HR outsourcing evolves with specialized services

Collaboration among vendors, personalization for employees a reality as outsourcing matures

When human resources outsourcing made its debut in the 1990s, companies focused on moving transactional activities out the door to free up time for HR departments. Then call centres became popular to respond to queries from employees — another big time saver for in-house HR departments.

As the new millennium dawned, providers began offering web tools for HR applications. Online benefits enrolment was one of the first to be rolled out. From the employees’ perspective, this meant they still received information about HR programs in print or in person, but went to a website once a year to make their benefit choices.

Fast forward to 2009 and employers are looking to HR outsourcing to meet a wide variety of objectives, according to Hewitt’s HR Outsourcing Trends and Insights 2009 survey. While outsourcing continues to help ease the administrative burden of increasingly complex HR programs, companies also hope to lower costs, gain access to outside expertise, avoid making large investments in technology, improve service quality and enable HR to deliver greater value to the organization.

HR outsourcing has made the leap from a mere time-saving solution to a strategic initiative.

Vendors catch spirit of collaboration

Several years ago, the argument in favour of outsourcing HR functions focused on cost savings. Providers claimed the more services that were outsourced to a “one-stop shop,” the greater the savings would be for an employer.

The new mantra for employers is to seek out best-in-class outsourcing providers to achieve not only the highest cost savings but the best service. This can involve a number of providers that offer specific HR outsourcing capabilities. For example, a company might turn to one provider for pensions and benefits administration, another for payroll and a third for recruiting. These specialized providers realize being all things to all employers is challenging and often doesn’t make good business sense.

Fortunately, using multiple providers does not generally result in a disjointed hodgepodge of systems that don’t work together. From the provider perspective, the emphasis is on co-operation. From an employee’s vantage point, the service and experience are seamless as integrated technology enables access to multiple systems by signing on once. The information gathered by each system feeds into others so, for example, a change in pay picked up by a payroll administration system is reflected in all provider records.

Of course, managing multiple outsourcing provider relationships can be challenging and time-consuming for an employer. Accordingly, a new outsourcing service is gaining in popularity: A provider management expert, who takes on contract management responsibility.

Employers have come to see employee portals as opportunities to help educate and inform workers so they have increased awareness and understanding of the HR programs available to them. At the same time, the population at large has become more familiar with online media so, for the most part, employees are quite willing and eager to access information this way.

But online tools also enable tailored communication to individual recipients. Instead of creating and managing multiple versions of a print communication piece, employers can use online communication to personalize messages on an individual level, populating data fields with information specific to an employee.

Online modelling tools make for better decisions

In addition, online tools enable powerful decision support and modelling tools that help employees make better-informed decisions. Some companies have found providing materials on paper actually increases call-centre activity by younger employees who don’t read them or misplace them.

The bottom line is HR outsourcing is no longer just a means for handling administrative trivia. It has evolved to become a “need to do” for many organizations, helping to meet business objectives.

Jean-François Potvin is a Toronto-based principal and the leader of Hewitt Associates’ consulting administration practice in Canada. He can be reached at [email protected].

Future Trends

New frontiers for HR outsourcing

Absence management: HR outsourcing services are expanding beyond the traditional areas of benefits, pensions and payroll. An emerging area for specialty providers is disability or absence management. Absence management can improve workforce productivity by providing the integration of tools and resources not only to support employees requiring time away from work but also to facilitate their successful return.

Communication: In terms of communication, there is a growing emphasis on conveying the “what’s in it for me” message to employees so they have a greater appreciation of their total rewards package. Online solutions can not only educate employees — and even job candidates — about the total annual value of the rewards a company provides, they can assist and motivate employees to take action and maximize the value of their rewards.

Education: Providers are also exploring opportunities to make broader financial education available to workers. Employees’ personal financial issues can cost organizations valuable productivity and engagement. With a resource that provides fast answers to pressing financial questions, employees can get back to work as quickly as possible. These services provide sought-after education and guidance on a range of personal finance issues, using various methods designed to meet the preferences and learning styles of diverse employee populations. The employee education program may be online, over-the-phone or on-site.

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