Should you outsource your benefits administration?

If you're a small employer with little HR support, handling employee benefits might be challenging and time-consuming. If that’s the case, you may consider outsourcing as a possible solution.

Outsourcing employee benefits administration offers numerous advantages. But, it's not a one-size-fits-all solution. The decision requires careful consideration of your organization's unique needs and goals.

In this article, we'll cover the pros and cons of benefits administration outsourcing.

In this blog post, you'll learn the following:

• The importance of employee benefits and some of the most commonly offered options.
• How employee benefits outsourcing can impact time savings, cost efficiency, and compliance.
• How to determine whether this strategic initiative is right for your business.
• Why PeopleKeep is the ideal health benefits administration solution for your company.

Why are employee benefits important?

Competitive salaries aren't enough to recruit and retain top talent. According to our 2024 Employee Benefits Survey, 81% of employees said an employer’s benefits package is an important factor in whether they accept a job.

Based on survey results, these are the types of benefits that people want the most:

• Health benefits
• Dental insurance
• Paid time off (PTO)
• Retirement benefits
• Vision insurance
• Flexible work schedules

Providing these attractive benefits can improve the overall employee experience at your company. Your employees will be happier and less likely to look for opportunities elsewhere.

What is benefits administration?

Benefits administration is the process of managing employee benefits plans within an organization. It includes tasks like setting up benefits, coordinating with vendors, and monitoring employee use.

Proper administration ensures that employees receive the appropriate entitlements and services as part of their compensation package. It also ensures that any benefits offered are in compliance with any legal requirements.

What is benefits administration outsourcing?

Outsourcing benefits administration is when companies hand over the management of their employee benefits program to an external service provider.

This third-party partner takes care of tasks related to benefits, including:

• Health insurance: Managing the selection and administration of group health insurance plans. Admins may also help with employee enrollments.
• Health reimbursement arrangements (HRAs): Managing health benefits that provide tax-free reimbursement for healthcare expenses.
• Flexible spending accounts (FSA): Managing pre-tax accounts for healthcare, dependent care, or commuter expenses.
• Wellness programs: Organizing efforts that support employee health and well-being.
• Disability and life insurance management: Administering benefits related to disability and life insurance coverage.
• Employee assistance programs (EAP): Providing resources and support to help employees with various personal and professional challenges.
• PTO: Tracking and managing employee time off for vacation and sick days.
• Retirement plans: Managing retirement benefit programs, like 401(k) or pension plans
• Benefits enrollment: Assisting with the enrollment process to ensure employees can access their benefit options.
• COBRA administration: Overseeing benefit continuation for employees who leave the company.
• Benefits compliance: Ensuring that benefits programs follow important laws and regulations, like the Affordable Care Act (ACA) and the Employee Retirement Income Security Act (ERISA).
• Claims processing: Processing employee claims and handling inquiries related to benefits coverage.
• Vendor management: Working with vendors and benefit providers to ensure operations run smoothly.
• Communication and education: Informing employees about benefits options and updates.
• Records: Keeping accurate records of employee benefit choices and updates.
• Benefits cost analysis: Evaluating the costs and effectiveness of benefits programs.

What are the pros and cons of benefits administration outsourcing?

Employee benefits constantly evolve thanks to trends and regulatory changes. This can mke outsourcing administration an attractive option for small employers. Before you decide to go a specific route, let's review the advantages and disadvantages.

Pros of benefits administration outsourcing:

• Enhanced efficiency. By outsourcing, companies can save time and resources. An outside benefits administrator can work on day-to-day administrative tasks. This allows internal HR teams to focus on core functions and strategic initiatives. This can improve overall productivity and efficiency within your organization.
• Cost savings. Working with an external provider can lead to cost savings. They often have established relationships with benefits vendors. This means they can negotiate better pricing or terms. This can result in more competitive benefits packages for employees.
• Access to expert resources. Outsourcing benefits administration to a trusted partner allows businesses to tap into specialized expertise and extensive experience that they may not have in-house. Having benefits experts on your side can lead to better decision-making and more effective employee benefits management.

• Ensured compliance. Working with an employee benefits administrator can help ensure compliance with ever-changing regulations. Dedicated providers stay updated on legal requirements, reducing the risk of non-compliance and potential penalties for your company.

Cons of benefits administration outsourcing:

• Administrative expenses. Working with an external provider comes at an extra cost. You'll need to factor this into your overall budget.
• Less control. A possible downside of outsourcing employee benefits administration is that you might have less direct oversight. Since the external provider handles most of the administrative tasks, employers may find it challenging to manage the specifics of their benefits programs. This can lead to less customization.
• Communication concerns. Working with a benefits administration outsourcing partner can create communication gaps. This is especially true when employees need support or when it’s important to share updates about benefits plans.
• The employee experience is at risk. Outsourcing makes you dependent on the provider to manage your benefits programs effectively. Any problems with the system or with customer support can affect the employee experience at your company.

How can PeopleKeep help you?

Outsourcing isn’t for everyone, especially if you don’t want to give up control of your benefits. But, small businesses often can’t manage their benefits efficiently in-house. That’s why many employers compromise between the two with the help of benefits administration software.

With a benefits software platform, you keep ownership and control over your benefits. But, you offload the most time-consuming tasks to tools that can automate busy-work and experts who provide support for these tools.

PeopleKeep is one benefits administration software option. If you're an employer looking to provide employee health benefits, we can help. Our HRA administration platform lets you easily set up and manage health benefits.

An HRA allows you to reimburse your employees tax-free for their qualifying medical expenses. Depending on the type of HRA you choose, this includes individual health insurance premiums. With a qualified small employer HRA (QSEHRA) or individual coverage HRA (ICHRA), you don’t need to offer an expensive and complicated group plan. Instead, your employees can choose the coverage that’s best for them. Plus, you set your employee allowances, meaning you’re in control of benefits costs. You’ll never pay out more than you intend.

If you’re struggling with any of the following, an HRA might be the solution for you:

• Offering a health benefit for the first time
• Increasing health insurance premiums or administrative burdens
• Meeting minimum participation requirements

We simplify the process of managing an HRA by:

• Reviewing documentation for submitted employee expenses
• Offering award-winning customer support
• Creating your benefit plan documents to ensure compliance
• Helping your employees find qualifying individual health insurance. Our integrated shopping experience and in-house enrollment team make this easy

As your trusted benefits administrator, we can save you valuable time and money that you can reinvest in other areas of your business.

Conclusion

Managing employee benefits can be a daunting task for any organization. With regulatory compliance, the workload can quickly become unmanageable for internal teams. As a result, you may consider partnering with external providers to streamline employee benefits administration.

While this option may suit you in specific circumstances, it's important to consider your goals, as well as whether administration software may be a better fit.