Growing companies have a lot to juggle: satisfying customer demand, ramping up production, hiring and training staff, and remaining compliant in an increasingly complex regulatory environment. It’s hard to manage, especially when you’re enjoying steady growth. Instead of building and maintaining in-house expertise, some employers choose to outsource certain HR functions to outside specialists. By outsourcing employee benefits, employers can help control costs and ensure legal compliance.
Which employee benefits can be outsourced?
This question brings up a really important consideration. Your benefits package shouldn’t be limited by your selected provider. Think about what benefits will differentiate you from the competition and amplify your brand values. Also, research any workforce trends that are gaining traction. Traditional benefits like health insurance and retirement planning are very important, albeit expected. What other voluntary benefits will distinguish your company and inspire your employees. Let that curated list be your guide when looking at benefits administration outsourcing.
Why do companies outsource benefits administration?
Quite frankly sorting through benefit provider options while containing costs is an arduous task that takes a lot of time. For small and mid-sized businesses, it’s a missed opportunity when HR staff can’t dedicate their talent to strategic HR functions. By outsourcing benefits administration, HR has time to develop talent, foster a meaningful corporate culture, support business goals and more. Relegating HR to recurring administrative tasks may save money in the short-term but become more costly in the future.
Advantages
Small companies are no longer hindered by their size. Securing benefits via an outsourcing provider opens the door to advantages usually limited to corporations.
- Expertise– It’s impossible for one person to have deep expertise in everything HR. Your employees will welcome working with a specialist who understands the intricacies of existing products, new products, industry changes, Affordable Care Act implications or recommendations during crises, like COVID-19. By educating them on the full value of the company-sponsored benefits program, an outside benefits administrator could enhance the employee experience with insights and recommendations.
- Save time– Employee benefit providers streamline the enrollment process with web-based tools and simplify administration as the point of contact for all employee inquiries. During open enrollment, they analyze the most cost-effective options for sign up or renewal. Enrollment, updates or changes can happen quickly using customized technology platforms.
- Cost-effective– Small companies have been dramatically impacted by rising healthcare costs. By outsourcing benefits administration, companies benefit from their buying power and enjoy more competitive pricing. Plus, providers have nurtured long-term relationships with many insurance carriers which helps when negotiating renewals or exploring comparable plans that are affordable.
- Enhanced benefit offering– Your outsourcing partner has access to a wider range of products from top-rated providers including: health insurance (medical, dental, vision), voluntary benefits, flexible spending accounts (FSAs), retirement savings (401(k) plans), disability insurance (ST, LT) and more. This allows employees to select which coverage best supports their needs.
- Protect from liability– Experienced benefits administrators stay current on the impact of local, state and federal regulation changes to ensure compliance. Another legal advantage is the burden of confidentiality shifts. It’s one less liability to worry about when internal HR team members are no longer aware of sensitive health and financial information.
Limitations
Before outsourcing your benefits program, anticipate challenges and discuss potential limitations with your team. Explore workarounds or solutions before final negotiations with prospective vendors.
- Communication challenges – Using a remote resource, there will be a new communication process for employees. Will your company have access to a dedicated benefits specialist? Can employees schedule in-person or virtual meetings with this person? What kind of turnaround time can employees expect to time sensitive questions? You can also designate an on-site employee who understands the benefits process but limit their official role or employees won’t invest time in the new process.
- Evolving needs – Business needs can change rapidly, and you want to be prepared for that evolution. Can your new provider handle out-of-state employees? Can they structure tiered benefit plans? Do you choose a company that specializes in benefits outsourcing or a company that offers a full suite of HR services? Understand each providers’ capabilities and limitations before fully engaging.
- Trust factor– When it comes to time-consuming administrative tasks, employers typically understand it’s more cost effective to outsource. On the flip side, deciding on benefits can be very personal and employees may prefer consulting with someone who has their best interests in mind. If the provider is too hands-off, it may be hard for employees to trust the advice.
Professional employer organizations (PEOs) offer complete HR outsourcing. They provide expertise for employee benefits PLUS payroll and tax administration, HR guidance, retirement services and workers compensation. Some PEOs require companies to purchase a service package. This forces companies to buy services they don’t currently need. Whereas other PEOs offer a la carte services so companies only pay for what they want and expand later if needed.
MidwestHR, a top PEO & Chicago employee benefits outsourcing company has been providing human resources expertise to small businesses in dozens of industries for over 20 years. Every client has different needs, which is why we offer customized solutions with no long-term contracts. Whether you want basic or comprehensive HR support, you pay for the exact services you need. Everything is tailored and personal. With regular on-site visits and communications, our tenured staff are dedicated to understanding your challenges and ambitions. With a 97% client retention rate, clients who start with us, stay with us. Give us a call 630-836-3000 to see if outsourcing employee benefits could benefit your company.
