Flexible benefits schemes are gaining increasing interest from many organisations. David Wicken and Jon Tye of Mercer Human Resource Consulting look at technology solutions for flexible benefits delivery.
The systems technology supplier market is very aware of the current level of interest in flexible benefits (flex) and over the last couple of years there has been significant growth in providers offering benefits services, ranging from full design and administration through to hosted technology solutions.
Given such choice it is not surprising that the solutions adopted by organisations vary. Some have decided to keep the whole scheme in-house and have adapted existing HR systems such as SAP or Oracle to deliver benefits to their employees. Others have chosen to work with one of the fledgling ASP providers such as Vebnet or 4th Contact – purchasing the technology solution and doing the administration in-house.
Over the past decade many companies have sought to outsource large sections of their HR activity, and benefits delivery is no exception. One of the most popular routes for flexible benefits scheme delivery is through a comprehensive service that combines a technology platform with administration and consultancy.
Understanding your organisation
Moving benefits online will raise employees’ awareness of the value of entitlements available. Assuming the business drivers for benefits delivery require an online solution, getting answers to a few simple questions relating to organisational structure and technology could signpost the way ahead. For example:
Does the organisation have a devolved operating structure of separate business units and/or alternatively has it grown through acquisition?
If the answer to either of these is yes, then it is possible that diverse HR and payroll systems exist that could mitigate against an in-house solution.
How widespread is web access within the organisation?
If the spread isn’t universal, other means of delivering benefits may have to be incorporated into the programme.
What have the IT gurus got to say about navigators, security and firewalls?
Key information in deciding whether the whole thing is viable.
Can the HR system(s) deliver the data required?
Data is key and if current systems cannot deliver you will be continually challenged to deliver anything meaningful.
Just how sound is the quality of data on the HR system(s)?
If it is low quality then administration costs will increase and employee disaffection grow.
Do current HR systems provide the business with the tools/information it needs?
Might be more effective to invest in these before considering online benefits delivery.
Does the business have the internal resources to administer a scheme itself?
Implementing and administering flex should not be seen as an adjunct to the ‘day’ job.
Typically, what are the administration processes involved and what amount of time is required to do the job?
Will vary from scheme to scheme – but expect heavy workload to support annual enrolment.
To answer such questions it is good practice to audit current HR and payroll systems and the platforms that underpin internal and external information and knowledge exchanges. An audit will provide a clear understanding of current capabilities, the gaps that exist and any additional investment required to support the project.
Making sense of benefits
A clear understanding of what the current benefits package contains and who is entitled to what benefits is imperative. Where companies have grown through merger or acquisition benefit rationalisation can be relatively low on the list of HR priorities. Implementing flex will bring these ‘grandfathered rights’ to the table.
A benefit audit can help identify such anomalies and also serve as a starting point for defining the structure of a flexible benefits plan and the rules surrounding it. It may provide an opportunity to rationalise benefits or replace or replicate existing entitlements within an arrangement.
Flex allows organisations to broaden the benefits available to employees, but if the arrangement is not properly considered an overload can occur in year one. It may be better to introduce two or three new benefits in the first year so the scheme can evolve and grow over time and remain fresh and relevant to employees. It is advisable to get feedback from colleagues to ensure that benefits are targeted at a range of lifestyles.
Getting the resourcing right
Whether you opt for an in-house or outsourced solution it is crucial to identify and commit the necessary people resources to implement and maintain a flex scheme. A common mistake is to add delivery responsibility to existing day jobs and hope by chance that everything will happen. Experience repeatedly shows that this approach does not work as the project requires dedicated resources and expertise at different times, particularly during the implementation phase.
It is always recommended that organisations appoint a full-time project manager to help drive the project through to a successful outcome, as input and commitment from a diverse group of individuals is required. The communication of a flex scheme and employee support through the first annual enrolment is of crucial importance – typically 40% of employees seek information or clarification at this time.
The list below gives a broad indication of the time commitment required from an internal project team set across the three delivery solutions for a scheme with 2500 lives:
HR/Benefits manager
In-house – Medium to high
Fully Outsourced – Low to medium
ASP Provider – Medium to high
Payroll Manager
In-house – High
Fully Outsourced – Low
ASP Provider – Low
IT Specialist
In-house – Low to medium
Fully Outsourced – Low
ASP Provider – Low to medium
HR Administrator 1
In-house – High
Fully Outsourced – Low
ASP Provider – High
HR Administrator 2
In-house – Medium to high
Fully Outsourced – Nil to low
ASP Provider – Medium to high
Communications Specialist
In-house – Medium
Fully Outsourced – Nil to medium
ASP Provider – Medium
Project Manager
In-house – High
Fully Outsourced – Medium to high
ASP Provider – High
Whichever solution is chosen it is wise not to underestimate the internal resource that will be required for the first annual enrolment.
Go slow to go fast
Mercer’s approach is to advise clients to ‘go slow to go fast’. Even in a changing environment when business demands speedy responses to complex matters, it makes sense to invest real time in assessing the delivery options in order to arrive at the most appropriate solution.
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