through seeking employee feedback or communicating regularly — tend to see better value.”

Introducing more flexibility into the benefits program is one way that employers are looking to address the benefits value gap. Almost one-third (32%) are looking at increasing flexibility over the next 12 months, whilst more than one-quarter (26%) are planning to introduce flexible benefits.

For organizations that already offer flexible benefits, the majority felt that their programs had been successful in promoting employee understanding and/or appreciation of benefits (67%) and improving attraction and retention (59%).

“Flexible benefits continues to be an effective way of delivering benefits and improving their perceived value to employees,” said Mr. Heard. “Besides recognizing the diverse needs of employees, offering flexible benefits necessitates regular communication to enable employees to make choices and puts values on the various benefit items included in the program. These aspects help increase the value employees attach to their benefits.”

Benefits are increasingly seen as an integral part of an Employee Value Proposition — a reward lever to help attract, retain and engage employees. Two- thirds of employers surveyed said that attraction and retention of key talent is the major focus of their benefit strategies. According to the survey respondents, annual leave and health/ medical care remain the most prevalent benefits, whilst risk benefits ( life insurance, accident insurance) and retirement benefits are also popular.