While many of the problems remain the same, airlines such as German national carrier Lufthansa operate within a different framework for the benefit treatment of international employees.

Lufthansa operates under normal airline treaties. That means we do not have companies outside but we have branches," explains Cologne-based international employee benefits manager Bernd Zander. However, in European countries where it does have a significant staff presence, it has set up its own schemes. "We do not try to export any German standards in general but we look to the market practices in a country," he adds.

As international benefits manager, Zander operates as a sort of internal consultant to overseas management in terms of benefit design, helping them consider the strategic direction of their total compensation packages. In matters of investment, however, final responsibility lies with him. "When it comes to the question of which programme is to be used, whether going through a pension fund or using an insurer, the decision is dominated by us."

The role covers the benefits of 6,000 employees in over 60 countries - though this varies from 1,500 in the US and 400 in the UK to very small numbers elsewhere.

Within Europe the largest scheme outside Germany is a £40m ($68m) UK scheme. In countries where employee numbers are lower insured arrangements are used.

Zander's approach to benefit provision is two-pronged, involving an assessment of the type of system available in any country and of the needs of employees through an examination of factors such as social security provision. The second prong is to look at what Lufthansa's competitors are offering.

"By competitors we mean the circle of airlines that we compete with. We also look to multinational companies in general. From these corner stones we try to find our solution." Research is normally done by Lufthansa itself, though for specialised projects consultants are engaged.

In terms of benefits, Zander places the UK in an Anglo-American grouping which also includes the US, Canada, Hong Kong, South Africa and Australia. In this group the company uses funded schemes, mostly under a defined benefit design. However at least for smaller funds a move to defined contribution will be considered in the near future.

Other countries with fewer staff are brought under the German provisions. "For countries in Africa and South America where people get a simple flat amount according to a service-related formula then we do book reserve. That means we use the German tool."

He does not believe that in the area of benefit design, Europe will see any harmonisation because "there can be no harmonisation of social security for the next 20 years".

In terms of investments, there will be scope for change. "The euro will provide us with new possibilities in terms of investments whilst Germany will have to open to the idea of pension funds over the next 10 or 15 years."

He also believes that progress will be made in providing for expatriates and third country nationals (TCNs). "We do foresee that in Europe things are getting internationalised. We should have an increased possibility of keeping TCNs in the pension arrangement of their home countries. Whether we use TCNs or not is not dependent on the provisions we have available for their retirement."

Part of the solution has been to make extensive use of insurance pooling arrangements. Lufthansa, says Zander, has a controversial reputation amongst insurers because it makes use of four insurance pools. "The background is quite simple. As we sometimes have a local population of 20 or 25 employees only, we cannot place much emphasis on where the contract is underwritten. We do accept the preferences of local management as long as the policy matches certain standards."

"I think we are better off if we have the choice between several network alternatives. In addition, as an airline flying to 80 countries with employees in about 60 countries you have to face the fact that the networks do have regional biases."

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