Employer Concerns in Response to the Situation in Ukraine and Russia

Many employers are concerned about by the situation in Ukraine as they strive to ensure the safety, health, welfare and well-being of employees in the region.  Global benefit professionals are facing several volatile issues related to the unfolding Russia-Ukraine conflict.

To support our HR colleagues, we are providing the information below concerning key considerations along with the attached Ukraine Client Alert.

Employee Well-being

• Supporting employees and dependents based in Ukraine is a top priority.  Many people have left the country as refugees while others have remained. Employers may want assist with basic needs including food, clothing, transportation, communications, healthcare, housing, cash, and legal assistance regarding immigration matters. Existing market providers like local brokers, employee assistance programs (EAPs), mobility vendors, law firms, payroll providers, and insurers in Ukraine and neighboring countries may be able to offer a broad range of support.
• Mental health related concerns are seeing an increased demand throughout Eastern Europe.  One choice is Workplace Options (WPO) that is offering enhanced EAP services for therapy (24/7) and can be set up within 3-5 days. 

Business Environment

• Disruptions to insurance and services are increasing in the impacted region will need to be closely monitored and managed
• The crisis has created problems related to issues such as health and risk protection coverage, pension fund investments, and a range of mobility concerns. Lockton recommends a coordinated approach across HR, risk, operations and legal/compliance teams to be a critical effective response.
• Sanctions are complex, far-reaching, and evolving. Benefit managers responsible for employee benefit insurance policies in Russia are advised to discuss the status of provider relationships, open/upcoming policies, and placements with their local broker, global advisors and legal teams. Some insurers are owned or controlled by financial institutions that are subject to sanctions.
• Some companies are exploring moving Ukrainian and Russian staff to other locations in Eastern Europe.   Given the broader payroll, tax, and benefit impacts we are recommending that clients considering this action seek legal and accounting advice prior to making a commitment.
• The global insurance market is evolving with respect to Russian operations.  For instance, Generali announced that they are pulling out of the Russian market and winding down their Europ Assistance business in Russia.

Payroll Concerns

• Ukrainian companies are continuing to process payroll as usual.
• Making payroll in Russia is becoming increasingly difficult due to Office of Foreign Assets Control (OFAC) and international bank sanctions.  Companies are not able to make deposits into or payments from impacted banks.  We are recommending that HR leaders speak with their payroll and accounting teams to understand the risk and how to address the employee impact (inability to pay rent, mortgages, or other expenses).  The general solution at this time is encouraging employees to change their banking institutions to a non-sanctioned bank.

Sanctions Impact on Employee Benefits

• Sanctions are complex, far-reaching, and evolving. Benefit managers responsible for employee benefit insurance policies in Russia are advised to discuss the status of provider relationships, open/upcoming policies, exclusions and placements with their local broker, global advisors and legal teams. 
• There are number of Russian carriers on the OFAC and Specially Designated Nationals (SDNs).  We recommend that companies vet their carriers through internal legal/compliance teams. Where the carrier is sanctioned, we are advising clients to seek internal legal guidance and to move the plan at their earliest opportunity.
• Lockton expects that OFAC will continue to designate additional individuals and entities as SDNs which will further curtail available insurance cover for risks in the region.  We are advising all HR leaders to continue to review their carriers in the event additional carriers should become sanctioned. 
• Premium payments cannot be made into or out of sanctioned banks.  We are reviewing the implications and how this will impact the policies, additional guidance will be forthcoming.  In the meantime, we are recommending HR leaders seek guidance from their local broker and internal legal team. 
• From a benefit standpoint, we understand that local policy claims are still being made to local Russian nationals. 
• Many insurance policies contain an act of war provision that triggers whether the act of war is declared or undeclared.  It is important to review their policies for this provision and discuss the implications with their local broker.
• In Russia, the policy may contain an exclusion due to death or injury while attending a protest. It is important to internally discuss how this issue would be addressed should an event arise.  Some companies are considering self-insuring this risk.
• Employees in Russia/Ukraine will not be covered under a BTA policy for evacuation as such activity may be deemed a transfer of the usual place of work by the carrier.  Any company thinking of removing employees from Russia [Russian national employees] should be making arrangements now. Also, BTA policies may or may not provide coverage after relocation.  This is an extremely hot topic among carriers.

 What’s next?

• Employers have recent experience in crisis management processes as a result of the COVID-19 pandemic and we recommend leveraging these lessons learned.
• Employers should start to plan such arrangements for their Ukrainian and other employees who are now working remotely away from their home country.  Employees will be seeking permanent or temporary employment in a new country.

• In order to avoid an abrupt loss of healthcare and other benefits, employers closing or suspending operations in Russia will need to consider how they can help their local employees. We are anticipating that this trend will increase over the coming days and weeks.  In other cases, the business may be maintaining their legal status, but conducting layoffs.  Given the employee impact we are recommending that HR leaders speak with internal stakeholders to understand their company’s plans.
• For workforces in Ukraine, Russia, and other affected countries, a range of social security issues will ultimately need to be considered and addressed. General employee health and well-being will require a proactive approach.
• Given the limited supply of clinicians in Eastern Europe, demand for healthcare will be high with constrained supply.  In addition, according to Our World in Data, only 35% of the Ukrainian population fully vaccinated for COVID-19, pandemic challenges, among other public health challenges, are likely to be aggravated.

As a result of this conflict, needs will emerge in the coming days, months, and perhaps even years. Ongoing monitoring, continued planning and collaboration across the enterprise will be critical to providing the support employees need now and in the future.  Lockton will continue to monitor and update these situations as they develop.

Not legal advice: Nothing in this alert should be construed as legal advice.

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