If there is one sector that has been making the economic running in recent decades it has been the IT/computer industry. Swift growth and global expansion have meant that these corporations have had to quickly create world-wide pensions and benefits arrangements, sometimes with mixed results.
On top of that, they share particularly modern HR and pensions preoccupations, employing young, highly mobile workforces, for whom long-term benefits such as retirement schemes don’t come as top priority.
Hartmut Wastian, is a compensation and benefits consultant for Europe, Middle East and Africa (EMEA) at Microsoft – a corporation that needs little introduction.
Based in Germany, Wastian is in charge of compensation and benefits for about a third of all the EMEA countries, which have around 6,000 employees in total.
“We tend to cover compensation issues here and we are the first point of contacts for benefits. There is also an additional group of experts who sit at the corporate level in the US. They take care of more complicated legal policy matters whenever it comes down to changing benefits practices and policies around the globe.”
He explains that local Microsoft entities are not autonomous in terms of the benefits provided, but adds that benefits are ‘driven’ by the local markets.
“What I mean is that they are not uniform. Our policy is to be at least at market average when it comes to benefits by country or by region. However, the country operations don’t have the discretion to make independent decisions and they need to contact us prior to implementing new programmes. We then make sure that everything is in line with company philosophy, such as whether it is cost effective, fiscally responsible, etc.”
Wastian says Microsoft’s ‘core benefits’ comprise pensions AD&D (accident, death and disability) and health insurance where possible.
Additionally, Microsoft takes part in a multinational pooling network for the insurance contracts that cover these benefits. This arrangement, says Wastian, is very cost efficient when it comes to the dividends returned to the company on an annual basis due to the young age profile of the Microsoft employee population.
“Whenever we can we encourage local HR departments to use an insurer that is linked with one of these multinational pooling networks.”
On pensions, however, Wastian notes that Microsoft policy tends towards the legal minimum rather than any paternal type of retirement provision. “As you know pensions are very difficult to implement and maintain and there are huge cost burdens associated with them. Also, if you are facing, on any given day, economic challenges, it’s very hard to cut back any pension arrangements that you might have. Basically what we try to do is to encourage our subsidiaries to do DC not DB, if they do anything at all.”
He adds that Microsoft tends to stay away from any pension model where the company can be held responsible for any liabilities.
“In most cases we are in favour of a model of deferred compensation where the company only functions as a legal entity ensuring that the preconditions for a deferred salary benefit are in place. We don’t provide any additional finance to the employees by way of contributions. I think this is a fairly typical approach in the IT market.”
Another IT multinational, which prefers to remain anonymous, has approximately 2,000 employees in Europe, working in both sales and marketing and manufacturing/ application.
The group’s new European head of compensation and benefits (C&B) has been handed the task of harmonising pension and benefits arrangements around Europe, where possible, following a legacy of somewhat ad hoc country arrangements.
The manager explains that the group’s philosophy is to be ‘at market’ in terms of benefits for most, if not all the countries where it operates, and to have one ‘prime’ benefit in each country. “This prime benefit can differ from country to country depending on what is most important for the workforce in the local market. “It could be healthcare or pensions or whatever, although in most countries the trend is to move towards pensions as the biggest benefit, which is interesting because there is a relatively young workforce in the IT industry and people don’t care so much pensions.”
Core benefits for the group include disability, death, pensions, healthcare, and long-term secure leave, but as the C&B manager explains, pensions is the most important part of this in terms of the amounts of money managed and complexity of arrangements.
“We look at whether we run a DB or DC pension scheme according to the country specific legislation.
“If there is a DB pension scheme in place and it is working well and providing a good level of retirement then that’s OK. But, if there is a shift in the market towards DC schemes then we would try to introduce a DC or hybrid pension scheme.”
Citing examples from some of the company’s main European markets, the C&B manager explains, for example, that in France the state pensions pillar is backed up by a DC scheme that the company implemented several years back.
“What’s good is that in France most of the time DC top-up schemes are only available to managers. With us it is open to all employees, no-one is excluded.”
Contributions to the DC plan are split 50/50, although, as befits a multinational, nothing is ever quite so straightforward.
The group has two operations in France; a French subsidiary where contributions are 1.75% from employer and employee, and a European headquarters where the DC arrangement is slightly more generous at 3% each. “They are the same sort of scheme but the level of contributions is higher for the European HQ employees. We want to change that though and harmonise the system. I’m also now starting to look at this arrangement and think where we might have some kind of lifestyle /managed investment part or maybe some kind of employee choice as to where they want to invest their pension assets. It’s an issue of flexibility and I think its quite good for employees to know that they have some kind of control of their pension assets.”
Conversely in the Netherlands employees are covered by a defined benefit (DB) pensions arrangement.
The C&B manager comments: “It’s a generous arrangement that works like a kind of book reserve cover, which is reinsured.
“We are under pressure to change from our corporate finance department because when they see the numbers involved they go crazy! I’d like to move to something different but we haven’t decided what yet.
“This is certainly one of the things that is on the agenda this year and I believe that it will be much more complicated than changing the French system for example.”
The manager is unsure whether the corporation will seek to transfer contributions in Holland towards a DC type arrangement, or simply close the DB plan to new entrants. “This is the kind of answer the US parent will be giving to us. Germany is another market where the company has work to do this year. We offer a direct insurance contract but it doesn’t come up to the 4% salary savings provision that was introduced under the Riester reforms. Therefore we are on the cusp of introducing a complementary pensions system in the form of a Pensionskasse.”
The company also recently acquired a new subsidiary in Germany where employees had no pension arrangements. This is a situation that it is trying to redress: “We want to complement what we are providing to our existing employees and provide the same for these new employees, even though they will still be a separate company.”

Nonetheless, the German pension arrangements are funded by employee contributions only: “We want to offer employees the opportunity to save within the tax breaks that the government offers. However, we don’t have much of a budget, so there are no company contributions for the time being. We do already provide a number of other initiatives in the compensation and benefits area in Germany though.
On the issue of mobile employees around the continent, the C&B chief says that the number of workers affected is too small to warrant any pan European pensions vehicle.
“Also the current legislation is too difficult, but I personally would be very interested to see what the final developments are at the European level.”
For the time being, changes in local cultures look like being enough of a task. “Getting information is already a big step and not as easy as I would like. Many of the systems that we have at present were introduced and retained and the providers that were selected at the start would come back every three or five years and tell us what they gave us and for how much, and we would tend to say ‘OK’.
“This is the first time that we are looking at this harmonisation issue seriously. My task is to get an understanding of what is going on in the organisation, because to be honest I don’t think the company had that at a global or regional level – at least not in Europe.”