Mix of outsourcing and in-house HR seems to work for U.S. organizations
Despite the growing interest in outsourcing, very few companies in the U.S. completely outsource their employee benefits administration, according to a new study.
In a survey of mostly large and mid-size organizations, Consulting firm Watson Wyatt found most organizations use a combination of internal and external resources to administer their retirement and health plans. And most of them are satisfied with the results.
“The outsourcing decision is not cut and dried,” said Richard Hubbard, global director of Watson Wyatt’s technology solutions practice. “One-stop outsourcing makes sense for some. But most companies are leveraging their technologies and people in combination with outside vendors to achieve better results.”
A total of 315 organizations participated in the survey, Finding the Right Mix for Benefits Administration: Watson Wyatt’s Benefits Outsourcing Study, and a subset of 87 firms also provided information on their internal and external call centers.
While companies were generally satisfied with their in-house and outsourcing decisions, companies with internal HR call centres were more likely to report they were successful at meeting their cost reduction goals (86 per cent of in-house versus 67 per cent of outsourcers).
Watson Wyatt said companies using internal call centres were also somewhat more successful at improving customer service and transaction accuracy, and increasing productivity. Participants with outsourced HR call centres, however, were more successful at driving employees to use Web-based self service applications.
“Overall, companies do not have as precise a handle on costs as might be expected, given the stakes involved,” said Hubbard. “That said, costs are not the only factor in outsourcing decisions. Other considerations — such as improving service to employees and reducing HR administrivia — usually come into play. There is no one-size-fits-all answer.”
In the retirement benefits area, most U.S. firms have long outsourced the administration of 401(k) plans. For defined benefit (DB) plans, the survey found 60 per cent of companies use a combination of internal and external resources for plan administration. Only one out of four (27 per cent) completely outsource all pension plan administration functions and even fewer (14 per cent) have their internal HR departments fully controlling administration. Watson Wyatt said 80 per cent of large and mid-sized companies outsource the processing of pension benefit payments. But only 31 per cent outsource the actual interaction with employees to an external vendor.
While the administration of DB pension plans can be outsourced to a single vendor and bundled with actuarial services, very few respondents (six per cent) opt for this approach.
“Many companies are concerned about the risk of putting all their eggs into one basket,” said Tony DeNucci, national leader of pension administration systems for Watson Wyatt’s technology solutions practice.
But a majority (71 per cent) outsource the actuarial function and use a mix of sourcing approaches for administrative functions.
“Web-based defined benefit administration tools allow companies to keep those functions in-house that make the most sense, like interacting with employees, while outsourcing other services like system hosting or more complicated participant calculations,” said DeNucci. “And, when done right, these Web-based tools allow plan sponsors to electronically interact with their consultants and actuaries on participant-specific issues, while giving employees direct access to their data.”
In a survey of mostly large and mid-size organizations, Consulting firm Watson Wyatt found most organizations use a combination of internal and external resources to administer their retirement and health plans. And most of them are satisfied with the results.
“The outsourcing decision is not cut and dried,” said Richard Hubbard, global director of Watson Wyatt’s technology solutions practice. “One-stop outsourcing makes sense for some. But most companies are leveraging their technologies and people in combination with outside vendors to achieve better results.”
A total of 315 organizations participated in the survey, Finding the Right Mix for Benefits Administration: Watson Wyatt’s Benefits Outsourcing Study, and a subset of 87 firms also provided information on their internal and external call centers.
While companies were generally satisfied with their in-house and outsourcing decisions, companies with internal HR call centres were more likely to report they were successful at meeting their cost reduction goals (86 per cent of in-house versus 67 per cent of outsourcers).
Watson Wyatt said companies using internal call centres were also somewhat more successful at improving customer service and transaction accuracy, and increasing productivity. Participants with outsourced HR call centres, however, were more successful at driving employees to use Web-based self service applications.
“Overall, companies do not have as precise a handle on costs as might be expected, given the stakes involved,” said Hubbard. “That said, costs are not the only factor in outsourcing decisions. Other considerations — such as improving service to employees and reducing HR administrivia — usually come into play. There is no one-size-fits-all answer.”
In the retirement benefits area, most U.S. firms have long outsourced the administration of 401(k) plans. For defined benefit (DB) plans, the survey found 60 per cent of companies use a combination of internal and external resources for plan administration. Only one out of four (27 per cent) completely outsource all pension plan administration functions and even fewer (14 per cent) have their internal HR departments fully controlling administration. Watson Wyatt said 80 per cent of large and mid-sized companies outsource the processing of pension benefit payments. But only 31 per cent outsource the actual interaction with employees to an external vendor.
While the administration of DB pension plans can be outsourced to a single vendor and bundled with actuarial services, very few respondents (six per cent) opt for this approach.
“Many companies are concerned about the risk of putting all their eggs into one basket,” said Tony DeNucci, national leader of pension administration systems for Watson Wyatt’s technology solutions practice.
But a majority (71 per cent) outsource the actuarial function and use a mix of sourcing approaches for administrative functions.
“Web-based defined benefit administration tools allow companies to keep those functions in-house that make the most sense, like interacting with employees, while outsourcing other services like system hosting or more complicated participant calculations,” said DeNucci. “And, when done right, these Web-based tools allow plan sponsors to electronically interact with their consultants and actuaries on participant-specific issues, while giving employees direct access to their data.”
