HEALTH WEALTH CAREER

2016/17 ASIA TOTAL REWARDS CONFERENCE

COST OPTIMIZATION & TALENT RETENTION

FLEXIBLE BENEFITS

For Church & Dwight Internal Use Only

SHANGHAI SEP 22-23
HONG KONG SEP 26-27
SINGAPORE SEP 29-30
 Agenda

Introduction
For Church & Dwight Internal Use Only

Evolution of Flex

Effectiveness of Flex

Breakout Discussion

Case Studies

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 2

2016/17 ASIA TOTAL REWARDS CONFERENCE

INTRODUCTION TO

For Church & Dwight Internal Use Only

FLEX
 Did you know?
D ITDOYTOAUL KR
NEOW
M UT H E R…AT I O N – T H E F U L L P I C T U R E
NAT

Yet only 7% of employers interact to employees about their benefits

1 Benefits cost usually amount to 25% - 30% of total payroll cost
For Church & Dwight Internal Use Only

on a monthly basis

Yet rewards packages are undervalued by an average of 5.4%

2 Benefits package are worth 10% - 15% of employee’s total pay
every year

Increase in flexible working, options to buy days off, and

3 travel/health insurance are among top
employees want
5 benefits

3 in 5 people rate perks in their top consideration

4 before accepting a job

Source: The rise of flexible benefits – NGA Human Resource, May 2016

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 4

Flexible Benefits – defining the scope

Any arrangement by employers to enable employees to

make choices on benefits offered to suit individual

For Church & Dwight Internal Use Only

What? needs

One Size Fits One

Ta l e n t Market
Retention Competitive

Why?
Why not?
Ta l e n t Cost
Attraction Savings

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 5

 Why choice is important
Life Keeps Changing & So Should Benefits
RETIREMENT 65 20
ENTER WORKFORCE
• Cash (Study loan)
• Pension
• Vacation
• Medical 50
For Church & Dwight Internal Use Only

30
• Car
• Work/Life Balance
LIFE • Career & Training

YOUNG PARENTS STAGES MARRIAGE

45 30
• Coverage for Dependents • Home Purchase
• Life & Medical • Spouse Coverage
• Work/Life Balance • Career Progression
35 40
• Work/Life Balance

Younger Employees Overwhelmingly Looking for Benefits Flexibility

Agree that they
would like to reduce
58% value of some 70% 59% 48% 38%
YES benefits they receive YES YES YES YES
and increase value of
others
O V E R AL L 1 8 - 3 4 3 5 - 4 9 5 0 - 6 4 6 5 + Y R S
Source: Inside Employees’ Minds Survey 2015, Mercer

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 6

What attracts employers to flex?
DRIVERS
• •
Create employee awareness on Total
Remuneration
• Meet employees’ needs as workforce
becomes more diverse
• Long term cost containment
• Talent attraction & retention
• Competitive differentiation –
Strengthen branding
• Tax advantages
• Harmonize benefits across entities or
during M&A
• Facilitate Benefits program change
2016/17 ASIA TOTAL R EWAR DS CONFER ENCE
BARRIERS
For Church & Dwight Internal Use Only
Various Costs (e.g. flex admin costs/
High claim cost)
• Employees’ ability to understand flex and
make appropriate decisions during annual
selections
• Admin complexities & workload
• Lack of infrastructure support
• Lack of market prevalence
• No tax efficiency (fringe benefits tax)
7
 Classical vs flex structure
Additional cash top up EMPLOYEES

Core Benefits • Carry on existing benefits

For Church & Dwight Internal Use Only

Benefits • Order new benefits through sacrificing

Flexible Benefits from current benefits

• Create more flex budget through salary

sacrifice.
CLASSICAL STRUCTURE

Salary Sacrifice
FLEXIBLE STRUCTURE • Spend additional budget on new
Option benefits

EMPLOYERS
Compensation
Compensation • Effective use of benefits budget

• Control long term benefits costs

• Create awareness with total rewards

statement

8
2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 8
Typical flex plan types PLAN
C
PLAN PLAN
A B
FLEX ITEMS

