BenefitsEngaged Workforce

The Allure of Outsourcing Benefits During a Downturn

When employment is down, the demands on internal HR resources grow. Some organizations view an external solution as a panacea.

By David G. Zick
 
There’s an old adage that when challenges occur, opportunities follow. Many business managers are viewing today’s climate as an opportunity to improve the way they do business from a cost, efficiency, and employee morale standpoint.
 
As financial pressures grow, businesses are focused on the bottom line more than ever, and departments are charged with maintaining or increasing quality with fewer resources. That can be a tall order for HR managers who are already taxed; employee terminations generate more paperwork not less. At the same time, retained employees are understanding their benefits packages better and look to maximize their return. From an employee’s vantage point, learning how their compensation packages impact their families is more important than ever before, so HR has to be more prepared to answer employees’ calls for help.
 
Even without the complications of a down economy, the headaches associated with managing employee benefits are as tedious as they are numerous. Enrollment, compliance, handling COBRA, and just everyday questions consume enormous resources. With all the complications and time-consuming tasks, it’s easy to see how an internal HR department can become overwhelmed with the headaches transactional issues present while neglecting the strategic planning necessary for corporate long-term success. Outsourcing benefits administration functions can serve as a solution.
 
When evaluating outsourcing options, companies often find they can better measure costs, change benefits more quickly, and offer employees more robust benefits support services through an outsourced delivery model. Many organizations also find they have more control of their benefits programs due to improved processes, communication, and reporting.
 
The decision to outsource is important and requires thorough study. The first step is to conduct a comprehensive evaluation of current practices, including benefits communications, enrollment processes, financial reporting, compliance, carrier reporting, and employee services. This evaluation process will likely reveal inconsistencies, errors, and time-consuming tasks that repeat each month. There are often redundancies, and it is common to find potentially costly clerical and administrative errors. Mid-sized and larger companies, particularly those with multiple locations and ones that utilize differing regional or site-specific benefits, are vulnerable from a cost, employee morale, and compliance perspective.
 
For example, a company may have offered the same benefits strategy for several years assuming it was the best fit. However, reporting from an outsourced benefits administrator may show differently. Perhaps by altering the benefit plans offered for specific employees at specific locations, or for union employees when negotiating a new contract, the company can reduce overall costs. The outside expertise and access to technology that many companies can’t afford to purchase are often available through a provider. With benefits and their administration being such complex fields, seemingly minor details can have enormous short- and long-term impacts on the bottom line.
 
Another consideration in managing benefits is that employees are more educated today. Many employees want better, more detailed information, which requires greater HR resources and can lead to escalated issues if not handled appropriately. Employees are more likely to be aware of their plans, enrollment options, and cost of benefits to take full advantage of them. Increases in inquiries or claims issues contribute to a greater workload for HR.
 
To cope with the economic downturn, companies have had to make tough decisions. In this case, direct employee communication is more important than ever. When an employer cuts or changes benefits, clear messaging is key. Rather than waste internal resources developing employee communications from scratch, an external benefits administrator only has to modify a product used for similar situations at other companies.
 
Effective employee communication plays an integral part in wellness initiatives. Many forward-thinking firms, in conjunction with insurers and benefit management solution providers, have implemented wellness initiatives. As with other communications initiatives, a company that outsources administration can use a third party’s expertise on how best to communicate these programs.
 
Although outsourcing benefits administration is not for everyone, many who have considered the headaches, resource needs, financial risks, and expenses of in-house operations are turning to this option. Employers want to focus their energy on growing and fostering their businesses, not managing their employee benefits. In these times of uncertainty, companies don’t need to invest in the most up-to-date compliance personnel, new software solution and platforms, and technical support. When companies realize they can pass the vast majority of benefits management responsibilities onto an expert that already has the necessary resources, they can garner enough savings while improving employee satisfaction to make the effort worthwhile.
 
David G. Zick is president of Bingham Farms, MI-based Group Associates, Inc., which offers companies proprietary benefit management solutions.  He may be contacted at david.zick@groupassociates.com.
 

Tags: Benefits, Engaged Workforce

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