How benefits strategies are rapidly changing in Latin America

Bnamericas Published: Saturday, August 20, 2022
How benefits strategies are rapidly changing in Latin America

Benefits strategies at Latin American firms are shifting quickly as business practices across Latin America have been in a constant state of flux going back to March 2020 and the start of the COVID-19 emergency, with lockdowns and telework transition followed by supply-chain shocks, global inflation and a labor shortages in many countries.

The pandemic has also yielded a crop of fast-growing tech start-ups in the region, with companies eager to recruit and retain the best talent.

To get a solid grasp of current trends in employee benefits in the region, BNamericas spoke with Álvaro Cristi, head of health and benefits for Latin America at Willis Towers Watson, which is managing about US$1bn in benefits within the region.

BNamericas: What is WTW doing to address the evolving needs of workers in 2022 and the trends coming for human resources and employee benefits?  

Cristi: We’re very involved in the design and strategy of benefits, as well as their negotiation, implementation and administration. Therefore, we have to collect a lot of information, while also making sure the data we get is good. 

Over the last three years, we’ve been targeting information on the latest developments and ultimately developing a survey of human resource managers we call ‘benefit trends’. 

Furthermore, with the issue of well-being becoming a top priority since the start of the pandemic, we put together another survey that gathers data on the well-being strategies deployed in each company across the region, and with that information we’ve been able to establish a solid benchmark.

Finally, and this is coming fresh from the oven, we have a survey called ‘benefit aptitude’, which is answered by the employees. 

We’ve had more than 35,000 employees answer this survey worldwide, and about 5,000 in the region, and with it, we’re able to gather data to perceive what employees want. 

BNamericas: I read a message you delivered recently on the importance of understanding ‘employee experience’, sort of in the same light that software developers understand UX, or user experience, and this is something on which WTW really focuses. What is WTW’s thinking on this?

Cristi: These days are there just so many challenges. We’re in a constantly changing world, and the human resources process is accelerating. 

Before the pandemic, the process for benefits was much more static. There was this idea of trying to deliver flexibility, to improve perception, but companies were worried about integrating what employees actually valued to avoid building expectations.

But we integrated this into a labor environment survey conducted once or twice a year. The pandemic accelerated this process by forcing us to take a hard look internally and raise risk profiles.

Secondly, it obliges us to understand where we’re going, like in those companies where teleworking had to be applied quickly, what we need to do to is make that shift in the culture.

It also forced us, independent of whether or not in-office work has come back, to see the kinds of problems people were facing at home. The strategy shifted to focusing more on the person. Health problems became paramount, mental health issues as well.

BNamericas: What about adapting to the new jobs climate and labor shortages? What are companies doing to retain top people and hiring the best talent?

Cristi: Benefits strategy is changing very quickly. Today, your human resources department is battling it out to retain talent against companies [workers] view as more attractive, such as start-ups – tech companies who in many cases were boosted by the pandemic.

We’re seeing today how start-ups, in a short period of time, become unicorns, which accelerates their valuation process, and all this is very attractive to younger generations.

Those companies that have a brand recognition and that, in the past, was enough to generate greater retention, are now being threatened by new companies - start-ups - that have innovated in their benefits strategy, managing to capture the attention of the talents in the different industries.

Competitiveness in attraction and retention is being seen in the profiles linked to areas of technology, consumer experience and developments, where companies are seeking a better positioning of their benefits matrix for these talents. This also helps to improve the employee experience within the organization.

BNamericas: Are there new realities with retaining workers?

Cristi: There are several. For one, our expectations on how long someone is going to work with us is never long, especially with younger generations. So, the only way for a company to attract and retain [talented people] is to make sure their experience working there, even just for four years, has been excellent.

Strategies are moving this way, and as they do, our work at WTW is also beginning to evolve in this direction. 

Today, our structure is a much more holistic model, which goes beyond just being a broker for different benefit plans. Our focus is centered on supporting the development of benefit strategies to improve the employee experience, seeking to reduce the gaps between the perceptions of companies and employees. 

In this sense, we’re seeing a revolution, even in the composition of human resources teams, where people with much more analytical profiles are being incorporated, who seek to align the objectives of the strategy with the purposes of the company. This change leads to the search for new benefits and their flexibility.

BNamericas: Do you have an example of a company that deployed such a radical change in mindset with benefits and it paid off?

Cristi: Some time ago, in Chile, the large state-owned mining company [Codelco] had a conflict with the employees of the contractor companies, which led to them being able to access a benefit plan with similar scope to the employees. 

This produced a change in the benefit strategies of other large companies, where they defined as a policy that contractors have access to benefit plans. This change led to an improvement and transformation in the benefit policies of many companies in this country, which to this day continues to be a good practice.

The result is that today Chile is the most advanced country in the region in terms of equalizing benefits between contractors and direct employees.

BNamericas: What about benefits strategy in specific industries, with firms requiring specific skillsets?

Cristi: Our challenge as a company is to support the development of benefit strategies for the new roles that appear, such as automation processes in productive companies. In this case, the problem that exists is to generate a sample for review of the competitiveness of its profits. For this, the comparison between different industries becomes very relevant.

BNamericas: How are companies, and especially start-ups, holding up to the economic uncertainty that has broken out since, with continued lockdowns, war in Ukraine, high interest rates, strong inflation, supply chain problems, etc.?

Cristi: Inflation has affected some countries more than others. The current economic uncertainty leads to focus on the constant review of the benefits strategy, due to the cost that this represents in total compensation.

Given this, we have seen that for employees the flexibility of benefits has become a valued attribute. Between 70-72% of people prefer a more flexible structure. On the other hand, start-up companies, within their strategy, seek to differentiate themselves with more innovative benefits. 

They are providing coverage, for example, for gender reassignment or to address co-parenting, allowing both members of the couple to organize time off, days off, vacations. The flexibility in [start-ups] is much greater.

Obviously, it’s very different to compare a start-up with 80 employees to a company with 1,500. When you're looking for flexibility, the problem is that it's more expensive in large groups. 

When I offer such options, it generates anti-selection, higher claims rates and increasing cost projections. It’s harder to fund.

Let's not forget that flexibility includes tailor-made developments. Each manager puts together a project according to the culture of the company. Today, we’re very challenged by our customers who ask us to always be monitoring, looking for efficiency and structures that make the benefits sustainable in the long term. 

BNamericas: Are there regional issues in play with benefits?

Cristi: Given the new governments, there are changes in certain countries in the region that will require a reevaluation of the benefits strategy. 

The closest example is the process that Chile is going through, where there are possibilities of change in the health and pension systems, as well as in labor legislation, which pushes companies to be in constant evaluation about the economic impacts that these modifications could generate.

BNamericas: Are there areas of benefits hit harder with inflation?

Cristi: We’re running a study to project medical inflation for 2023, and we expect it to be between 7% and 12%, depending on the country. We try to generate good projection mechanisms, average costs, frequency, etc., to evaluate the accident rates of benefit programs. We also seek to generate agreements with suppliers to reduce costs, for example telemedicine, negotiations with pharmaceutical chains, etc.

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