` OTHERS

For Church & Dwight Internal Use Only

LIFESTYLE
$/FSA

WELLNESS
$/FSA

$/FSA HEALT H

Core-Plus Flexible Spending

Traditional Modular
(semi-flexed) Account

 Same benefits for all  Top Up for Desired  Selection of fixed  Company provides
employees Benefits supported Benefit Modules, pre-tax
 Easily understood – by flex dollar (supported by flex dollars/credits;
no choice to make  Employees can top dollar) employees can spend
up for desired  Employee can select the credits as per
 Limited flexibility
benefit items from one of the packages, their interest, to
the given list. supported by purchase different
spending flex credit. benefits items from
2016/17 ASIA TOTAL R EWAR DS CONFER ENCE approved list. 9
 Typical core benefits OPTIONAL
ADD-ON
Group Term
Group term Hospitalof Hospital Other
Choice Medical
life/PA
Life/PA Insurance
Plan Insurance
Outpatient
For Church & Dwight Internal Use Only

insurance
insurance Supplementary Major Medical
Minimum sum assured for Critical Illness
Multiples
employeeof base monthly salary or Higher or lower hospital plans
fixed sum assured Disability Income
May be multiple of salary or fixed Basicdependants
Add hospital plan (eg 4-bed) for Basic medical outpatient plan for
May include dependants
amount employee employee
Vision

Dental
Dental Buy/Sell
Health Retirement
Health Screening Annual Leave
Screening Savings
Maternity Basic employer contribution
Additional employer/employee
Typically 3-5 days’package
up toscreening
Basic health accrued toward private supplemental
contributions toward private
Various dental / health screening / annual leave
for eligible employees retirement scheme
supplemental retirement scheme
maternity plan options for (Defined Contribution)
Fully flexed or basic dental plan Additional employer contribution
employees & dependents Conversion rate package
Basic maternity of 100% daily
for Basic employer contribution
for employees toward short term savings plan
salary
eligiblerate
employees / spouses toward short term savings plan

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 10

2016/17 ASIA TOTAL REWARDS CONFERENCE

For Church & Dwight Internal Use Only

EVOLUTION OF FLEX
 Prevalence of flex around the world
EURO PE
AM ERIC A S
UK Canada
Netherlands APAC
For Church & Dwight Internal Use Only

Czech Republic
Germany U.S.
Hungary
Spain South Korea
Turkey Mexico Colombia
China
Philippines
Varies significantly by region Reason for not providing choice
Thailand
There is
63% 62% Legislation
no
Singapore We do not does not
advantage
agree with permit it,
in letting
EUROPE

the idea of 8%
A PA C

employees
26%
Australia allowing do so,
employee 19%
19% ` 19% choice,
11% 11%
Our
The cost employees
Strong flex market
Already Not offered, Not offered, of such have not
offered considering not Emerging flex market programs asked for
considering are too choice,
high, 60% 36%

Source: Mercer Global Trends in Flexible Benefits, 2011, 2014

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 12

 Slow pick up in flex across APAC
Growth in APAC Flex Prevalence (2011 vs 2015)
16%
2011 2015
14%
Highest Growth

For Church & Dwight Internal Use Only

12%

10%

8%

6%

4%

2%

Country0% KR SG PH TH ID CN TW IN HK MY JP AU NZ VN
2015 14% 12% 11% 6% 6% 6% 5% 4% 3% 3% 3% 2% 0% 0%
2011 8% 8% 0% 10% 0% 3% 5% 0% 0% 0% 0% 0% 0% 0%
Change 6% 5% 11% -3% 6% 3% 0% 4% 3% 3% 3% 2% 0% 0%
Count
58 114 28 49 33 141 73 51 119 62 40 45 10 23
(2015)
Note: Survey results may be affected by data pool over the years.
.
Source: Mercer-HRBS Employee Benefits Survey 2011, 2015
.
2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 13
 FSA more popular in SG and Korea
Singapore (14) South Korea (7)
FSA more FSA more
Production Worker 50% 50% 50% popular 100% popular
General Employee 29% 36% 71% 33% 67%
For Church & Dwight Internal Use Only

Professional 29% 36% 71% 33% 67%

Manager 29% 36% 71% 29% 71%

Function Head 29% 36% 71% 33% 67%

Company /
Business Head 33% 44% 78% 40% 60%

Core Plus
more China (8) Hong Kong (4) FSA more
popular popular
Production Worker 67% 17% 17% 100%
General Employee 71% 14% 14% 25% 25% 100%
Professional 83% 17% 25% 25% 100%
Manager 63% 13% 25% 25% 25% 100%
Function Head 67% 33% 25% 25% 100%
Company /
Business Head 40% 20% 40% 25% 25% 100%

Source: Mercer-HRBS Employee Benefits Survey 2015

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 14
SG: FSA credit almost doubles for family
Flex Credit Amount - 2012 vs 2015 (median)
2,500 2012 employee (single)
33% jump in flex 2015 employee (single)

