Outsourcing Employee Payroll & Benefits

Outsourcing isn’t the taboo subject it once was. There are, understandably, people who will think of redundancies and work moving offshore but, for many modern businesses constantly searching for flexibility and cost efficiencies, shifting duties to third parties can be a smart way to reduce your company’s investment in an area while boosting its effectiveness. Outsourcing employee payroll and benefits is one such area that can always bring improvements and savings, as long as it’s done intelligently.

In-house vs Outsourcing Employee Payroll Benefits

Managing employee payroll & benefits in-house

Due to the time, investment, and complexity of self-insuring most companies choose to purchase employee benefit programs from a third party provider. This reduces the liability issue as well as the upfront costs. The decision making power for who can claim what, and what gets denied, is put at arm’s length and the provider, who has no special interest in your staff individually, treats each member the same.

Administration expectations are therefore smaller for companies opting for this type of solution, often being limited to on/offboarding members, dealing with claims applications and progress, and assessing the plan’s performance. While this means less of an investment into support resources within your company, it also means vesting significant power with the provider in terms of information and data on hand, as well as expertise and advice come renewal time.

Certain providers may not give you completely transparent information regarding the products and services of their competitors. If they convince your company to go elsewhere for its benefits, they’ve given away profits. This is why it can be extremely important to ensure that your own HR staff has sound employee benefits knowledge to ensure that your company can negotiate effectively. Companies, however, can be torn between paying top-dollar for a specialist or leaving their benefits future up to unfamiliar generalists.

Outsourcing employee payroll & benefits

Balancing the need to be well supported in your payroll and benefits plan, and keeping the costs of securing that expertise low is where outsourcing employee benefits management comes in. Your company engages the services of a broker or intermediary who works with your business to put the right benefits package in place then acts on your behalf when it comes to handling issues or negotiating renewals.

Here are the five key ways businesses are at an advantage with this solution:

1. Reduced costs

A major upside to outsourcing employee payroll and benefits is that it can save your business money. While some brokers can charge extra fees for providing benefits services such as staff orientations or market bench-marking, some can offer you a total support package that’s included in the commission they’re paid from the benefits provider. Companies will still need to crunch the numbers to make certain they’re better off but handing off administration and management responsibilities to an intermediary can help in reducing your costs.

2. Increased efficiency

With the engagement of an expert specialist when outsourcing employee benefits, your company will benefit from their market knowledge, renewals intelligence, and a range of other sector-specific experience that can take HR staff years to accumulate. Hiring an in-house expert can will result in you paying them a decent salary, especially where renewals only happen annually, so utilising the specialists of an outsourced company can be a more efficient way of management. In addition, these experts can use all of their industry knowledge to put you in the driver’s seat when it comes to dealing with your provider.

3. More flexibility

Not all businesses start out as they end. Not just in size, many companies may change their focus and goals over time – and your benefits platform should always reflect and support what you’re trying to achieve. Outsourcing your employee payment and benefits to a third party means having the support to make changes that are necessary to ensuring that your plan not only remains successful but sustainable in the long term.

4. Less impact on your HR department

The second significant factor to outsourcing your payroll and benefits is related to the time HR staff can save by not having to directly deal with employee benefit matters. Getting third-party support for staff orientations and inquiries, benefits communication, claims processing, and dispute resolution allows your HR experts to focus on more important things like supporting the growth and success of your business.

5. Protecting your business

Reducing the risk of liability by placing the responsibility of employee benefits management with an outsourced company can be an intelligent step for businesses. It places the decision making at arm’s length, offering a level of fairness and equality to the way the benefits are run from both a staff and company perspective. Such a relationship can also protect the company for liability where mistakes are made – the burden then lies with the outsourced company.

Choosing the right outsourcing solution in Africa

Not all outsourcing partners are created equal.

At Africa HR Solutions, all our services have been developed to enhance and support our clients operations on the African continent.

We understand what it is for companies to administer their employee payroll & benefits, and we provide a flexible solution to your business model and goals.