LSAs are the most sought-after employee benefit, meeting employees exactly where they are, wherever they are, globally.
LSAs are the only global benefit that can offer inclusive equalization of reimbursements regardless of geographical location. These ultimately flexible and purpose-built plans help smart companies positively impact business goals and outcomes.
In Session 3 of the Espresa Discovery Series on LSAs, we will cover:
– Equalization and inclusion of reimbursements across the globe
– Localization in nearly every language and currency
– The potential of Purchasing Power Parity
– Multi-region payroll support and integration
– Global support for employees and employers
– Real-time analytics to ensure program transparency and success for leadership
Discover immediate and actionable ways you can create the most wanted new employee program. Watch the virtual forum video and/or read the transcript below.
Discovery Series Session 3: Lifestyle Spending Accounts (LSAs) as a Global Benefit, Session Three: Transcript
(Modified to remove superfluous language for readability)
Welcome to part three of our LSA education series. First, we’re going to do a quick recap of what an LSA is. Then we’ll look at LSAs from a global standpoint, that’s really going to be the focus of our discussion today is, how do we drive global LSA programs to ensure that they’re equitable and inclusive for your workforce. How do you budget for the different regions? Obviously, there’s a lot to having a global program from a currency exchange perspective. How do we support that in a way that’s both scalable and not a large administrative burden? And then lastly, how do we localize these programs to ensure relevance for every one of your employees, again, to ensure that it’s inclusive?
What is an LSA? An LSA is simply a Lifestyle Spending Account, and this is the nomenclature that has been adopted across the industry by many consultants and brokers, but also the majority of our clients. But by no means is that the only thing that they’re referred to. Some companies call them a reimbursement program, or a stipend, or an allowance. Some call them a perks program.
So it’s really up to employers to determine what you want to call your LSA program. But the key to these programs is that it’s a predetermined amount of budget that your employees have, based on a unique plan design. And I say a unique plan design because, LSAs are incredibly flexible, and they’re personalized to the wants and needs of each individual company.
So some of the designs that are very, very commonplace when it comes to an LSA are wellbeing, and wellbeing from a physical fitness perspective. So for many years, organizations have provided stipends or full reimbursements for in-person gym memberships. The idea being that a healthy worker is a better worker, it reduces healthcare costs, et cetera. When the pandemic hit, we saw a lot of companies that traditionally had very limited plans, where it was only for reimbursement for gym reimbursements, moved to a more inclusive program where it was allowing for a lot more virtual fitness with plans, such as Peloton subscriptions, or there are amazing providers online in the marketplace, like a Les Mills, where they’re allowing their employees to use their LSA benefit for those as well.
LSAs are incredibly flexible, and they’re personalized to the wants and needs of each individual company.
But the shift that we’ve seen even more so in the past year or so is, not just looking at physical wellbeing, looking at it from a holistic perspective, people bring their whole selves to work. So in addition to physical fitness, how can we help with things like mental wellbeing, financial wellbeing? How can we help folks that are working from home ensure that they have the appropriate tools that they need to ensure they’re doing their best work? So things like home office setups, ergonomic chairs, and providing work from home stipends for those. Then some of the more traditional plans that we see, things will like commuter transit benefits, are very common in certain geographical locations. Also, employees want to have the opportunity to develop and grow at organizations. And one of the best ways to do that is to provide stipends or spending accounts for learning and development, and education and intuition. And then lastly, on this list, we’re seeing companies provide stipends for adoption and surrogacy as well.
LSAs are the only global benefit that can offer inclusive equalization of reimbursements regardless of geographical location. These ultimately flexible and purpose-built plans help smart companies positively impact business goals and outcomes.
Now, those are a variety of different offerings that we typically see in a plan. But typically what we see is one or two plans, some companies may do three or four, but typically, it’s one or two. And each of those plans has the ability to then have subcategories or pillars beneath them. So, this is one plan, for the purpose of this presentation, I’ll call it the wellbeing plan. This wellbeing plan has $1,000 allocated to it. That’s the budget. And then there are four subcategories within this wellbeing plan. The first is personal wellness. The second, financial wellness. The third, dependent care. And the fourth, the work-from-home stipend. Now, maybe some employees for them, it’s most important to invest in their home office setup. Maybe they’re working from home full time now and they will be for the foreseeable future. And they really need that work-from-home set up so they can be their most productive.