For Church & Dwight Internal Use Only

credit provision for 2,000
2015 employee (family) -additional
Professionals
employees (single)
1,500 1,000
850
555
700
1,000

1,072
1,000
500 1,000 1,000 1,000
750 855
700
517 650
0
Top
Singapore (SGD) Year Management
Top Management Management Professional
Professional Staff
Staff Direct
DirectLabour
Labour
Management
Total amount of flex dollars/ 2015 1,000 1,000 1,000 855 650
points allocated per employee
per year 2012 1,072 1,000 750 700 517
With Family ( X employee) 2015 2x 1.9 x 1.6 x 1.8 x -

Source: Mercer Benefits Monitor 2012, 2015

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 15

 Dental continues to top flex item in SG
Singapore (12) 2015
Benefits covered under Flex Employee Spouse Children
Dental 100% 33% 33%
TCM^ 75% 25% 25%
Clinical 67% 25% 25%
For Church & Dwight Internal Use Only

Medical Check-up 67% 33% 33%

Optical 67% 17% 17%
Holiday Perks 58% 17% 17%
Training Courses 50% 8% 8%
Hospitalization 42% 17% 17%
Life Insurance 42% 17% 17%
External Club 42% 0% 0%
Education Assistance 42% 8% 8%
Maternity Benefits 33% 17% 8%
PA Insurance 33% 17% 17%
Social Recreation 33% 0% 0%
Major Med & Critical Illness 25% 8% 8%
Travel Insurance 25% 8% 8%
Annual Leave 8% 0% 0%
Car Program & Car Allowance 8% 0% 0%
Long Service Award 0% 0% 0%
Share Purchase Plan 0% 0% 0%
^TCM = Traditional Chinese Medicine Source: Mercer-HRBS Employee Benefits Survey 2015

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 16

Fast flex growth in SG manufacturing
29 consistent
38% 45% 55% 55% companies surveyed
YES YES YES YES

over 4 years.

For Church & Dwight Internal Use Only

2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5

Prevalence of Flex Ben Items - 2014 vs 2015

100%

80% 2014
2015
60%

40%

20%

0%

Source: Singapore High-Tech Manufacturing Industry Survey 2015

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 17

 FSA & Lump Sum are prevailing
Mode of Provision (% of Co.) Type of Max Limit (% of Co.)
Core Plus Modular FSA Lump Sum Only 78%
Separate Limit for Single Employee
17% 6% 83% 17%
and Employee + Family
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.
Others 11%

Average Limit for Flexible Benefits

1,400 Company Head Function Head
Manager Professional / Supervisor
1,200
Limit Per Year (in US$)

General Employee Production Worker

1,210
1,210
1,089
1,089
1,000
886

881
800

804
804
781

737
737
705

600
605
605
589
589

572
498

480

400
418
367

200

-
Lump Sum Single Employee Employee and Spouse Employee, Spouse and
Children
Source: Singapore High-Tech Manufacturing Industry Survey 2015

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 18

China – Medical benefits tops flex items
China (8) 2015
Benefits covered under Flex Employee Spouse Children
Medical Check-up 50% 38% 38%
Note that China’s
Clinical 38% 63% 63%

For Church & Dwight Internal Use Only

flex prevalence is
Hospitalization 38% 63% 63% only 6%.
Major Med & Critical Illness 38% 50% 50%
Traditional Chinese Medicine 25% 50% 50%
Maternity Benefits 25% 25% 25%
Annual Leave 25% 0% 0%
Life Insurance 13% 13% 13%
Dental 13% 25% 25%
Optical 13% 25% 25%
Social Recreation 13% 0% 0%
Long Service Award 13% 0% 0%
Holiday Perks 13% 0% 0%
Share Purchase Plan 13% 0% 0%
Training Courses 13% 0% 0%
Education Assistance 13% 0% 0%

Source: Mercer-HRBS Employee Benefits Survey 2015

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 19

 2016/17 ASIA TOTAL REWARDS CONFERENCE
For Church & Dwight Internal Use Only

EFFECTIVENESS OF FLEX
Benefits ranked low to attract/retain
Top Attraction Drivers Top Retention Drivers
Rank Singapore Hong Kong Shanghai Singapore Hong Kong Shanghai
Basic Basic Advancement Advancement Advancement Advancement
salary salary opportunities opportunities opportunities opportunities
1

