Many companies work hard to provide top-notch benefits and streamline benefits administration. However, doing it without a large HR department can be tough.
Small HR departments struggle to find sufficient time to handle benefits administration properly. They don't just need to design and manage benefits packages but also answer complex questions quickly. That's why outsourcing often takes center stage.
Outsourcing benefits administration can have a variety of advantages for SMBs (Small and Midsize Businesses) with understaffed HR departments.
Reasons to Outsource Benefits Administration
Let's take a look at the key advantages of benefits administration outsourcing.
1. Reduce HR Costs
The complexity and duration of benefits administration tasks can compel companies to hire additional HR team members. Otherwise, HR specialists don't have sufficient time to focus on other functions, which in turn affects the company's profitability and leads to churn.
By outsourcing benefits administration, you don't need to pay salaries, benefits, and other overhead costs associated with supporting new employees.
With the right HR outsourcing partner, you can gain access to top-notch benefits while paying less than you would spend trying to obtain them on your own. This doesn't just save you money but also increases employee satisfaction and reduces turnover.
2. Increase Plan Options
Benefits options are usually limited by the size of your company. To gain access to enterprise-level benefits, you need to hire hundreds of employees. Otherwise, you have little bargaining power.
By working with a reliable HR partner, you can take advantage of Fortune 500 benefits regardless of your company's size.
Comprehensive HR outsourcing partners that work with numerous companies pool all employees together to gain access to benefits offered to enterprises. Besides allowing you to improve the regular benefits package, an HR outsourcing partner can help implement and administer such sophisticated benefits as 401(k)s.
3. Streamline the Benefits Process
In the past decade, companies have been gaining access to a variety of benefits administration technologies that makes the process easier. However, applying these technologies can be complicated, confusing, and costly.
An HR outsourcing partner can provide integrated technology that enables employee self-service for improving benefits administration.
HR service providers have experience simplifying the process. This doesn't just save time for HR teams but keeps employees happy as well.
4. Access Expertise
The complexity of the benefits administration process is often overshadowed by the variety of tough benefits questions. Small HR teams spend a significant amount of time looking for the right answers.
When you outsource benefits administration to an HR partner, you gain access to expert knowledge. Any time a benefits question comes up, you can call up a specialist and receive an answer quickly.
If you want to handle some of the benefits administration tasks directly, the expert can guide you through the process.
5. Risk Management
Companies that sponsor employee benefits plans are legally required to follow federal compliance regulations. They need to implement regulatory compliance procedures and related controls. Failing to follow regulations may result in fines and a decline in employee satisfaction rates.
An HR outsourcing partner can make sure the benefits are in full compliance with federal and state regulations.
By working with experts, you can avoid compliance risks without spending an immense amount of time studying and monitoring the ever-changing rules.
6. Employee Privacy
Employee self-service portals are specifically designed to give employees access to important information related to salary revisions, safety procedures, benefits, and much more. By allowing employees to study and manage their personal health benefits through a portal, you minimize unnecessary discussions in the workplace.
A reliable HR outsourcing partner provides the technology to set up comprehensive HR portals. Using these portals can improve employee privacy, provide answers to HR-related questions, and help with time management.
7. Vendor Consolidation
It can be taxing for a small business to work with several vendors. Many companies have separate programs to process payroll, manage benefits, handle recruitment, and much more. Managing each program separately isn't just time-consuming. It can lead to errors and data loss.
By outsourcing payroll, benefits administration, onboarding, and other tasks to an HR partner, you can consolidate all those vendors into one single source of expertise. Comprehensive HR outsourcing partners use the same software to manage all HR functions should your company decide to outsource.
When Benefits Administration Outsourcing Works Best
For SMBs, outsourcing benefits administration has numerous advantages. From saving time and money to improving plan options and mitigating compliance risks, working with an HR partner can have a direct effect on the company's bottom line.
The value of outsourcing benefits is tied to how comprehensive the outsourcing solution is. The more services an HR partner offers, the more value your company can gain.
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Tom DiSilva has been providing professional human resource services for over 30 years. As the CEO of Navigate PEO, he actively partners with organizations of all sizes in the Greater New England area and across the country to help their businesses grow. He has expertise in HR and Labor Management, offering guidance and support for key areas of business such as negotiations, operations management, employee coaching, and employee benefits design.