The word outsourcing has such a negative connotation. The word conjures up images of jobs going overseas, downsized departments, shuttered businesses, and the downward spiral of service and product quality. To U.S. workers, outsourcing is a dirty word.
But whats the reality behind outsourcing?
An interesting study by the Outsourcing Institute highlights the top 10 reasons why businesses today are turning to third parties for assistance. Only three of the reasons for outsourcing had anything to do with cutting expenses, such as reducing operating costs. The majority of organizations surveyed said they outsource because they need access to specific expertise, require additional resources, find certain functions difficult to manage,
want to focus internal staff on more important projects, or want to reduce risk.
The outsourcing of employee benefits administration follows that logic. Todays HR staff juggles a multitude of program tasks and projects that have been made even more complicated by the demands of the Affordable Care Act. According to HR.com, most organizations that outsource benefits administration do so to achieve legal compliance, reduce burdens on internal staff, gain efficiencies, and gain access self-service technology. Few businesses outsource benefits to reduce headcount in HR.
If we examine the economic landscape since 2008, we find out why businesses arent keen to reduce HR personnel. Many organizations significantly reduced overheard over the past six years. Today, all departments, especially HR, are asked to handle the same amount of work with fewer staff members. HR not only handles benefits administration, they are expected to support corporate initiatives such as recruitment, employee onboarding, staff training, etc. Although the economy has improved, uncertainty remains and businesses in general have been unwilling to expand HR. With this in mind, outsourcing benefits administration is a logical way to offload transactional work to experts,
Benefits administration is all about processing and verifying transactions. If a step is missed or a transaction doesnt happen, serious liability and penalties can occur. Moreover, in the ACA era, employers face greater regulatory scrutiny of their health and welfare benefits. The Department of Labor, for example, has increased audits, which is adding further pressure on HR staffs. Compliance document filings, employer mandate requirements, HIPAA procedures and other routine ACA transactions can produce fines and penalties if not handled properly. A qualified benefits administration outsource partner provides the necessary
A third party outsourcer can also help you identify and select enrollment/benefits administration technology that works for you and can manage the system on your behalf. Learning how to navigate a platform, generate reports, and validate carrier feeds doesnt have to be the responsibility of HR. A good outsource provider will have the ability to deliver best-in-class technology implementation and management.
Limited HR staff, increasing complexity due to the ACA and other regulatory requirements, and the greater potential for financial and regulatory risk make it much easier to build a business case for outsourcing employee benefits administration. Business owners and stakeholders have begun to realize there is a tipping point where cost-saving measures of the past several years are now putting organizations at unnecessary risk.
Thats why the fear of replacing HR staff by a third party outsourcer is unfounded in todays environment. Many
Andrew Brickman is director of benefits administration at
