Posted tagged ‘hr outsourcing’

Flexible Benefits and HRO Add Choice for Employees and Options for Employers

May 2, 2012

Mercer’s What’s Working Survey found that one-third of European participants are seriously considering leaving their organization. This had me immediately questioning why. Does it have something to do with the employee’s benefits package? Probably not in the U.K. since 36% of respondents stated that their benefits package was the primary reason for staying at their organization.

In fact, 30% of survey participants in the U.K. said that their employer’s benefit package was the key reason for joining the company in the first place, up 5% since 2005. Across Europe including France, Germany, Netherlands, Spain, and Italy, the average percent of employees that are content with their benefits package is 50%, representing a general decline over the last five years.

The survey shows what employees value varies by country, culture, and age. While surveyed European employees have many common interests, there is variation by country. Employees in France and Italy were the most dissatisfied over many of the employee value proposition elements studied including base pay, benefits, and development opportunities. In most cases, score varied. For example, employees in the Netherlands were less likely to intend to leave and were satisfied with their benefits, but were dissatisfied with employer assistance in retirement plans and base pay.

With pressure on all aspects of workforce costs, including benefits, what is an employer to do?  One option is to add a flexible benefits program to increase employee desired choice while still controlling costs. Program designs include one or both of the following:

  • Employer paid benefit “credits” that employees can use to select the choices most important to them
  • Employee paid benefits available through the employer, payable with payroll deductions and usually at better prices than available in the general market.

While flexible benefits schemes have been slow to take off, the continued adoption rate will have a positive effect on flexible benefits service providers since internal HR departments tend to lack the skills necessary to administer these benefit choices successfully. According to Mercer’s European Survey on Employee Choice in Benefits, flexible benefits programs generally meet employer objectives (63%) and are well-received by employees (71%).

Using HRO to administer the programs reduces administrative cost and complexity for employers.  The number of European organizations outsourcing their flexible benefit plan has increased. Specifically, Mercer’s survey found the following:

  • 36% of employers outsourced their entire flexible benefits program, up from 28% in 2009
  • 33% use a combination of in-sourcing and outsourcing for their flex program, up from 23%
  • 16% manage the flex offering in-house, down from 35%.

NelsonHall’s upcoming Targeting Benefits Administration market analysis report will indicate that growth opportunities for flexible benefits are very good as organizations look for an alternative to salary increases and bonuses while meeting the needs of increasingly diverse workforces.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

What are the Top Global Skill Shortages?

April 26, 2012

Even when the U.S. unemployment rate was over 10%, we’ve heard that the unemployment of skilled workers with college degrees remained low at ~4-5%, and we’ve read data on just how bad the skill shortage is, including ManpowerGroup’s findings that 52% of U.S. companies are struggling to fill key jobs. We’ve also heard from me as an analyst (and former HRO buy-side client), pointing to the fact that development and retention of talent are more paramount than ever. But not as much has been written about what are the top global skill shortages. Well not until last week when U.K.-based global recruitment and RPO provider Hays issued a good concise summary of the top ten global skill shortages.

The list divides the skills by soft skills and hard skills that are in shortage globally.

Soft Skills

  • Languages
  • People and communication
  • Team management and leadership
  • Organization.

Hard Skills

  • Financial and budgetary
  • IT
  • Green skills
  • Procurement and negotiation
  • Research and development
  • Healthcare.

Beyond being good for job candidates and employees to know the skills they need to focus on; employers need to do a better job of investing in their workforce to develop and retain the talent that they already have. In fact, employees are looking for that. Mercer’s newly released eBook, “What’s Working Around the World”, points to the fact that career advancement and training opportunities are among the top priorities of the employee value proposition in many countries and are needed to address low levels of employee engagement.

As I get ready to publish my next global learning BPO report, I am optimistic to hear that talent management focus is no longer just a desired priority but is now a business imperative. Clients are increasingly focused on learning linked to talent management, including the linkage of learning to performance management and developmental plans. To meet client needs to attract, develop, and retain talent, vendors have been developing their talent management capability. This includes MPHRO vendors such as Xerox, Aon Hewitt, Talent2, IBM, and Accenture, whose talent management offering includes workforce forecasting and analytics, recruitment, performance management, succession planning, and learning.

