As an employer, our role is to provide a safe, productive workplace – one where employees can learn, and develop their skills and talent. Around the world, we employ just over 28,300 people, approximately 60% in the US, the Netherlands and the UK.
Over the past three years, while the overall size of our workforce in these markets has been reduced, we've taken on employees elsewhere, particularly in Asia and Asset Management. We make an important contribution to local economies through the salaries and benefits we pay to our employees. In 2017, these totaled €2.2 billion.
New technologies, new skills
Across the finance sector, we're seeing a reshaping of workforces. New technologies mean some jobs will be lost. Most of these will be in back-office areas that can be easily automated – in pricing, sales or claims processing, for example. At the same time, there's increased demand for new skills. It's important that, as an employer, we continue to attract people with digital and marketing skills, for example.
Through new technologies, we can reduce costs and, more importantly, give customers quicker, easier access to our products and services. But we recognize that the introduction of new technologies will also bring disruption to employees who lose their jobs or have to switch to new functions. Our approach is two-fold. First, to invest in the new technical capabilities we'll require. Second, to make sure employees have the skills they will need in their future careers, whether within Aegon or outside.
We've identified capabilities that we believe are vital to Aegon's future: these include digital skills, marketing and customer analytics. It's clear that, in some of these areas, we will have to bring in skills from outside. But first we're looking to develop the skills we already have. We've set up our own Analytical Academy, for example, and run regular two-day Digital Acceleration programs to bring managers up to speed with the latest technology. We're also investing in specialist training – in Europe, we have a digital marketing course, which will soon be extended to Asia and Brazil.
Just as important is changing the mindset within Aegon. With new technologies, we need to build a more flexible, collaborative workplace, where ideas and skills are shared horizontally between teams and departments. We've made Agility an integral part of Future Fit, our strategy for transforming Aegon. We're encouraging new ways of working, and greater accountability (where employees own both problem and solution). In the Netherlands, we now have development teams that are self-organizing, and decide their own goals and working methods. Future Fit also means putting away older, less effective working practices – where too much work was done in silos, and internal processes drove decisions, rather than the needs of our customers.
When restructuring, we keep redundancies to a minimum. In Europe and Asia, we work through trade unions. And, where possible, we reassign staff within the company, and provide support, training and advice to those leaving. In 2017, some 5,400 employees left Aegon – partly as a result of recent divestments. Another 4,689 joined the company – most in the US. Under our recent US outsourcing agreement, in 2018, around 2,100 employees will be offered positions at Tata Consultancy Services in their home cities. Across the group, turnover last year was 25%, still high; this is mainly because of restructuring in some of our main businesses.
Job losses in the insurance sector – and new jobs being created
Because of automation, many insurers are cutting jobs. Most at risk are jobs with clearly-defined processes, like claims adjusters and underwriters. Insurance is one of the sectors most susceptible to automation, along with manufacturing and retail. Recently, PwC estimated that nearly a third of jobs in the UK's finance and insurance industry were "at potential high risk" of automation1. Low interest rates, in particular, mean insurers are under increased pressure to find savings – new technologies are giving them the opportunity to do so. While jobs are lost, the insurance industry as a whole is doing well – and expecting to grow in the years ahead. That means, while overall employment is reduced, jobs are being created elsewhere. There's growing demand for new digital skills, for example, particularly in customer relations and analytics, and for softer, more 'human' skills, in sales and financial advice. In the US, for example, research from Mercer shows the number of financial advisors and actuaries are forecast to grow substantially over the next few years (see below):
Projected change in employment
(US insurance sector, 2014-2024)
Ultimately, it's employees who drive the performance of our company. The more engaged and motivated they are, the better our performance. That's why, several years ago, we made employee engagement one of our four strategic objectives. And why we've built it into pay incentives for senior management. We measure employee engagement every year. Our latest survey was carried out in November 2017. It showed an overall engagement score of 65%, an increase of two points from the previous survey. The survey helps us pinpoint possible improvements for us as an employer; we use it to assess our performance in areas like work-life balance and career development. The survey also allows us to track our Future Fit program. Through the survey, we measure both employee awareness and progress against the four Future Fit themes (Acting as ONE, Accountability, Agility and Customer Centricity)1. Eighty-five percent of our employees took part in our last employee engagement survey.
Employee welfare and development
To attract and retain the best people, we need to provide the right working environment. We offer benefits like part-time and flexible working, health checks, parental leave and, of course, company retirement plans. We also allow paid time-off for volunteering because we think it's important our employees continue to feel a strong connection with their local communities. Aegon employees work within a Code of Conduct, which sets out clearly what we expect of them, and what they can expect of us2. We also have company policies covering human rights, non-discrimination and health & safety in the workplace. We encourage greater diversity through local initiatives such as the LGBTQ group Aegon Proud and the Women's Network in the US – because we believe diversity makes for better decision-making and brings us closer to our customers. We also have programs to reduce stress in the workplace, an important issue for office-based companies like ours. Last year, we spent €14 million on training; this includes online, specialist, management and awareness training. Aegon has a Learning Catalog, open to all employees.
Salaries and incentives
Attracting and retaining talented staff isn't all about pay, but pay is important. We have a Global Remuneration Framework, which sets out our approach in this area3. This framework applies to all employees worldwide; it ensures that pay is linked to performance – that incentives and bonuses, for example, don't encourage excessive risk-taking. Currently, more than 17,000 Aegon employees are eligible for performance pay. That's approximately 73% of our workforce. Last year, we paid out €197 million in performance-linked pay. For our executives, bonuses are tied directly to Aegon's financial and non-financial performance4. Executive pay is subject to assessment by the Supervisory Board's Remuneration Committee. At €1.5 billion, pay is an important cost for us. There is pressure, as with any listed company, to restrict employee expenses to increase profits and returns for shareholders. We try, as much as we can, to get the balance right, and ensure we pay fair wages, and continue to have access to the best and most talented people.
Gains in employee engagement
(Results from Aegon's global employee survey, 2017)
Chart shows selected results from our latest employee engagement survey, conducted in November 2017 (compared with previous survey in February 2017). Based on Culture Amp methodology. Internally, results are benchmarked against scores for the professional services and finance sectors.
Our Analytical Academy
Aegon's Analytical Academy has now been running for three years. Its role is to develop new talent in data science, a critical function for our business. The Academy provides an intensive three-year program, focusing on all areas of data science, including advisory skills and analytics. The benefits of the Academy are flowing through to our business. We estimate savings already of €8.5 million thanks to improvements in pricing, risk modeling and better fraud detection. The Academy operates alongside other initiatives, including the Aegon University, as well as the company's Leadership Development Center and its dedicated People Management Program.
1 Our last survey showed a Future Fit awareness score of 83% (compared with 71% during the previous survey in February 2017).
2 Aegon also has an Ethics Line, which allows both employees and external parties to report in confidence any issues of concern relating to the company's operations, decision-making and policies.
3 Please note that Aegon is exempt from certain Dutch rules limiting variable compensation because more than three-quarters of the company's employees work outside the Netherlands.
4 Variable pay for Aegon's Executive Board is based on a number of indicators, including underlying earnings after tax, return on equity, capital generation, value of new business, return on economic required capital, and metrics covering corporate responsibility, strategy and sustainability. For more details, please refer to Aegon's 2017 Annual Report.
5 Source: PwC (UK Economic Outlook, March 2017).