For Church & Dwight Internal Use Only

Company Company Basic Basic Variable cash Basic
branding branding salary salary salary
2
Advancement Variable cash Company Variable cash Basic salary Flexible working
opportunities branding environment
3
Variable cash Advancement Benefits Company Company Company
opportunities culture culture culture
4
Company Company Flexible working Benefits Flexible working Leadership
financial stability financial stability environment environment
5
Benefits Benefits Variable cash Company Benefits Benefits
financial stability
6
Source: HRBS Survey on Benefits for Retention, Mar 2015

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 21

 Flex more effective in developed nations
Which benefit has been effective for you in employee attraction/retention?
Emerging Countries Developed Countries
Benefits
Attraction Retention Attraction Retention
Car / Car Allowance 4 8 11 8
For Church & Dwight Internal Use Only

Transportation 7 9 10 10
Housing Benefit 1 3 3 6
Defined Contribution Pension 10 5 7 7
Defined Benefit Pension 13 11 2 2
Insurance 8 10 9 12
Medical Benefits Insurance to Employee 2 1 1 1
Medical Benefits Insurance to Employee & Family 3 4 4 3
Flexible Spending Account 12 13 6 5
Annual Leave 6 7 5 4
Employee Training Development 5 2 12 9
Employee Education Benefits 9 6 8 11
Children Education Benefits 11 12 13 13
Developed=Hong Kong Singapore Macau South Korea Australia Netherlands
Emerging = China Malaysia Vietnam Thailand Philippines India Bangladesh
Source: HRBS Survey on Benefits for Retention, Mar 2015

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 22

 Is flex effective in reducing cost?
Global respondents 8% 22% 42% 20% 7%
Cost is significantly lower
AsiaPac 19% 26% 28% 19%
9% Cost is somewhat lower

Cost has been largely unaffected

For Church & Dwight Internal Use Only

Canada 9% 31% 39% 19% 2
Cost is somewhat higher
Europe 5% 23% 51% 16% 5%
Cost is significantly higher

Latin America 11% 13% 52% 20% 4%

Employer’s POV: Has flex met objectives? Employee’s reaction to flex

More negative than
Don't
positive, 1%
know/can't
measure, Evenly mixed between
Strongly positive and negative,
13% Strongly
Disagree, 16% Strongly
Agree, 19%
0% Positive,
28%

Disagree,
5%

More positive
Agree, 63% than negative, 55%

Source: Mercer Global Trends in Flexible Benefits, 2014

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 23
 Flex among rising benefits cost
72% of respondents estimate benefit costs at >10% of total payroll.
Change in Benefits Cost (Past 3 years) Benefit Items to be Adjusted Next Year

3% 0% 7%
For Church & Dwight Internal Use Only

Health/ Medical 72%

Insurance 58%

Allowances 43%
36%
Flexible Benefits 41%

Leave Benefits 39%

Car Benefits 32%

53%
FWA* 31%

Training 23% Cost Intensive

Substantially Increased
Benefits
Increased Supp. Retirement 19%
No Change
Decreased 0% 20% 40% 60% 80%
Substantially Decreased * Flexible Working Arrangements

Source: 2016 APAC Benefits Pulse Survey

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 24
Cost control practices: Health/Medical

For Church & Dwight Internal Use Only

R AN K / Implementing Caps Reducing Premium Provision Of Healthy Implementing Co-
& Limits On Costs Through Pooling Lifestyle Benefits & payment & Front End
Y E AR
Benefits Spend & Group Schemes Wellness Programs Deductibles

2016 1 2* 2* 4

2015 1 3 2 4

2014 1 3 2 4

*Note: Equivalent prevalence/ranking.

Source: 2016 APAC Benefits Pulse Survey

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 25
 Key to Cost-Efficient Flex

Benchmark to market
For Church & Dwight Internal Use Only

Add limits/deductibles/co-insurance

Co-pay for in/out-patient expenses

Adopt defined contribution approach

Remove luxury coverage

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 26

2016/17 ASIA TOTAL REWARDS CONFERENCE

For Church & Dwight Internal Use Only

BREAKOUT DISCUSSION
 Breakout Discussion
I NTYOOTUARLOR
WEN MGU
RN EPRSAT
OU A S–E T
, PILOE N SHP EEN D
F U3 0L LM IP
N ISCTTOUDRI E
SCUSS THE FOLLOWIN G:

1 Does your company implement flex? What was the objective?

For Church & Dwight Internal Use Only

2 What are the challenges faced during/after implementation?

3 How successful was your flex implementation? How do

you measure the success?

Is flex effective in reducing cost and improving

4 attraction/retention?

