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Holistic benefit approach at GSK

In January last year multinational corporations Glaxo Wellcome and SmithKline Beecham announced merger plans to create a global leader research-based pharmaceutical and research company. Last December, after months of negotiations and integration plans between the two companies, the merger was completed and the new organisation began trading under the name of GlaxoSmithKline (GSK). GSK has over 100,000 employees and supplies products to 140 markets around the world, and will have an estimated R&D budget of approximately £2.4 bn (€3.8bn) a year.
The integration and centralisation process has also been translated into the company’s approach to employee benefits. From GSK’s headquarters in London, the group’s international benefits division supervises the employee benefit arrangements currently in place in every single country where the company operates.
“As a result of the merger we can say that we now have an overall philosophy and an overall strategy that we didn’t have before,” says Philip Churchill, international benefits manager at GSK in London. “We now have a working method for the integration of our benefit plans worldwide and centralised guidelines which the various countries have to work through themselves,” he says. Churchill is one of the two London-based international benefits managers in charge of overseeing the company’s benefit arrangements in all the different countries around the world except for the UK and US. His area of responsibility is mainly the European region, although he sometimes covers other areas as well. “The other international benefits manager deals with the company’s benefit plans in the rest of the world but equally he might have to cover other areas in some occasions,” he says. “In general both us take the work as it comes.”
The work of GSK’s international benefits managers consists of looking after both benefit arrangements and pensions that the company has in place in all the countries where it operates. They act as internal consultants, supervising employee benefits arrangements and helping local subsidiaries to gain approvals for setting up new plans or making changes to those schemes already in place. “We cover all areas related to employee benefits including the design of benefit structures, investment strategies and administration,” he says.
Although since the merger a more centralised structure has been put in place, in terms of employee benefits and pension plans the company does not aim to impose a standard method or system worldwide. Due to differences in terms of regulation, taxation, and common practice of the various countries involved, achieving an overall, homogenous approach to benefits it is not something that will happen in the near future. “Each country makes its own design decisions but those have to be agreed by the headquarters,” says Churchill. “In terms of pension systems we prefer a defined contributions model but we certainly don’t insist on it. At the moment we have as many defined benefit plans as we have defined contribution and we are not planning to impose a change at a corporate level regarding this.” Even within the European Union, the company’s schemes vary from country to country and it seems that it will remain like this for the time being. “The major obstacle to achieve a greater harmonisation in Europe is taxation,” Churchill says. “You can see that many European countries are refusing to give up their control over their own taxation system so I don’t expect major changes in this respect in the near future.”
In terms of investment, at the moment there is not an overall strategy in place although this might change during the years to come. “You have to take into account that GlaxoSmithKline is a very new company as a result of the merger and right now we are concentrating on combining the different plans that we have all around the world.” He adds: “Once we have done we can then look at developing global strategies for our investments.”
Another aspect that might be changed in the near future is the introduction of pension funds in those countries where so far employees are only covered under insurance contracts. “At the moment we have too many countries, both in Europe and in the rest of the world, covered by insurance policies rather than directly invested funds and this is something we would like to change soon,” he says.
In terms of multinational insurance pooling, GSK is now trying to reduce the number of networks they use. “Because both Glaxo Wellcome and SmithKline Beecham were using international insurance pooling arrangements before the merger, we ended up having five different networks and we are trying to bring that number down to around three,” Churchill says. “We see many benefits in using these vehicles, first in terms of costs but also because they give you continous cover for people moving from country to country. We do use some of these networks for pension provision but this is likely to end because it inhibits your investment freedom.”
Maintaining a mobile workforce is crucial for all multinationals and GSK is offering different solutions for this type of employees. “When talking about mobile employees you have to distinguish between those who are sent abroad for a relative short term and those who move from country to country very frequently,” he explains. “We try to keep those employees who work a abroad for a period of two or three years in their home pension plan and for those seriously mobile we believe an offshore plan is the best option.” He adds: “We also have to have an offshore fund for those who don’t have a home base, for instance for a Frenchman hired in Japan or an Irishman hired in Romania.” Before the merger both companies had offshore funds for these type of employees and they are now designing a new one for the combined organisations.
Pension arrangement are often seen as a major worried for employees taking on an international assignment, but Churchill does not think these issues are actually putting people off going abroad. “It is an important question to consider and that’s why we offer them these options but we don’t find that people refusing to work abroad because of concerns about their pension and benefits arrangements,” he says.

The schemes operating in the UK and the US are the only ones which are not covered by by GSK’s two international benefits managers and they are also going through changes. GSK has several pension funds in the UK and a new plan is being designed. In general terms, rather than significant changes in structure or functioning, the new plan will try to bring employees a new perspective in terms of benefits. “What we want is to provide employees with messages of wealth creation rather than just retirement,” says Churchill. “We want to provide them with share options, share purchase plans and retirement plans in combination so they have a wide range of savings opportunities.” This message of creating wealth for the future instead of focusing only on pensions is also being discussed among the company’s subsidiaries in the US and in the future might become an essential part of GSK’s approach to employee benefits worldwide.

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