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Benefits Outsourcing at Tipping Point for Midsized Organizations

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Benefits outsourcing has reached a “tipping point” for midsized organizations. Several trends are converging to make outsourcing more attractive to and viable for this market sector, as described in the Benefits Quarterly article, A Midsized Proposition—Benefits Outsourcing Is Not Just for Large Organizations.

Costs…

The price tag for benefits outsourcing has been a barrier for mid-sized organizations. These employers have had difficulty offsetting outsourcing fees with a corresponding decrease in internal costs. The outsourcing industry, however, has matured and the price point has stabilized, and in some cases actually dropped, over the past few years. This trend is fueled by increased competition within the outsourcing arena, improved efficiencies, decreased systems development costs, and utilization of labor in lower-cost geographies.

Risk…

The risks involved with in-house benefits administration have multiplied as compliance requirements have increased and benefits gotten more complex. Companies find themselves exposed when they rely on one or two HR staff members to handle their benefits administration. Should these individuals leave, they take with them historical and technical knowledge that is costly to replace. There is also risk from errors when processes are not handled with extreme care and accuracy or when data becomes corrupt, disorganized or incomplete. There are also technology risks. When a company purchases or builds its own administration system, it can become obsolete, be discontinued or compromised by other IT business priorities. Outsourcing can mitigate these risks.

Employee Expectations…

Employees have high expectations of their employers. They want great service, real-time information and transactions, and easy access to personalized benefits information. Meeting these expectations, to the extent possible, is particularly important at a time when employee loyalty is at an all-time low and organizations need to retain skilled, productive staff. Outsourcing offers features to meet these expectations, such as online transactions and access to information, benefits modeling, decision tools, access to a wide range of resources and full-service call centers and customer support.

HR Business Focus…

To be a strong and effective business partner, HR needs to focus on strategic issues that impact the organization. Outsourcing frees up internal staff to keep abreast of administration best practices, rather than implementing and maintaining them.

With these points in mind, mid-sized organizations may want to re-evaluate the cost-benefit analysis of outsourcing vs. in-house benefits administration. You may find that the balance has tipped in favor of the outsourcing model.