Benefits and Compensation, HR Management & Compliance, Technology

Q&A: Why Should HR Consider Outsourcing HR Benefits Administration?

Deciding when it’s time to abandon in-house processes in favor of outsourced assistance can be very challenging, especially when it comes to HR benefits administration.

Source: selinofoto / shutterstock

Today, we are joined by Jon Shanahan, CEO of Businessolver, to discuss the situation.

HR Daily Advisor: Can you explain to our audience what shadow IT is and how it happens?

Jon Shanahan: Basically, shadow IT is technology used at an organization without the knowledge or approval of the organization’s internal IT team. It can be as small as an employee downloading Spotify to his or her desktop or as broad as a department using Google Docs to work together and share materials when the rest of the company uses a different program. Using unauthorized and insecure technology can leave organizations vulnerable to potential security risks.

From a Human Resources (HR) perspective, much of today’s HR benefits administration technology is software-as-a-service (SaaS)-based. SaaS platforms allow business owners to source and implement technologies quickly and without significant investment in IT resources, capital purchases, or business resources to deploy them. However, that does not mean IT should be left out of procurement, source, or evaluation discussions, as this can lead to a shadow IT concern and potentially unaccounted-for risk.

Not all technology platforms are built the same or have the same features to protect the information they maintain. The best way to prevent shadow IT within a company’s HR department is for benefits managers, chief human resources officers (CHROs), and chief information officers (CIOs) to work together to ensure the platform integrates well with other technology the organization uses, is compliant, works within security protocols, and meets the organization’s specific needs.

HR Daily Advisor: A study by PwC found that organizations stand to save a lot by outsourcing HR benefits administration (instead of using in-house/insourced solutions). Why is that?

Jon Shanahan: Insourcing HR benefits administration may, at first, seem more cost-effective for an organization. There is a perceived benefit in managing all processes and technology internally, but the significant time commitment and large number of resources required are often overlooked, causing company costs to far exceed expectations. For example, investments in hard-to-find staff may have to be made, or the organization may need to pay consultants for ongoing maintenance.

Benefits administration is too important to gamble on when you look at the size of the investment your organization makes in employee benefits. A third-party vendor handles a majority of the people, processes, and technology in outsourcing benefits administration models, and by outsourcing HR benefits administration technology and related services, organizations receive a best-in-class solution with a more predictable cost structure and lower cost of ownership overall. HR departments that outsource can also create efficiencies in managing health and welfare benefits, voluntary benefits, Consolidated Omnibus Budget Reconciliation Act (COBRA) benefits, enrollment, and more, which gives them more time to focus on strategy and enhancing their employees’ experience.

HR Daily Advisor: What are the advantages of outsourcing to a single vendor vs. multiple vendors?

Jon Shanahan: Outsourcing to multiple vendors allows HR managers to look for the best point solutions to address specific needs for their organization, such as a benefits administration platform. These point solutions are often the provider’s core focus, which usually results in a higher level of innovation compared with the “we can do it all” HR offerings. Integration across vendor platforms is often seamless and allows systems to work together, given the rapid pace of innovation in HR technology, application programming interfaces (APIs), and SaaS-based solutions.

HR teams have enough on their plates handling day-to-day tasks and organizing future initiatives, coupled with learning frequent regulatory and technology changes. But when partnering with the right vendors, organizations can pass along the costs and burden of staying up to date on compliance issues or other related technology updates/challenges, as well as stay focused on building the best suite of solutions that fit the needs of the HR department, add organizational value, and meet business goals.

In part 2 of this article, we’ll continue our discussion with Jon and learn how organizations can decide if outsourcing is right for them and how to get started.

Jon Shanahan is the President and CEO of Businessolver, a benefits administration solution.