In the report, I also wrote about the advent of social learning. For now, I’ll just say that speed to competence, followed by how the new generation of employees that are entering the workforce wants to learn, as well as the need for improved talent management, are what’s driving the acceleration of social learning.

If you are not already following me on Twitter, please do so at @GaryB_NH as I will tweet when the LBPO report is published. I’m targeting the 30th of April, in time for my presentation at the HRO Today Forum on May 1st titled State of the Learning BPO Marketplace and the Emergence of Social Learning.

Gary Bragar, HRO Research Director, NelsonHall.

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

NorthgateArinso Sets a Cadence for Growth

April 25, 2012

NorthgateArinso (NGA) recently held its annual analyst day in Boston. Chief Executive Mike Ettling reported that NGA’s revenues have increased 6-7% every quarter for the last six quarters and it had brought in over £500m in revenues for 2011. With very good growth under its belt and its built-out set of services, updated core technologies, and global delivery network, NGA is setting new goals to reach its target of $1bn in revenues by 2014.

The company is defining itself as “an HR BPaaS business enabled by technology, process, and domain expertise.” Business-platform-as-a-service is what many are calling business platforms, and since we are talking about HRO, I call it HRO platforms. From that perspective, NGA is already in the BPaaS business of providing bundled business process services and technology solutions.

NGA has ~8,500 personnel in 35 countries with HR technology, outsourcing, and consulting services in over 100 countries. That will not change. It will continue to offer unbundled technology and software services for payroll and HR. It will also continue to offer consulting services for HR systems and implementation of sand integrations, as both are good revenue streams. What is new is that the company is staking out its direction for future growth as an HRO services company, not a technology company.

How does an already good, solid HRO performer accelerate to outpace its competitors? For NGA, the answer is in structure and cadence.

Structure

Management structure is seen in the cascading goals, upcoming changes in organizational structure and alignment of compensation, the use of metrics, and the top-down involvement in selecting and managing key initiatives, investments, and projects. NGA is continuing to standardize its services into a catalog of selections, standardize implementation, and even standardize the offer to delivery process. It is developing an internal system called ScopeHR, which will standardize and automate the production of all key BPO/BPaaS information and documents to make solution selection, selling, pricing, and contracting easier, faster, and more efficient for both the client and NGA.

Cadence

Timing and pacing are also NGA keys in achieving profitable long-term growth. This includes an understanding of how to migrate and grow client scale and scope over time, to step-by-step refine its robust system for services delivery that includes moving to “mega centers of scale” and plans for workforce development to avoid capability gaps. Components of the service delivery value chain are addressed, cross-checked, and backed up. Continuous improvement is also seen in the use of Lean Six Sigma teams, CCMI standards, and an operational excellence framework to increase capability maturity while growing the business and retaining satisfied customers.

There is still a lot of uncertainty in the economy, which may impact NGA’s plans and timing. Given NorthgateArinso’s track record so far, clear goals, and achievement plans, if it adds in a bit of flexibility, the odds are good that it will hit its target.

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

Benefits HRO and the Impact of Changing Benefits Trends

April 18, 2012

This week, we look into the world of benefits from the 10th Annual MetLife Study of Benefits Trends. The long-running employee benefits research highlights the changes in trends due to the changes in the economy and their impact on the generations of employees.

Employer goals and objectives for benefits remain the same: control costs, attract and retain employees, and increase productivity. It is what employees, especially younger employees, value now that has been changing. And that may call for a change in strategies and approaches to maximize the dollars that employers spend on benefits.

Traditionally, younger employees were not very focused on long-term financial planning and retirement; now, 52% of those 21- to 30-year-olds are concerned about long-term financial security. Even though employees know that they must accept greater individual responsibility (63%) and are likely to face additional cost shifting in the future, nearly half (49%) of those surveyed say that because of the economy, they are looking to their employer to help them achieve financial protection through a range of employee benefits. The Generation Y percentage looking to the employer for help is even higher at 66%. Today’s employees of all ages are more aware than ever of the value of employer benefits, both traditional – like medical and dental – and voluntary benefits, where the employee may pay more or all of the cost. Take advantage of this awareness to increase communication, education, decision support tools, and even branding of the benefits you are providing.

