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Outsourcing vs. Insourcing

What Difference Can Using a Skilled Benefits Implementation Provider Make Versus Doing It All In-house?

Virtually any and every aspect of benefits administration can be successfully outsourced. Outsourcing benefits administration can provide direct support for employees and management staff, but how do you know if it is the right solution for your company? Unfortunately, there is no clear-cut answer in regards to the best practice for managing benefits administration as it can be affected by a variety of factors including company size, cost, and employer preference. In an effort to weigh your options, we will address the most common reasons for managing benefits administration internally; outsourcing business administration; or implementing a co-sourced solution.

Insourcing is a common business practice in which a project or job that would have otherwise been contracted out is delegated to a person or department already established within the company. There are three key considerations associated with insourcing benefits administration:

1. An employer’s desire to maintain full control of the administration process
2. An employer’s need to provide a custom experience to its employees
3. The fact that an employer may have invested in a customized Enterprise Resource Planning (ERP) solution that could potentially support some aspects of a benefits administration program. An ERP is a business-management software used to collect, store, manage and interpret data from various business activities.

Insourcing places the responsibility of managing all capital transactions and processes related the company’s human resources and benefits administration program entirely in the hands of the internal HR department.

Conversely, outsourcing is an arrangement in which one company is contracted to provide services for another company that could also be or usually have been provided in-house. Outsourcing benefits administration can provide the opportunity to:

1. Improve the service plan at a lower cost
2. Assist with tracking and maintaining important compliance information
3. Gain access to knowledge and expertise
4. Bring advanced technology to both employees and managers more quickly than most employers could otherwise do

Outsourcing places the responsibility of maintaining compliance and continuously improving a company’s benefits administration program in the hands an external implementation provider whose core competency is human capital management.

While there are benefits associated with both insourcing and outsourcing, the majority of employers of all sizes will choose to implement a co-sourced solution in which they continue to handle some elements of benefits administration internally. Larger employers are more likely to outsource benefits administration than are small or midsized employers. One of the most attractive drivers of benefits outsourcing is the increasing complexity of adhering to new and amended compliance regulations. Knowledge and expertise on new and amended compliance regulations has become expensive to maintain internally, so outsourcing some of the highly technical services not only reduces a company’s risk of lawsuits, fines and penalties due to noncompliance but also reduces the overall cost of the benefits administration program. Contracting a skilled benefits implementation provider allows employers to free up some of their internal resources to focus on higher value strategic or core business opportunities. However, by continuing to handle some of the benefits administration services in-house, employers improve their ability to stay involved with their employees and provide better access to data.

Deciding whether to insource, outsource or co-source your company’s benefits administration program requires a comprehensive knowledge of each approach. Gulf South Risk Services can work with you to develop a customized benefit implementation program to meet your company’s specific needs. For more information on how GSRS can assist with your company’s business administration program, visit www.gsrsinc.com or call 800-256-4776.