Maybe for other folks, it’s more important for them to have, financial coaching so they can feel confident about their finances. Or for other folks, maybe that’s personal wellness with something like a Peloton or Les Mill’s membership that they can utilize. However, your employees want to use that $1,000, they’re empowered to do so through these four pillars, and then they can submit for reimbursement. Now, I also mentioned some companies have multiple plans. Typically, it is one or two. The key to that though is, plan A, as I mentioned, the wellbeing plan, might have four pillars. Plan B, may only have one offering, in this case, tuition, it’s $500, there aren’t other pillars. That’s strictly up to the company when we do a design. The key is when you have different plans, the dollars cannot be co-mingled between plans. Those are specific budget items for specific plans. So that tuition cannot be used for an ergonomic chair from the work-from-home stipend. Those are two separate plans, two separate budgets.
And one of the key aspects to this is each global region can have its own plan. So if you have a purpose build plan, that’s an LSA, it’s meant to be global, and you can even do regional on a country level if there are different wants from your employees in different areas of the country. This is very, very different than some of your traditional offerings, particularly in the United States, such as HSA, FSA, where it’s basically the same at every single company. It’s very black and white. It’s determined by US tax law, strictly an American concept. And all of those are the same. LSAs do not have to be like that. They’re unregulated. You can do whatever you want with them, which makes them a lot of fun and a great benefit for your employees.
Equalization and inclusion of reimbursements across the globe.
So, because it’s a great benefit for your employees, typically when companies come to us, they have a goal to be the best place to work or have an amazing culture to attract and retain talent. And they want to build a brand that shows that they are a great place to work and that they have this inclusive culture. And typically, what they say when they come to us is, “Hey, our US-based employees have these particular benefits that are country specific like FSA or HSA. And where we’re lacking is on our global offering.” Where we’re unable to give these benefits globally, why don’t we explore more equitable and inclusive plan such as an LSA, because they are also inclusive on a global scale. So we’re going to walk through how we build these amazing cultures and these amazing global plans.
But to build these plans first, you have to consider a few key aspects to ensure that you have a great plan design. So first of all, you have to disguise on your limit by region and by country. What do you want to offer from a budgetary amount to your employees? Next, you have to determine how you’re going to provide support from a currency perspective. You’re probably going to begin by budgeting in… If you’re based in the United States with us dollars, if you’re based in the UK, maybe something like British pound sterling, but once you’ve done that budgeting, how are you then going to do the transformation into the currency support that’s needed?
Localization in nearly every language and currency.
Next on a global program, you need to understand how are we going to support different languages? And there are two important aspects when it comes to language support. The first is having the software in place that supports language. So, when your employees go in, everything’s in a native language, all of the aspects of the plan are in the native language. The subcategories are in a native language. So it’s really, really clear what’s approved, and what is not. The second aspect, which is incredibly important, is the approval process or what the industry calls adjudication, and that’s going through a receipt, approving or declining it. And then once that’s completed, the adjudication process, how are you going to process the payroll on a global scale to ensure that people are reimbursed in a timely manner, all compliance is taken care of, and any pre or post taxation is accounted for as well?
So, the first step in making this global plan is ensuring that the currency is taken care of. And the way we do that here to ensure an equitable and inclusive plan is through, a purchase power parity index, that we partner with the OECD, to ensure that it’s updated on an annual basis. And what we’re looking at, our standard of living costs, specific to items that you typically see in LSA, to ensure everyone’s ability to have an equitable and inclusive plan.
So for instance, if you were budgeting out of the United States and you decided that you wanted to give $1,000 on an annualized basis to all of your employees for this LSA plan, you could do that and then running it through the purchase power parity index, you would easily see, to have the same standard of living in India would be $300, whereas a place like Switzerland, where the cost of living is very high, you would actually have to invest $1,200. Additionally, these local plans default to the purchase power parity index, but we can further adjust them based on local considerations.
The potential of Purchasing Power Parity to meet your workforce where they are, globally.
So, let’s say one country has an onsite gym, and because of that in that country, you don’t want to reimburse for gym memberships, we can take that into account, or maybe you want to get more in that country because, while the standard of living, nationwide in India might be $300 compared to a thousand in the US, maybe you have a small office that’s in a city that has a much higher cost of living than the country does in general, we can take that into account as well and ensure that we’re still providing that equitable and inclusive plan.
And one of the things we see across our client base is that companies that utilize the purchase power parity adjustments are actually saving money while still providing an amazing experience to their employees. So here’s an example of a client of ours that’s actually operating in 13 different countries. They’re investing $1000 per employee based on their US budgeting. So we’ve put that into the PPP index. And what we get out of it is the exchange ratio, what that $1,000 looks like in these other countries, then we multiply that by the number of employees that they have on a globalized scale. And with just under 2,800 employees, we’re seeing just under $2 million invested in this plan. And the reason that’s so important is that, if they were to just give a $1,000 across the board, not put it through the purchase power parity index, they’d actually be overspending by over $800,000 in this plan. And it actually wouldn’t be equitable and inclusive. You’d have some folks in countries getting much more purchasing power than the $1,000 that you’re seeing on the US scale.