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 28

2016/17 ASIA TOTAL REWARDS CONFERENCE

For Church & Dwight Internal Use Only

FLEX CASE STUDIES
 Case 1 – Core Plus
Client: Global service company
OBJECTIVE
• Reduce/contain costs
• Recognise diverse needs
For Church & Dwight Internal Use Only
and values of workforce
• Recruit and retain key
talent;
• Improve employee
motivation
OUTCOME
• Utilization rate = 85%
• Challenge in communicating
to employees
• Admin outsourced, but
considerable amount of
work still needed
• to review Flex Plan
2016/17 ASIA TOTAL R EWAR DS CONFER ENCE
PL AN DETAIL
• Core Plan (Insurance): Flex Items
Term life, Personal
Outpatient
Accident, Critical Illness, Dental
Hospitalization, Outpatient Optical
Health Screening
• Core plan may be Gym Membership
downgraded. Excess credit Holiday Expenses
Child Care
added to FSA
Children’s Education
Outpatient Medical
• FSA Amount per year Expenses for employee’s
(forfeited at end of the year) parents
• US$ 520 (single) TCM
• US$ 550 (couple) Personal Development
• US$ 625 (family) Group/Individual Insurance
• Employee online access to
view utilization
30
Case 2 - FSA
Client: Global healthcare company
OBJECTIVE PL AN DETAIL
• To provide convenience and • FSA Amount
flexibility for employee to • US$ 1,300 (Prof &

For Church & Dwight Internal Use Only

choose the benefit that suit above)) Flex Items
their needs • US$ 900 (Below Prof) Outpatient
• Limit by item in the past TCM
• Same for all employees Specialist
whether single or family Vaccination
Maternity
Health Screening
OUTCOME Dental
• Utilization Rate close to 100%
• Employees more happy with increase in claimable benefit
• Higher claim cost for company
• Lower level employee stretched to pay first and claim later
• Administration outsourced for efficiency but incurred costs
• Will review cost of benefits if further changes are needed

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 31

 Case 3 - FSA
Client: Global consumer goods company
OBJECTIVE
• Promote wellness with a
limited budget
For Church & Dwight Internal Use Only
OUTCOME
• Utilization Rate = 100%
• Easy to control cost with the
limited credit amount
• Well- received by
employees as the plan
promotes health and
wellness
2016/17 ASIA TOTAL R EWAR DS CONFER ENCE
PL AN DETAIL
• US$ 1,000-1,250, or
US$ 750-1,000/person p.a.
• Contains mandatory
Flex Items
general body checkup
Check-up upgrade
• Credit balance after Fitness club membership
deducting mandatory part Yoga class
can be used on wellness Quit smoking class
courses Tai Chi class
• Balance cannot be carried Other health-related
forward
• Administration outsourced
(for special claims, their
country HRs will be
informed)
• Employees can check
balance on online accounts
32
Summary of cases
Plans with higher FSA
amount and more
flexibility in terms of more
claimable items are better
appreciated by employees
Cost savings to company
via benefits cost optimization
by allowing employees to
choose what they want to
spend on
2016/17 ASIA TOTAL R EWAR DS CONFER ENCE
Utilization rate is high.
Employees are generally
happier than before.
take on additional workload)
High claim cost
of FSA as employees will
strive to fully utilize
credits
For Church & Dwight Internal Use Only
Administration workload
is heavy
(even if outsourced,
company HR will need to
High administration cost
can be a concern
33
 Why flex failed?
• Poor understanding of employee needs
• Employee segmentation
•
For Church & Dwight Internal Use Only

Employee demographics
• Historical claims not properly analyzed
• Disconnect between employee needs and employer perception

• Poor communication during implementation

• Plan communication too confusing/difficult to comprehend
• Inadequate plan education
• Measures to track effectiveness of flex not properly identified
• No follow up post-implementation

• Poor plan design, implementation, maintenance, time &

cost management

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 34

Key considerations on flex

For Church & Dwight Internal Use Only

1 2 3 4 5

Company Employees’ Cost Administratio Design &

Objective & Needs Effectiveness n Communication
Strategy Effectiveness
Economies of
Support from top Satisfaction & scale Simplicity
management communication In negotiation Workload
with service
provider
No worse-off Guided decision
policy for new Willingness to Cost
plan absorb increase
in claim/admin
cost

2016/17 ASIA TOTAL R EWAR DS CONFER ENCE 35

For Church & Dwight Internal Use Only

For inquiries, please speak with our consultants.

www.mercer-hrbs.com
Inquiry.hrbsasia@mercer.com

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Tel: (852) 3476 3748 Tel: (65) 6398 2430 Tel: (86) 21 6141 6633 Tel: (86) 10 6533 4307
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