outsourcing HR functions

Between ACA, ADA, FMLA and a host of other federal and state regs, some employers are coming to the stark realization that HR can’t do it all on its own.  

In fact, more than three-quarters (80%) of employers currently outsource at least one HR activity, according to research by Gartner Inc.

Help with federal regs

What types of HR-related activities are firms outsourcing?

For the most part, firms are outsourcing — our looking to outsource — the compliance responsibilities related to federal laws.

A separate study of financial executives by the CFO Research, conducted with Prudential Financial, found that:

  • 46% of employers were outsourcing — or looking to outsource reporting or other ACA requirements
  • 40% of employers were outsourcing — or looking to outsource — ADA compliance, and
  • 39% of employers were outsourcing — or looking to outsource FMLA compliance.

What about benefits?

One area in which many firm’s HR departments continue to go it alone: benefits administration. Part of the reason many firms want to retain control of this HR function is to provide a more personalized — i.e., better — experience for their employees.

But not everybody thinks in-house benefits administration is the way to go.

According to the VP for absence management and disability at Prudential Group Insurance, Jake Biscoglio, outsourcing benefits administration can actually improve employees’ benefits selection and usage.

As Biscoglio puts it:

“For the most part, it makes things easier for plan members because they are given tools that may not have been available in the past to help them better understand and manage their benefits.”

A 4-question checklist

Of course, for many employers the decision to outsource benefits administration is rarely an easy choice.

To help, a report by Empyrean Benefits Solution Inc. suggests on-the-fence employers ask themselves the following four questions about benefits administration:

  1. Do we have the appropriate resources and infrastructure to handle benefits administration in-house?
  2. Do we have the financial support to develop and maintain the skill sets and technology needed to manage benefits administration effectively?
  3. Do we have the in-house expertise to understand today’s complex regulatory compliance issues?
  4. Can we continue to manage all of our daily administrative functions while also supporting the strategic initiatives necessary for company to grow?

A “No” response to even one of these questions is enough for firms to consider outsourcing some or all of their benefits administration tasks to a third-party administrator, according to Empyrean.

When it comes to selecting the actual benefits administration vendor, HR Benefits Alert reported on a four-step selection guide based on a presentation at the Dig|Benefits Conference in Austin, TX, by Joshua N. Jeffries, a partner with Arkin Youngentob Associates, LLC.

Here are Jeffries’ four most important steps when selecting an “efficient, cost-effective” benefits administration system:

Step 1: Define your needs. What are you looking for in a benefits administration system? This step needs to go beyond HR and incorporate all departments within the company. Jeffries reminded HR pros that Benefits has one of the top Profit/Loss (P/L) line items for most businesses. Any soft-dollar spending in this area needs to be justified in your compensation plans.

Step 2: Evaluate your vendor. With the sheer number of vendors out there, this step can seem a bit daunting. But the process is much less intimidating when HR pros break it down into small questions.

Examples: What type of back-end customer support do I need? Is it broker-friendly — in other words, will most brokers be able to use the system easily and effectively? Does the system account for all ACA and other federal and state regs? Does the system offer a mobile component? Does the data make it home? If the system is giving employees easy access to their benefits, it should offer a mobile component for spouses and dependents. After all, most families use smartphones for virtually everything.

Step 3: Understand the implementation process. Obviously, you’ll want the system to be as accurate as possible, so you’ll want to do your homework and find out any vendors with less-than-stellar track records in this area. You’ll also want to find out if the system updates automatically or if that’s a separate undertaking.

Step 4: Change your culture. For many employees, any type of change is difficult. If your benefits administration system alters the way people are used to doing things, which it most likely will, you have to account for that — and find ways to make sure the new system can positively impact your company’s culture. Here, Jeffries lauded the use of employee committees as a means to educate staffers on how everything works and all that workers can get from a new system.

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