When it comes to HR outsourcing, the buzzwords appear to be around integration, specialization and, of course, technology. There has also been a lot of consolidation among vendors as the industry transforms alongside employer demands.
HR outsourcing has come full circle, with employers moving away from putting all their eggs in one basket with a sole provider — for benefits, pensions, back office administration or recruitment — to more single-process deals, where people are looking at “Who’s the right vendor for X, who’s the right vendor for Y?” according to Van Zorbas, a Calgary-based partner at Deloitte who runs the HR transformation practice.
“What we’ve seen now is a shift back to a lot more emphasis on the buyer, and the buyer having a little bit more power.”
Employers are not just doing full-scale renewals but instead are considering pulling services out, he says, adding it’s difficult for big outsourcers to be deep subject matter experts.
“So now you have players that are specific to recruitment, so if you were going to outsource recruitment, you’d probably go to a specialized provider versus going to a big player — like Aon Hewitt or Accenture or IBM — and say, ‘Take all of my recruiting.’”
A lot of employers are trying to attract and retain employees by making sure they understand what programs they offer and how and when they should be used. An integrated online solution or portal can help, according to Paul Sywulych, vice-president of enterprise solution architecture at Morneau Shepell in Toronto.
“It really brings together all of the programs that an employer’s offering in a way that adjusts based on what’s happening in an employee’s life so they can make use of the programs at a time that’s relevant to them,” he says, adding it’s an issues-based approach versus a program-based approach. To the extent that an employer is working with other providers, we can also tie in those other providers — that makes it seamless to employees,” says Sywulych.
Outsourcers are also looking at how technology enables new solutions, such as mobile, on-demand or a zero carbon footprint, said Rod Dobson, outsourcing lead at Aon Hewitt in Toronto.
There’s also a push for more flexible technology, in contrast to large-scale enterprise resource planning (ERP) software, as seen with companies such as PeopleSoft, says Zorbas.
“Cloud computing has now pushed vendors to start thinking differently and also pushed clients to start saying, ‘What about using cloud computing?’”
In the area of retirement planning, employers are looking for help with different types of pension plans, such as defined benefit (DB) and defined contribution (DC), says Sywulych.
“That means more often we’re seeing employers looking for a provider that can actually straddle both the defined benefit or defined contribution or cap administration capabilities... so an employee that may have entitlements under both types of programs can actually be served by a single provider.”
Plan sponsors also want more services available to members, says Paul Forestell, senior partner and the central Canada market business leader for retirement risk and finance at Mercer in Toronto.
“Their ability to model, there’s a lot more interest in that, which has driven some consolidation in the market.”
And there’s a lot more interest in financial planning and advice for members, he says.
“As more of the responsibility for retirement savings shifted to the employee, people also feel there’s an obligation to make sure they’re able to take that responsibility.”
Absence management is another area of interest in the outsourcing realm, says Sywulych.
“Things like short-term disability and workers’ compensation case management isn’t necessarily a core competency of employers,” he says. “So they’re looking for solutions that are not necessarily a typical insurance company solution, where it’s focused on adjudication but more based on looking to try to make sure employees are at work — or they’re back to work as quickly as possible — when they actually start to manifest some issues that would take them down the disability path.”
That can mean taking an integrated approach that straddles both short-term disability, workers’ compensation and incidental absences, he says, as opposed to the simple transaction management associated with adjudication.
Member experience important
Cost is definitely a factor in outsourcing but for many employers the drive is more about rebuilding services from the member perspective or experience, and helping an organization get to a place where it’s serving its core mission around attracting and retaining top talent, according to Dobson.
“That’s part of the theme, that outsourcing should be about not just delivering at a lower cost but delivering at a better standard... actually expanding the capability of the organization at a given spend level.”
In line with the United States, a lot of Canadian employers are looking to engage employees in total health by including incentives within flexible benefits programs. That can mean encouraging them to complete a health-risk assessment (HRA) so they understand different health risks and learn how to mitigate those risks, says Sywulych.
“Typically it’s outsourced because employees have a heightened sense of concern around privacy with this kind of information. When you complete a health-risk assessment, you’re divulging some pretty significant information about you and about your lifestyle.”
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