Now, looking across our global deployments, there are some companies that really focus still predominantly on the US. Some of these companies are taking a crawl-walk-run approach to LSAs, where they want to start in the United States and take them global over time. Some of these companies have more of a US footprint, or they’re having more of a war for talent in the United States. But we do see about 45% of our clients fully embracing the purchase power parity index. So that’s a great number of folks that are taking advantage of that savings while keeping it equitable and inclusive. And then about 34% of our clients are actually doing customized plans for their international employees. So again, that’s looking at other variables within the benefits program that are provided, and they’re doing customized programs internationally and probably something else in the United States.
So continuing on with our list of key variables to consider when it comes to a global LSA, I’ve mentioned currency support. So how do we support that? Obviously, each country has its own currency, but one of the key aspects that we have to take into account, is an employee submitting in that local currency. And what does that look like? So once a planned allowance is set, it’s run through the purchase power parity index, and then that currency is localized. So here’s an example, again, sticking with India, where they want to invest $1,000, we then convert that through the purchase power parity index to 300. And then the second conversion is into the localized currency of rupees, and that’s 22,300 rupees. For the sake of having round numbers, many of our clients round that to the nearest whole number of 22,000, we certainly can support that. And that’s going to keep it really clean from a bookkeeping perspective where it comes in, and then we can convert it back to US dollars for reporting’s sake, to ensure that your budgeting is very clean.
Multi-region payroll support and integration.
Next, we need to focus on language support. So, employees need to have visibility into the plan in a localized language. If you’re uploading user guides or parameters for approval, that needs to be in their native language, but then once they go through and utilize that, employees need to be able to submit receipts in their local language. So here’s an example of someone using the wellbeing plan to go to a Yoga Studio. This individual happens to be in Japan, they’re going to submit the receipt as part of the claim. It is in Japanese, and the currency is Yen. So you see that here on the receipt. The important part is then that the adjudicators, the person that’s approving this, can review the claim of the receipt within Japanese, ensure that that’s an appropriate amount of yen within the plan. And then based on the parameters of the plan, approve or decline the request. Once that’s approved or declined, the next step in ensuring a very good employee experience on the backend, is to have full implementation and payroll files.
Global support for employees and employers.
So, input needs to come in with the employee’s information, so that the platform that’s purpose built knows what country they’re in, what type of plans they should be enrolled in. And all of that’s automated, and there’s a single sign-on for ease of use for the employee as well. Next is the output, and this is incredibly important on a globalized scale. So, you utilize a payroll file, and each region typically operates on its own payroll cadence. So, you may have a different cadence in Africa than you do in Australia than you do in Canada, that’s completely fine. And you may have a different payroll company in each one of these countries. And in that case, you would generate payroll reports for each specific region, and then integrate them with a payroll system on a localized basis. And a key to this, particularly if you’re a large company, and if you’re global, you probably are, all of this can be automated via API. So once we build out the plan, build out the purpose, build software, all of the backend is automated. So you don’t have to worry about that administrative burden.
Real-time analytics to ensure program transparency and success for leadership.
All right. So with that, we are about 20 minutes in and we wanted to make sure that we had plenty of time for both our poll questions and Q&A. So, folks who want to start typing in questions in the Q&A, either to everyone or to just the administrators, such as myself and Sylvia Flores, we can go through your questions.
Sylvia Flores, Head of Brand, Marketing + Culture, Espresa // Excellent. Thank you so much, Brandon, for your insights. We’ve got several questions that, as you have stated, were from previous sessions that were really important, or that we found were valuable to the audience, and then we’ve got some ones as well. So we have [Rashi], who’s asking, “Is purchase power parity built in, or does our team have to do the calculations per campus or country?”
Brandon Markham // Great question. So one of the benefits of pairing with a third party administrator, as opposed to trying to do this on a homegrown system is, we actually have the purchase power parity index built into our platform. So we default to that, we have 150 plus countries that are built into the purchase power parity index. That’s what we default to. Now, if you decide there are certain countries where you want to manually make changes, we can do that at as well and override the PPP default, so that we can support the needs of your employees. But at no point do you have to go through and determine for a hundred plus countries, what’s an equitable and inclusive budget, we do that for you.
Sylvia Flores // Awesome. And [Chris] is asking, “In looking at implementing an LSA program globally, how much will we increase the burden on my team? Do I need to hire additional resources to manage?”