Seventy percent of surveyed employers are planning to retain current benefit levels and only 10% may cut benefits, but 30% may need to continue cost shifting to employees. Few employers are planning to spend more overall on benefits, but employers are open to shifting priorities. For example, there are plans to increase the number of wellness programs and voluntary benefits offerings like long-term care, critical illness coverage, optional life coverage, and optional disability coverage.

Another reason why I wanted to bring this study to your attention is that it separates the employer data into progressive and standard. Progressive employers more attuned to changing employee needs – such as wanting more choices and life stage options – and likely to make adjustments to achieve cost control, attract and retain employees and increase productivity. This split is similar to other areas of HRO where one client wants the latest in transformation to optimize value and achieve business results and another wants improved technology and processes to lower costs and increase efficiency.

Employee benefits needs are growing, changing and challenged by uncertain economic conditions. All benefits HRO clients should expect to have a partner in adapting to changing conditions. Whether that means access to full-scale consulting for a revamp of benefits spend, policy, and offerings, or basic access to vendor research and client networking opportunities, what matters is the match of client expectations and the service provider’s ability to deliver.

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

The Seams Matter in HRO

April 13, 2012

To complete our review of HRO’s total cost of ownership (TCO), I want to expand on the factors that can either ramp-up or create a drag maximizing savings. The ADP studies on TCO do more than show the savings that real customers are achieving; the research also looks at why.

First, we need to understand what goes into TCO, which can help create a base case for outsourcing and in tracking the results. Included in the ADP TCO research are:

  • Systems cost for initial implementation, upgrades (both amortized over three years), and system maintenance
  • Direct fully loaded labor costs for associated administrative and IT employees
  • Non-direct labor cost for overheads like facilities and corporate overheads
  • Supplier or outsourcing costs.

Some of the costs are hidden in budgets other than HR’s, including IT, finance, or corporate. Remember that some of the employee costs are also hidden out in the field. We call them the shadow staff—people who support HR processes part-time. It’s important to understand the full cost of providing pre-outsourced services to be able to determine the difference in operating expenses after outsourcing.

There are also costs that result from the “seams.” Seams create gaps and can be found between technologies, processes, and people. These costs are seldom apparent or included in base cases, but they are real and can make the difference in 8-10% savings versus 20-30% savings.

Why does using a single vendor for multiple integrated processes create additional savings? With more services on one vendor integrated platform there are fewer interfaces to maintain, which costs less. When using various separate technologies and vendors, more complexity is in the system, and that generates an increased need to ensure that interfaces are maintained and addressed every time a change is introduced; it also increases the need for customizations and workarounds. When a payroll change was made, I could not understand why it took so long. It was because payroll data touches so many other HR processes that every calculation and interface needs to be addressed, tested, and ensured, many of which touch other suppliers and outsourcers, which adds even more time and cost.

Fewer systems, fewer non-integrated interfaces, and fewer vendors reduce complexity and can further reduce cost. The same concept is true for processes and people. Changing and standardizing internal processes and behaviors across the enterprise is hard. Persistence over time can make the difference in achieving 20% savings and 40% or greater savings.

The good news is that you do not have to do this all alone. Understand what you can expect from your primary HRO vendor(s) and what is included in standard pricing and what additional services are available at additional cost. HRO vendors like ADP, IBM, and Infosys, while specializing in various areas of HRO services, understand the importance of ongoing HRO governance, relationship management, change management, and step-by-step maturity along the way to maximizing the TCO benefits of HRO.

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

HRO Reduces TCO!

April 5, 2012

Buyers, how much will you save by implementing HRO services? Will it be 8% or over 50%?

ADP recently published the results of its latest total cost of ownership (TCO) study, The Hidden Benefits of Human Resources Business Process Outsourcing. The company has sponsored several PwC TCO studies since 2003 comparing the TCO of companies maintaining HR services in-house to those using ADP HR BPO. The 2012 study was completed by Sourcing Analytics and digs even deeper into the patterns established in the earlier PwC studies.

I touched on this topic last year, but it is well worth a second look because the research supports common HRO advice and counsel.

