BenefitsEmployee Engagement

Taking the Global Pulse of Benefits Outsourcing

Consistent online experience and manager portals are desired by employers, according to a benefits outsourcing study conducted by Mercer and Harvard Business Publishing.

by Jeff Miller

A key reality of today’s global economy, which plays out over a landscape of diverse cultures, industries, and geographies, is that organizations are struggling to find a single, integrated global service delivery model for the administration of their HR and benefit programs. They know that seamless service delivery across benefit domains and international borders can generate greater cost efficiencies as well as higher levels of employee engagement, retention, and productivity, thus helping companies sharpen their competitive edge in the global market.

But to deliver on this, the HRO industry needs a deeper understanding and clearer vision of what clients need globally and the challenges they face. Mercer partnered with Harvard Business Publishing (HBP) earlier this year to hold nearly 60 individual interviews with senior-level HR executives, 70 percent of whom hold global positions.

We already knew that the HR function in multinational companies is in the midst of major transformation, driven largely until recently by growth in emerging economies and the fact that more than 50 percent of many workforces currently reside outside of corporate home countries. That demographic shift has only heightened the need to globalize the HR function. Our research showed that 45 percent of those surveyed have taken on new global responsibilities within the past 2 to 3 years, while 40 percent have assumed such responsibilities within the last 12 months alone.

But while HR leaders step up to perform more strategic tasks, they admit that they still spend most of their time on local and regional issues. The reasons for this include a lack of necessary support systems and constraints on internal resources. In addition, regulatory differences and organizational complexities are keeping many administration processes a local responsibility, with outsourced transactions varying by region. For example, in the U.S. and Australia, transactional administration work is mostly outsourced; in the U.K. and Europe, there’s a mix of in-sourced and outsourced transactional work; and in Asia, most benefits administration is still performed in-house.

The result is a patchwork of local systems and vendors around the world. A typical sourcing of retirement benefits, for example, combines outsourced activities and in-house benefits administration by country, often with multiple vendors in each region, including local consulting firms, insurance carriers, and third-party administrators. It’s not unusual to see a single insurance carrier handling both defined-benefit (DB) and defined-contribution (DC) plan administration in Canada, while in the U.S., companies may use one record-keeping firm for DB and another for DC.

Until systems evolve and companies advance further along their learning curve, today’s HR executives will continue to be pulled in both global and local directions. Our survey revealed that the most significant challenge is the lack of centralized employee and benefits data.

In particular, fragmented employee and benefits data has meant many companies cannot tell with any degree of accuracy how many employees they have across all locations, the benefits offered in each country, and the total cost of those benefits. This lack of solid metrics not only makes it difficult for HR to demonstrate its strategic value to the organization but also impedes its ability to ensure benefit plans are in compliance, cost-effective, and help attract and retain employees.

Our research also revealed a lack of a consistent approach to governance and compliance, especially in Europe and Asia, where employment and tax laws vary widely in different jurisdictions. Adding to HR’s headache is a lack of standardization around global employee mobility, hindering HR’s ability to apply consistent procedures to compensation and benefits, not to mention its ability to manage the logistics of expatriate moves, track associated costs, comply with host-country regulations, and provide competitive total-rewards packages.

Finally, respondents noted the external challenge of finding a vendor to help them achieve benefits globalization. In addition, vendors find it difficult to support a consistent service model when the existing level and type of service varies so widely among countries and regions.

In the most mature benefits outsourcing markets—the U.S., Australia, and Hong Kong, representing approximately 80 percent of global spending—there’s a great emphasis on employee self-service. In comparison, many parts of Eastern Europe and Asia are still new to benefits outsourcing and have not made the necessary technology investments. Still, 90 percent of those surveyed agreed on the value of such investments and pointed to two global solutions they welcomed: a consistent and integrated global employee online experience and a global HR manager portal to centralize employee benefit plan data.

An integrated portal could deliver employee demographic, compensation, and benefit data, industry benchmarks, and legislative news by country. Meanwhile, a global employee online system integrated across all domains and regions would not only empower and engage workers but also make vendor management and employee communications far easier.

Ultimately, one solution leads to the other: a global data warehouse that can collect information for managers on a provider-agnostic, multinational basis can also offer employees direct access to the benefits information they need in an increasingly global workplace. Such solutions offer a real outsourcing advantage that will eventually be proven among multinationals.

Tags: Benefits, Engaged Workforce, HRO Today Global

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