Brandon Markham // Very good question, Chris, and one that comes up quite a bit. You look at this, how difficult from an administrative standpoint, is this going to be? So, if you do it from a homegrown perspective and try and run it through spreadsheet or something, you will need more people, because you need to support all the languages, all the adjudication, all the localized tax laws, the payroll. Again, if you partner with a vendor that has a purpose built platform, there’s very, very little administration that goes into it. Really, most of the legal work is upfront in plan design. What do you want to offer within that program? Do you want to take a holistic approach? All of that is part of plan design.
Good vendor is going to give you best practices, share what industry norms are, but once that’s designed, it’s really automated. And because a vendor is going to have outsourced adjudication, and do that globally, you don’t have to worry about any of that. So, basically the administrator, all they need to do is look at the reporting and the data. And then if they’re interested, they do have the ability to look at the adjudication process, to see what’s going on there as well.
Sylvia Flores // Awesome. And we’ve got [Natasha], who’s actually from the Virgin Islands, by the way, “We are deploying LSAs in Japan, Korea, and some Eastern European countries. Can you please confirm that you are able to process receipts in the local language?”
Brandon Markham // Absolutely. We operate in all of those regions already.
Sylvia Flores // Rock and roll. [Imogen], “Our US and European payroll is run by different providers and on different schedules. Can you support multiple payroll providers within the same plan?”
Brandon Markham // Yeah, absolutely. That’s very, very common, where we support multiple payroll providers on a global scale. And if you have different cadences, even within the United States, some of our clients might run five different payrolls, or within Europe, they might run four. That’s completely fine. That’s all part of the file feed that we work on during the plan design and the implementation.
Sylvia Flores //Awesome. [Lynn-Carroll] asks, “Since Espresa is doing adjudication, how do we ensure those claims being approved are within the plan? And can we see the approvals and claim denials?”
Brandon Markham // Yeah. You have full visibility into the audit trail of all approved, declined, and escalated reimbursements that go through the platform. The adjudicators are trained on each specific client plan. So they do a very good job where approving or declining, in the rare instance, where something looks fraudulent, or maybe isn’t a gray area, or an employee doesn’t agree with a decline, we do have an escalation process as well. So that would be brought to your attention probably before you even manually were looking for it. But certainly if you want to go through and look, we give you full access to do that.
Sylvia Flores // Awesome. So we’ve got, it looks like, about two more questions, so please keep them coming. But here’s what we got thus far left, [Susan] would like to know, “If an employee uploads a receipt that is illegible, or that needs more info, does the claim automatically close?”
Brandon Markham // So, very good question and very pertinent, because in your legacy systems, like an FSA, typically they decline those types of reimbursements. The employee then has to start the whole process from scratch, fill out all the fields, not a great user experience. With a purpose-built LSA program, the way that we approach it and we feel is the best practice is, enable communication between the adjudicator and the employee. Again, this is going to reduce your administrative burden because they’re not coming back to you, in HR or finance. They have the ability to communicate with your employees. So an adjudicator would simply say, “This receipt is illegible, or this is the wrong date. Please upload this again.” Once uploaded, boom, immediately approved. So very, very good employee experience.
Sylvia Flores // Excellent. And our final question is from [Ashton], “How does Espresa help us promote a program like this for maximum adoption?” And I would also tag onto that because we’ve seen this question a lot, how do we sell this to the C-suite so that we can actually get the budget for it?
Brandon Markham // Yeah. So the way that we promote adoption, and typically, one of the first questions we get from the C-suite is, “How many people are actually going to utilize this? We have all these HR programs, what’s the adoption?” So, the way that we encourage good adoption here at Espresa starts right from the beginning with an amazing customer success team, they’re going to help you with your change management strategy, providing the templates, the communications, so that you can promote this out to your workforce. What we typically see in an LSA program is 80 to 90% adoption. So that’s very, very high compared to most benefits that are being offered. And because of that, people love the program. If you get 90% of your employees utilizing something, that’s a good sign that they like it, and they appreciate it. And, getting back to the C-suite, if you have 90% of your employees that like and appreciate a program, that leads to higher engagement, retention, more referrals, all of the things that are so important, particularly at a time like now when there is a labor shortage in the marketplace. So, hopefully that was helpful.
Sylvia Flores //Yeah, that’s excellent. And, through the multiple channels, I’m not seeing anything else come through. So, I just want to thank you, Brandon, for your amazing insights on this, and thank everybody here for participating. And I really hope that we get to see you all, again, for the creative portion of the series in session four.