Benefits Administration: Tops on Today’s HRO Food Chain

Our recently completed Targeting Benefits Administration research report – an annual study that monitors the global benefits administration market – found that benefits outsourcing is experiencing an annual average growth rate of seven percent through 2013, while other HR processes are comparatively limping in today’s economy.

Why is benefits administration beating its brethren to gain the top spot on the HRO food chain?

While the main traditional driver for benefits administration outsourcing was enhanced participant experiences, e.g., through better communication integration and self-service implementation, reduced cost is now an equal factor in the decision to move to an outsourced model. In fact, the state of the economy is driving new benefits administration outsourcing contract activity, particularly within health and welfare in North America and flexible benefits administration in Europe. In some cases these are first time engagements as organizations are realizing the value their peers have gained from outsourcing, and in others it’s a move to a different service provider to gain more bang for the outsourcing buck.

We’re also seeing an increase in contract scope. New RFPs are extending beyond traditional transactional processes like enrollment and premium collections to include quick hit process areas such as dependent audits. And organizations already in the midst of outsourcing engagements are expanding their list of in-scope processes to achieve even more rapid ROI. For example, with dependent audits, imagine taking an average of eight percent of ineligible dependents off the books at an average cost of $3,000 per dependent….a finance director’s dream come true, whether the company has 5,000 or 50,000 employees!

Oh yes, benefits administration outsourcing is a happier sector today than other HRO areas (even though it would be far happier were it attaining the double digit growth of quarters past.) Our HRO Confidence Index shows that benefits administration service providers ranked highest in terms of revenue growth (3.5 out of 5 on a 1-5 scale) and pipeline growth (4 out of 5.) This clearly demonstrates that the buyer community understands and is reaping, or is confident it will reap, the value it expects from benefits administration outsourcing.

Until next time, happy sourcing!

Helen Neale, Research Director, Human Resources Outsourcing, NelsonHall

P.S. – Please visit NelsonHall’s HRO Insight LinkedIn Group and become a member today. We’d love to have you join in the discussions and share your thoughts and insights with your peers!

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