The good news remains: HRO of services including payroll, time and attendance, workforce administration, and health & welfare reduce TCO over in-house services.

The bad news is that HRO is not a quick financial fix and first year savings are usually modest. It takes time and hard work to transform HR operations and service delivery, but there are companies that have reduced TCO by 50% with 20-30% being possible for most over time.

Often, one or more HR services are outsourced with the focus mostly on the technology and transactions and may include more than one service provider. While there should be many benefits in new service features and functions and improved processing, the TCO impact is likely to be low, perhaps only 8%. To get both full value and full savings, more is needed.

Here are some of the building blocks that can be used to further increase your HRO TCO:

Technology and process

  • Use one vendor for integrated payroll and time and attendance to bump up savings a bit
  • Move to SaaS-based technology platforms to reduce technology costs the most
  • Make it real BPO, include contact center services
  • Multi-process HRO (MPHRO) saves more than best-of-breed services managed in-house, can significantly ramp up savings.

Process and people

  • Support initial transition, adoption, and utilization
  • Adopt standardized and centralized best practice processes across the entire enterprise
  • Follow through and reduce or re-deploy the retained organization
  • Keep working on it together; it may take up to five years to achieve maximum TCO savings as maturity is attained and more and more of the building blocks are added.

How much a particular client will save depends on a number of choices and options that are largely within the control of the client. In addition to great HRO performance, top-notch providers will be able to support each client in their journey to attain the most savings possible.

Next week, we will take a look at some of the factors and actions that shape the HRO journey.

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

Opportunities Expand for HRO: Health Care Exchanges

April 3, 2012

Private health care exchanges are a hot topic, and the number of HRO service providers with such an offering is expanding. In addition to current providers including Aon Hewitt, Extend Health, and Xerox/ACS, Mercer announced a suite of health care exchange offerings last week.

It’s no surprise that health care exchanges are increasingly popular since the benefits extend to both employers and employees. While employers reduce liability and administration while accessing better plans or prices, employees obtain access to competitive pricing, employer subsidies, and assistance with selecting the plan best-suited for their needs.

Here is a brief synopsis of the existing health care exchanges in the market.

Retiree exchanges: These exchanges typically help retirees select a Medicare plan and/or supplemental insurance products based on their medical needs and budget. Service provider offerings typically include:

  • Call center services to assist retirees in selecting a plan including assessing needs, evaluating options, and enrollment into a plan
  • An online portal for shopping plans
  • Written materials / communications such as booklets, letters (e.g., appointment, confirmation of coverage, and annual enrollment letters), appointment reminders, etc.

Retiree exchanges were the first type of exchange to appear in the market, and as a result, there are a few service providers with such offerings available. Extend Health has its ExtendRetiree exchange. Aon Hewitt added its retiree health care exchange in March 2010 when it acquired Senior Educators, Ltd. In 2011, the exchange was renamed “Aon Hewitt Navigators.” Xerox/ACS launched its retiree exchange, “My Medicare Advocate,” in October 2010.

Among the exchanges it announced last week, Mercer launched its Retiree Medical Exchange. Its exchange leverages any employer subsidies available for coverage by converting current and future retirees to a DC model where they purchase individual coverage most-suited for them.

Active employee exchanges: While the retiree exchanges are focused on individual coverage, the exchanges for active employees are focused on group plans.

Aon Hewitt’s offering, for example, provides employees with a credit to purchase health coverage that can be accessed through its private exchange. Once employees log-on to the exchange, they will select health care coverage from group options that are standard levels of coverage with varying levels of reimbursement.

The Mercer Benefits Choice Exchange (MBCE) allows employers with 100 – 1,000 employees to contribute a set amount to a HRA. Employees then use decision-support tools to select coverage and enroll online.

Mercer’s other offering, Mercer Health Advantage (MHA), allows self-funded employers with >3,000 employees to enroll employees in new medical plans beginning January 1, 2013 that will save the employer 5% or more. Employers will also get access to dedicated MHA clinical care management with ongoing oversight and audit capabilities.

Benefits administration is a major and mature HRO service line. Health care exchanges present a welcome new growth opportunity for HRO and more options for employers and active and retired employees. Expect more benefits service providers to add to the available service offerings.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.