According to the folk over at VertiSource HR, providing cost-efficient employee benefits while still offering a quality plan is a challenge many companies face. While an appealing, comprehensive benefits package can help to boost both talent recruitment and retention, rising costs can stifle these goals. For many businesses, outsourcing employee benefits may be an ideal solution.
Defining Outsourced Employee Benefits
Outsourcing employee benefits essentially entails contracting with an external company to supply benefits like healthcare coverage, retirement planning services, life insurance, flexible spending accounts (FSAs), and more to employees. Also known as professional employer organizations (PEOs), these outsourcing companies integrate with a company to take on important responsibilities of the HR department. This allows internal HR staff to focus less on administrative tasks or weighing complex benefits options, and invest more time boosting employee engagement, culture, and performance.
When employee benefits are outsourced appropriately, both employees and employers can gain. Employees may receive cheaper, streamlined options with strong coverage and company resources are preserved. Additionally, outsourcing employee benefits allows smaller companies to offer more competitive packages that attract top talent.
Key Benefits of Outsourcing for Employers
An outsourced benefits arrangement shines brightest when it comes to cost-savings. Outsourcing provides economies of scale by leveraging external expertise and aggregation of risk pools. Benefits consulting is also significantly reduced when the legwork is handled by a dedicated PEO team. Additional advantages include:
Greater Access to Benefits Options
External benefits administration professionals are deeply knowledgeable of the ins and outs of various providers, plans, and policies. The wider view allows a PEO to present more diverse, optimized benefits selections that employers may lack context to source or supply independently.
Reduced Overhead Expenses
Outsourcing eliminates the need for extensive in-house benefits administration, including HR staff designated for this purpose. Health benefit costs, in particular, become shared liabilities with the PEO rather than riding fully on the company.
Improved Risk Management
When benefits liabilities shift to a PEO’s balance sheet, they assume important compliance, management of claims, and mitigation of loss costs. This reduces benefits-related risks for employers through economies of scale and regulatory expertise.
Key Benefits for Employees
While employers stand to operationally gain, employees also receive advantages from outsourced benefits plans. These include:
Cost Savings Passed Down
As overhead, consulting fees and premium expenses drop for employers, savings trickle down to staff. Outsourced plans can supply equivalent benefits for reduced payroll deductions compared to legacy options.
Consistent Support Resources
Relevant assistance navigating benefits questions, claims, or issues is critical yet often lacking with decentralized options. PEO solutions centralize support for quicker responses.
Flexible Spending Strategies
PEOs structure plans to optimize tax-advantaged spending accounts like HSAs or FSAs. Making the most of these tools maximizes compensation value.
Considerations When Outsourcing Employee Benefits
While outsourcing arrangements show immense potential for cost-effective employee benefits solutions when executed well, the strategy still warrants careful evaluation. Consider the following factors when exploring outsourcing:
Provider Experience and Stability
The financial stability, track record and client retention rates of a PEO influence outcomes greatly. Well-supported growth with expertise across company sizes demonstrates maturity.
Culture Compatibility
As PEOs integrate deeply with companies to handle critical programs, ensure your missions, values and operational approaches align to enable collaboration.
Service Model and Offerings
What specific benefits administration and supporting services are covered? Do they meet your company’s objectives? The balance of pricing and service should reflect positively on your brand.
Conclusion
Outsourcing employee benefits allows companies big and small to secure top talent through cost-savings, often only achievable at enterprise scale. When executed strategically through a reputable PEO, outsourcing employee benefits can transform labor expenses from burdens to competitive advantages.