By Owen Caterer

Companies need to be more resourceful in boosting employee retention rates. Why not explore company pension programs?

“Staff turnover is crazy! In the last year I’ve had to replace four staff that quit from my six member team and two had only just finished their first year training,” complained Ms Wang, a bank credit analysis team manager. She isn’t alone. China really is a poacher’s market for good staff. Employee turnover in finance and IT industries is estimated to be around 30% per annum. The Amcham business survey regularly ranks staff turnover and retention as the biggest non-government related challenge in business in China. How can companies reduce unnecessary staff turnover? Beyond good management and providing a career, what financial tools are available?

Money isn’t everything

The first myth, probably perpetuated by staff, is that a salary raise is all that is required for loyalty. Yes, cost of living is increasing and salary for good staff needs to be competitive. But increasing someone’s salary won’t prevent a poacher from offering another 10% above your already generous offer to lure them away. Salary is similar to a short-term bribe. Building long-term loyalty should be the goal.

HR and training consultancies often recommend providing a sense of career and challenge. It’s certainly a piece of the jigsaw, however self-serving the advice, but building a future for employees is not the whole solution. In many industries and sub-sectors it isn’t enough since promotions and challenges are already very quick and training programs are provided. Two of Ms Wang’s staff in their multinational bank left mere weeks after promotions. Pay raises and on-going training programs were offered continuously.

Prime examples

The solution is already out there in many senses and to understand what it might take, managers should take a page from the truly global multinationals. If we examine the expatriate packages from Proctor and Gamble, Unilever, Johnson & Johnson, Coca-Cola and the rest with their comprehensive health, life and pension benefits for expatriates, we see that they are very good at creating an environment and a system of benefits for employees that is difficult to leave. Can this be done in China?

Absolutely, via Chinese insurance companies. Let’s give two examples that can help provide long-term staff loyalty. Social security provides basic health coverage to a basic Chinese hospital, yet still requires most treatments to be paid. Comprehensive heath insurance can provide a much higher level of coverage that is difficult to leave. Many people, particularly mothers caring for children become accustomed to attending clean, orderly wards rather than jostling with crowds in public hospitals. What’s more, changing health policies can be difficult or expensive since coverage for pre-existing conditions can be lost. Don’t underestimate the powerful effect of a mother’s fears for her family’s health on employee loyalty.

Secondly, a less-understood benefit is the ability to structure a company pension incentive program with staged delayed benefits. Overseas share options with vesting periods are common, but in China an extra pension package for key staff can be structured for employees. It can provide access to say, 20% of contributions and earnings after 3 years and 60% after 6 years based on the company’s requirements. Early departure means forfeiting benefits, providing another good reason to hang around.

Assessing options

Before you jump in and talk to a provider it helps to understand the environment. Insurance benefits of health, life and pension incentive programs have gone through a Cambrian explosion over the last decade. Although many product classes are underdeveloped by overseas standards, the range of products varies considerably with some very good to very average products available.

Driving this has been the number of overseas insurance companies that have entered China to compete with the big 5 Chinese insurers. There are more than 100 different insurers with almost 50 foreign-funded or joint ventures alone, each with its own range of products. Like searching any forest for the right tree, it is worth finding experienced consultants based in China or multinational consultancies like Mercer and Aon.

Hidden costs, real benefits

At this point, many managers are probably thinking, “Yes, but am I really saving money overall? It sounds like a pretty handy investment to be considering.” The true cost of losing key staff members is often underestimated by most businesses until it is too late. Lost opportunities in particular are usually ignored, while the focus is generally given to lost productivity, training and replacement costs. Lost opportunities for the business can be quite significant for key managers or sales managers, in some cases in the millions of dollars in revenue that fails to arrive. In total, Mercer estimated costs to be around 100% of the annual salary of a mid-level employee up to 150% for senior or key positions. That is certainly quite a cost.

Company-issued press releases that contain corporate exhortations about how “they care for their staff” are often met with widespread cynicism. However impossible it seems for an inanimate object to actually do so, a good manager can put together a package that will make staff feel the company sincerely cares. That’s the sort of thing that breeds true loyalty.