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Outsourcing Employee Benefits Administration: Pros and Cons

Outsourcing Employee Benefits Administration: Pros and Cons

Your employees want great benefits, and you know that offering them a stellar benefits package will help keep them on staff. As a small business owner, it's not as simple as saying yes. You need to weigh the pros and cons of employee benefits administration and the impact it will have on your bottom line and your existing team's ability to handle the additional work.

Benefits administration is complex and requires expert benefits administrators to keep the process moving. For small and mid-sized businesses, that often means seeking HR outsourcing to support your in-house HR team. Outsourcing benefits administration can be the right move to keep your internal team focused on their goals while your HR outsourcing partner uses their experience to administer your benefits program properly. 

Pros of Outsourcing Employee Benefits Administration

Understanding the significant advantages of outsourcing some of your company's HR administration duties can give you a good look into what a partnership would look like with an HR outsourcing provider. 

Cost Savings

One of the biggest benefits of HR outsourcing is cost savings to your business. This comes in many forms, starting with labor cost savings. By outsourcing HR, not only do you complement your existing HR staff, but you also don't have to hire more HR employees. Hiring new staff is not only time-consuming, but it's a substantial added expense in payroll and taxes.

Health Benefits

Health benefits are another area where your business can see savings with the right partner. Offering health insurance to your employees is expensive, especially as a smaller business with little negotiating power. The right HR outsourcing partner lets you join their health insurance plan which provides your company with savings through lower premiums.

Workers' Compensation

Every company, with few exceptions, must carry workers' compensation insurance. Depending on the industry you are in, your experience modifier rate (EMR) might be extremely high. If your company has had workers' compensation claims in the past, it might be difficult for you to find affordable coverage. Through your HR outsourcing partner, you can join their workers' compensation plan where you can pay-as-you-go, saving your company up-front costs.

Time Savings

Operating a business takes a great deal of time. It also requires expertise in complex laws and regulations. Your business must remain compliant with all federal, state, and local labor laws. These administrative burdens can be shifted to your HR outsourcing partner where you gain access to their expert HR professionals who work tirelessly to keep your business compliant.

Higher Level of Productivity

Reducing your in-house HR team’s administrative burden gives those employees the chance to focus on your core business needs. They can work to create a more engaging culture, one that helps you attract and retain top talent in your industry. Besides that, the high-quality benefits serves to increase engagement with your employees and keep them loyal. Aside from salary, benefits are the most important factor employees consider when choosing to take or leave a job.

Cons of Outsourcing Benefits Administration

While the pros of outsourcing benefits administration are many, there are cons you need to be aware of so you can properly prepare for your transition. Your in-house HR team may get the impression that they are being replaced. 

However, proper HR outsourcing serves to complement your existing team, not replace them. Making clear that there are distinct and specific goals that you have for your internal HR team will help ease their concerns.

Other employees may feel that outsourcing some HR duties may harm company culture. Employees may feel that another company does not completely understand your company culture and may not make the right decisions. However, this concern can be mitigated by explaining that you are keeping the internal HR team to keep your company culture healthy and growing.

When your team hears from you the reasons for outsourcing HR and understands the distinction between what your internal HR team does and how your HR outsourcing provider complements those goals, your employees will get on board. Your team will see the benefits they receive through this partnership and see that their initial perception was wrong and that the pros vastly outweigh the cons of HR outsourcing.

What to Look for in a Benefits Administration Company

A Professional Employer Organization (PEO) may be the solution your company needs. You have many options when looking to outsource some of your company's HR needs. But there is a reason why so many companies choose to partner with a PEO.

A PEO is the only way your company can see cost savings on both health insurance and workers' compensation insurance. These are both critical components to keeping your employees loyal and keeping them productive. Along with all of the other pros to partnering with a PEO, your choice for outsourcing employee benefits administration is clear. To learn more about PEOs, subscribe to our blog’.

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