Providing your overseas employees with a cash lump sum may seem the obvious – and simplest – way to cover off their health and wellbeing needs. But, explains Sarah Dennis, appearances can be deceiving.
For employees embarking on overseas assignments, providing them with a cash lump sum to cover their health and wellbeing needs might seem like the simplest and most advantageous option. The business does not have to source and fund specific employee benefits, and the employee is unrestricted in their choice of support to meet their individual requirements.
Indeed, Towergate Employee Benefits’ research shows that 74% of businesses do just this, providing their employees with a cash lump sum rather than a package of specific employee benefits. There are, however, a number of pitfalls to this approach.
The thinking behind cash lump sums
The thinking behind giving a cash lump sum to an employee is that they will use it to purchase the health and wellbeing benefits of their choosing.
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Employers may be particularly tempted to take this approach for overseas employees, as it seems an altogether simpler option than researching the regulations and requirements in a different country and, quite possibly, many different regulations and requirements in several different countries. This is especially the case if the business employs people in multiple locations.
The employer works on the theory that the employee uses the money to purchase the appropriate health and wellbeing products.
For someone based overseas, these could include such things as private healthcare, life insurance, income protection, critical illness cover, emergency support and repatriation, health screening, wellbeing support, benefits to support a healthy lifestyle, mental health and resilience coaching, and more.
However, how many employees actually use the money to fund these types of support? It is doubtful whether most employees would be in a position to know or understand the best and most appropriate support to obtain.
It is unlikely that they would know which regulations need to be met, where best to obtain the benefits, or what sort of price to pay? There is also a great temptation to use the money in completely different ways and not to buy insurance and benefits at all.
The risks for employees and their employers
For the employee, the risks associated with not purchasing health and wellbeing support are perhaps fairly clear: if they suffer from ill health, either mental or physical, they may not have the support in place to provide them with treatment or even for them to return home.
An employee could suffer from a chronic or terminal health condition, which could leave them unable to work and their family stranded at home or abroad with no source of income or support.”
They could equally be caught up in political unrest or some sort of natural disaster, and not have the means to be rescued and repatriated.
With an overseas employee struggling with any of the above, they could perhaps understandably expect their employer to come to the rescue and provide emergency assistance.
This could, for example, be to pay for a medical procedure abroad, which could cost tens of thousands of pounds. Or an employee could suffer from a chronic or terminal health condition, which could leave them unable to work and their family stranded at home or abroad with no source of income or support. Again, it would not be unjustifiable for the employee to expect their employer to foot the bills.
As employers have legal and ethical obligations to ensure the health, safety and wellbeing of their employees, the employer could then face questions about whether they have met their duty of care.
Having provided a cash lump sum, the employer may not even know whether the employee has used this money to purchase essential benefits, such as healthcare and life assurance, until the point where it is needed.
And an employee working abroad is arguably at greater risk of needing support than employees based in the UK. They may be working in an area with no universal or free healthcare, more difficult access to medical treatment, and face a greater risk of political unrest. They are also likely to lack knowledge of where and how to source support.
Making the complex simple
One reason employers provide lump sums of money for employees based overseas, as opposed to providing a benefits package, is not that it provides the employee with greater choice, but simply that it is easier for the employer.
Every country has its own rules and regulations regarding what must be provided for an employee in terms of medical support and benefits.
The rules and provisions are likely to be different for a local national employed by a UK company and for an expat posted abroad. The situation also constantly changes, particularly if the political situation is less stable than in the UK. All of this makes it a complex matter to ensure that the appropriate support is provided and sourced at appropriate costs.
The best option is for the employer to take the initiative and to consult a global benefits expert. They will be able to provide advice based on local knowledge.”
The simple answer is, of course, to take expert advice. The best option is for the employer to take the initiative and to consult a global benefits expert. They will be able to provide advice based on local knowledge.
Obtaining the right cover at business level will help to ensure that it really is the right cover. It also puts the employer in control of the situation. A business will have better purchasing power than an individual employee, and the benefits adviser will be able to ensure that all the relevant regulations and requirements are met and that the employees are fully covered for the possible eventualities.
Moreover, many global benefits programmes purchased by the business itself will also include access to valuable added benefits. There will often be the opportunity to benefit from a global employee assistance programme (EAP).
This is similar to an EAP provided alongside benefits in the UK, but a global EAP will specifically cover matters that are likely to arise for overseas employees. It can be an invaluable resource and provide information on subjects from legal issues to financial queries and offer services such as counselling, which can help with the emotional strains of being based away from home.
Finally, communication is key
So, providing a cash lump sum may be an attractive option on the surface, for ease and simplicity, for the employer. It may also be attractive for the employee who is tempted by the money rather than the ability to buy their own benefits. But, either way, it is rarely the best solution.
The key is for the employer to take advice to ensure they provide the most appropriate package, and also to ensure this is carefully communicated.
In this way, the employee will be more likely to understand the true value of what they are offered and that this is worth far more than just a cash lump sum.
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