Fastest Growing Private Companies: What you should know about expansion to the UK, Part IV

Fastest Growing Private Companies: What you should know about expansion to the UK, Part IV Expanding across the globe is an important growth strategy for many companies – and the United Kingdom is a highly desirable place for businesses to pursue new opportunities. Unfortunately, it isn’t quite as easy as opening up an office; every region has it’s own set of challenges, and the UK is no exception. To support a successful expansion, human resources must address several key issues. Don’t wait until your CFO announces he’s just hired new people in UK – prepare now so that you’ll be ready. That day might come sooner than you think. Let’s look at two areas you need to consider: Employee Benefits, and Property and Casualty. The choices you make in each area depend on a number of factors, such as:

• Your industry
• Your overall size
• What types of employees you are hiring
• Your long-term expansion strategy
• Your company’s benefit philosophy

As we discuss some of the options below, remember that what you decide will be influenced by all of the factors above, and more. Four Options for Employee Benefits in the UK There are four main ways to offer benefits to employees in the UK. Here is a broad look at each one, and the pros and cons associated with them.

When an employer opts to provide employees with cash in lieu of benefits. Pros

• Easy to manage
• Easy to facilitate after initial set-up

Cons

• Not tax efficient if there are potential tax breaks for the employer or employee (varies by benefit)
• No guarantee that recipients will use the money to purchase private medical insurance, income protection or life assurance

When an employer asks employees to secure their own benefits, and reimburses them for costs incurred. Pros

• Guarantees employee is obtaining benefits

Cons

• May or may not be tax efficient, depending on type of benefit and whether or not the benefit is eligible for any tax relief
• May not give employer control over the level of benefit or plan design
• May be cumbersome to administer, obtain, and pay invoices
• Possibility of managing multiple plans (e.g. several policies per employee)

When an employer secures a local policy in the employee’s country. Pros

• Employer-controlled plan design
• Employer/employee could be eligible for any available tax breaks
• Medical underwriting may be waived by a population large enough for a group plan (i.e. Medical History Disregard private medical plans and higher free-cover limits for income protection and life assurance policies)

Cons

• Benefit plan set-up takes time and money to setup and manage

1. Global Insurance Products

When an employer secures a global policy that covers all employees regardless of locale. Pros

• Employer controls benefit plan design
• Potential for multiple plan designs
• Easy to administer and enroll employees and dependents
• No medical underwriting for groups larger than 20 employees across any number of countries. (i.e., 1 employee each in 20 countries – typically, this would be 20 individual plans).

Cons

• Generally not tax efficient
• May or may not be admitted insurance
• Generally more expensive

Property + Casualty Considerations in the UK While non-admitted is permitted in the United Kingdom, coverages such as Employers Liability and motor third party liability are compulsory, and must be purchased by law. Depending on your exposure, you may also want to consider other coverages. For example, because the UK is a major international hub, it is also a target for terrorism. The UK Terrorism pool will cover any property and business interruption losses resulting from terrorism. But in order to access the local Terrorism pool, a local property policy must be in place. This is just one of several things to consider on a local level. Your needs are unique Keep in mind that every situation is different. Depending on your company’s goals and appetite for risk, you’ll want to consider a number of factors before making a decision. Before you start doing business in the UK, you will want your broker to thoroughly evaluate all potential exposures in order to put a comprehensive insurance program in place. This post is meant as a set of general guidelines to help you start thinking in the right direction. We at ABD would be happy to meet with you to provide additional guidance on how you can expand in the UK – or any other country – in a way that makes sense for your company. Understanding the balance between risks and rewards is our specialty, so let us know how we can help.