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What Is Employee Benefits Outsourcing?

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When a small business starts scaling, the HR function becomes increasingly challenging to manage. From meeting customers’ demands and applying best practices to hiring and remaining compliant with complex regulations, the HR work is non-stop.

Think about it; when was the last time you heard an HR professional say their job was a walk in the park…yeah, never. This is where outsourcing to external HR consultants comes in. Not only do they ensure costs are well managed, they work hard to apply legislation correctly in order to avoid breaches or violations.

Employee benefits outsourcing refers to partnering with external HR consultants to ease the tasks involved, including enrollment services, payroll integration and employee assistance. The outsourced HR consultants focus on managing the daily tasks involved to ensure a quality experience.

As an organization, you can be creative and analyze what benefits will give you a competitive advantage. A good practice will be keeping up to date with trends and doing research. Most employees have higher expectations for modern organizations regarding their health and wellness benefits, as it is seen as a critical element of the total compensation package.

While joining forces with external HR consultants, it’s important to brainstorm benefits that will differentiate your company in a positive sense while inspiring and motivating your employees.

Benefits of outsourcing employee benefits

To be honest, sorting the best benefits options while taking note of costs is time-consuming and not an easy task. It can lead to frustration, annoyance, and maybe symptoms of hangry. With employee benefits outsourcing, the internal HR team can commit to developing employees, maintaining and improving the corporate culture, and work in line with the company’s goals.

The company is at a disadvantage when the in-house HR team can’t really focus on strategic HR functions. Relegating HR to recurring administrative tasks may save money in the short term but become more costly in the future.

The size of a smaller company is no longer a limitation with the presence of outsourced HR consultants. The perks of letting outsourced HR consultants handle employee benefits include:

  • Proficiency – Outsourced HR consultants have great experience in tackling the complexities associated with employee benefits products, volatilities, and response to any crisis, a good example being the COVID-19 pandemic. By providing knowledge and recommendations, the employee experience is greatly improved.
  • Less time involved – When external service providers manage employee benefits, the whole process from enrollment to administration is streamlined, coupled with acting as the point of contact for inquiries. They can find cost-effective options with various benefit brokers, rapidly carrying out changes and updates using technology.
  • Potential for lower costs – The rising costs of benefits are cause for worry in most companies. Organizations have a lot to gain from their service providers’ buying power due to economies of scale. With the fostered long-term relationships with different carriers, outsourced service providers can get a reasonable bargain for renewals and compare options.
  • Access to more options – The outsourced HR consultants can access a broader range of products and packages through their benefits broker. This gives employees the benefit of choosing which ones can better apply to their current needs.
  • Liability protection – Outsourced HR consultants have the obligation of staying current with different regulation changes to ensure compliance and are aware of these changes’ impacts. Coupled with this, the burden of confidentiality automatically moves to the service provider when handling sensitive information involving health history and finance.

The Not So Good Side

When companies decide to outsource their employee benefits, it is essential to forecast challenges while considering potential constraints. It’ll be worthwhile to work around possible solutions before negotiating with service providers. The potential limitations of involving outsourced HR consultants in employee benefits include:

  • Communication issues – Being able to access service providers when necessary, whether in person or virtually, is a critical aspect of outsourcing HR functions to external consultants. Unfortunately, outsourcing comes with a new communication process which is usually not as straightforward and quick as having the internal HR team handle employee benefits. This often comes with longer turnaround times as a result. Through the proper protocol, this problem can be solved and be a non-issue.
  • Changing and growing needs – Business needs keep evolving and changing. An organization might run into issues if service providers have limited capabilities that might not cater to the organization’s ever-changing needs. That is why it is key to ensure your outsourcing partner has the flexibility you need as you grow and expand.
  • Inability to build trust – Generally, deciding on benefits has a personal touch, and employees might not trust the external service provider to have their best interests in mind. Being an external team, they are not readily available to interfere with the options chosen. Considering that the employees will likely not have a personal relationship with them, it will be difficult to trust their advice. The right outsourcing partner will provide personalized service and touch to build relationships and bridges to ensure everyone is comfortable and on the same page.

As your organization grows and evolves, so will the benefit needs of your employees. For a smooth process between your outsourcing partners, it’s essential to review the products and services you have annually to ensure they keep developing at the same pace as your team.