In 1996, US multinational, Nike, chose Hilversum, in the Netherlands, as the base for its European operations. The Nike’s European headquarters (EHQ) have more than 600 employees who supervise the company’s retail marketing and sales business in 17 countries across the continent. The last few years have seen a significant increase on the company’s presence in Europe.
“We are present in all Western European countries and growing towards Eastern Europe,” says Jon Kemper, tax and compensation manager at EHQ pension funds with assets of DFI20m (E00m).
In terms of retirement, Nike turns its global philosophy into local strategies. “From here we only manage the pension fund for the EHQ’s employees,” says Kemper. “Each country has its own retirement plan which are different depending on state pension plans and so on.”
The EHQ pension fund follows a defined contribution (DC) model in contrast to the UK, for instance, where a defined benefit (DB) operates. “The general trend within the company is to offer DC plans and most of the new pension plans which are currently being set up are DC,” says Kemper.
With an average age per employee of 32 years and with a ‘the sooner you start the better’ approach, the EHQ’s employees are covered under a very flexible pension plan, which give them more freedom to design their own retirement strategy. “They have the possibility to choose between seven different portfolios offering different risk profiles,” says Kemper. The high risk portfolio, with 60% of assets invested in equities, is usually chosen for the youngest members of the scheme who can always change their portfolio if they are not satisfied with the way it is working.
“I believe we are one of the first pension funds within Holland offering this kind of DC plan and it’s been quite a big step,” says Kemper. “To be able to run this system, communication and member education are very important.” The pension fund board, with two representatives from the company and two from the workforce, has been focusing on this issue, distributing comprehensive booklets and CDs with specific information on how the system work among the scheme members. “In such a flexible plan it’s crucial for members to be aware of the different possibilities and choose the best one according to individual circumstances,” he says.
In terms of investment, the pension fund uses external managers and consultants who discuss, with the board, the design of portfolios. “After three years of running the pension fund it is just now that we are beginning to see whether the investment strategies in used are the most appropriate, and we are getting to the point where we can say if the managers are doing a good job or not,” Kemper says. Recently the board has been discussing with the managers the possibility of making changes in the portfolios.
“Recently, we’ve seen some progress in terms of asset allocation, but we believe that some further changes are needed,” he says. “Although the employees are the ones that choose the risk they want to take, it is the board’s responsibility to make sure that those portfolios are doing well, and introduce changes when necessary. Our fund is based on a shared responsibility between employer and employees.”
Regarding mobile employees, the general rule is to keep them in their home country’s pension plan. “We have a lot of people who have been transferred over here with short-term contracts and they are not part of our pension fund,” he says. “But there is a very specific group of people who could probably stay here for longer, if not permanently, who represent one of our major concerns right now,” Kemper says. “We are trying to find the best solution for them to get some kind of guarantee on their pensions.” One of the alternatives would be to establish an offshore pension fund which allowed those employees to keep their pension always in the same place, without taking into account the country they are working in. “This could help them to avoid all the taxation involved when moving from country to country,” he says. This plan would be especially targeted to those moving around Europe, in some cases with their families, and will help them to get them to get a better deal on retirement. Developing this system is one of their main short-term plans which will also include a greater harmonisation within the European region, although an world-wide strategy is unlikely to be achieved.
“I can’t see a company-wide strategy being implemented,” he says. “There will be more and more DC plans but in terms of investment, for instance, the European approach is different than the one we have in the US where there is a greater interest in the management of investment from within the pension fund. We rely on the work done by the asset managers and we focus more on everything to do with administration and services improvement.
“We would also like to see more pension funds being created in each European country instead of using insurance companies,” Kemper says. “We believe it’s better to give people returns on investments rather than use interest rates of 3% or 4% like insurance companies do.”
‘Life Trek’ benefits
The LifeTrek programme is Nike’s approach to what is known as ‘cafeteria plans’ or ‘flex plans’. The programme affects all Nike’s US employees, even though some of the services are only available for full-time workers, and addresses all the big issues concerning employee’s benefits. Through this system, the company provides staff members with a number of credits, in addition to their salary, which individuals can exchange for benefit plans based on personal preferences.
The benefits include medical coverage, paid time off and paid holidays, short and long-term disability protection, life insurance family aid – from education to adoption assistance – and different saving programmes.
If the credits given to the employee are less than the amount needed to access a particular service, the employee has the option to pay the difference, and if they are greater than the cost of the benefit plan they get cash back.
The retirement benefits include a profit sharing retirement plan, fully funded by Nike, and two plans where the employer matches the employee contribution. There is also a stock purchase plan where the company pays transaction fees.
For those not interested in the investment field, discounts at Nike stores, dry cleaning services and beauty treatments are also available.