Some Holiday Time HRO Cheer: Some Companies will Return to Better Benefits in 2010

Per a USA Today article on December 11, 2009, many companies have announced they will reinstate suspended benefits and/or increase some of the benefits they provide to their employees in 2010. Named companies include FedEx, JPMorgan Chase, American Express and Motorola.

During the current recession, many companies reduced 401 (k) contributions and lowered merit increases and bonuses, if they indeed provided them at all. And bah humbug, some companies even reduced salaries and/or employee hours.

The good news is that two thirds of the companies that did not give pay raises this year plan to do so in 2010. And one third that cut back on their 401 (k) matches plan expect to reinstate or increase company contributions next year. While FedEx and others may not offer 401 (k) matching and other benefits on par with previous years, any step in the right direction is still good news!

So what does this mean for the HRO industry?

First, Defined Contributions (DC) Administration represents the largest share of Benefits Outsourcing revenue for providers, and over half of all vendors get paid per transaction, in addition to per participant per month. The net here for providers is that more transactional changes results in more revenue. Dealing internally with these transactional changes may not, on the surface, seem like a big deal. But as a former programmer and systems administrator, I know first hand that all such changes must be fully tested and is a huge administrative burden. Thus, with buyers happy to get out of performing this type of transactional work, a return to better employee benefits likely means happier times for providers, buyers and their employees.

Second, consistent with several of my recent blogs, the fact that some companies are beginning to again invest in training and developing their employees is driving an increase in the pipeline for learning services agreements, and has resulted in some recently signed contracts. And even though significant hiring volumes may not return for some time, attracting and retaining top talent is showing signs of increased importance, and thus most RPO providers are also reporting substantially improved pipelines.

Finally, the today-released results of a Hackett Group study, which stated earnings are significantly higher for companies with strong talent management capabilities, underscores the importance of reinstating and increasing employee benefits in order to retain existing high performers and attract key talent in the future. Ala, more opportunities for HRO providers and for smart buyers that are re-acknowledging the value of outsourcing key functions such as learning and hiring.

While my blog today started out focusing on a return to better employee benefits, much of the success in today’s competitive (although still economically limping) environment is attributable to how employees are treated, developed and managed. Given the pipeline increases and contract awards we are seeing in the learning, RPO and SaaS talent management, I’m optimistic for a happy and healthy New Year!

Gary Bragar, Lead HRO Analyst, NelsonHall

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