Employee benefits management can pose a tremendous burden to small business and startup owners. Outsourcing is an efficient, cost-effective way to cut yourself some slack without cutting corners.
Not only does it take the weight of employee benefits management off your shoulders, but it saves you money, time and so many headaches. And that’s just the beginning!
Here are five upsides to outsourcing employee benefits that you might be overlooking.
1. It cuts costs
The administration of employee benefits typically falls under the purview of a human resources representative or even an entire HR department. But for small businesses and startups, hiring an employee or group of employees to oversee HR is not financially feasible.
That’s where outsourcing can provide a huge advantage. It’s much less expensive to pay a third-party company a flat rate than it is to provide a salary, benefits and insurance for an in-house HR rep.
The disparity between these two options is even more noticeable when you factor in the cost of hiring, interviewing and onboarding someone in-house. That alone could cost you, on average, around $4,100 per employee.
Companies that provide employee benefits management services assume responsibility for paying, training and administering benefits for their own staff members. The only thing you need to pay for is the company’s services, which is usually calculated at a monthly or hourly rate.
That’s why outsourcing is the perfect option if you’re looking to cut costs.
2. It (potentially) gives employees access to better benefits
If you’re attempting to administer employee benefits on your own without prior experience, you may not be aware of how many benefits your employees potentially have access to.
A third-party company staffed with industry experts will be able to better interpret the benefits plans your provider offers. In doing so, they can keep your employees up to date on the benefits they are eligible to receive, especially if the plans ever change.
They will also keep you and your staff aware of open enrollment dates and answer any questions your staff members have honestly and accurately. All this will serve to help your employees receive the maximum number of benefits that are available to them, which will only improve your reputation as their employer.
3. It reduces or even eliminates liability
Did you know that there are certain benefits that all small businesses are required to provide if they have employees on staff? These benefits vary by state typically include:
- Workers’ compensation, which will cover your employees’ medical expenses in case they become injured or ill while they’re working for you.
- Unemployment insurance in case the employee is let go from their job.
- Social Security and Medicare.
- Overtime pay (for nonexempt employees).
- Jury duty leave, based on the state where your business is located.
If you don’t have one or more of these benefits in place, even as a small business, you greatly increase your liability and the chance that one of your employees will sue you. That’s why you need professionals from an outsourced employee benefits management service to ensure that you are not vulnerable to lawsuits.
4. It ensures compliance
Many startups and small businesses struggle with employee benefits compliance , particularly when they are undergoing scrutiny from investors. It’s a terrible time to find out that you don’t have all your benefits that are required by law in place.
But with outsourced employee benefits administration, you never have to worry about being vulnerable to liabilities. The third-party staff is knowledgeable of state and federal regulations regarding benefits compliance, and they will ensure that you are in good standing before you start pitching to investors.
5. It gives you access to industry expertise
By far, one of the greatest advantages of outsourcing your employee benefits to a third party is the access you gain to industry expertise. Too often, small business and startup owners underestimate the value of benefits administrators who are experienced in their field.
They believe that it would simply be cheaper and more efficient to manage it all themselves or to hire a single administrator in-house. But the truth is, doing it yourself or hiring someone in-house isn’t always cheaper, and it’s certainly not more efficient than outsourcing.
First of all, if you or the person you hired makes a mistake out of sheer negligence or ignorance, that could cost you a lot of money. We’re talking thousands or even hundreds of thousands of dollars, depending on the error.
And second, hiring an HR rep or a single benefits administrator means that you’re placing this big job into the hands of just one person. If you aren’t able to manage all of it, how will they?
When you outsource, you get the benefit of an entire team of industry experts. These are professionals who will work together — and with you — to ensure your employees get the benefits they deserve, all while keeping you in compliance.
Employee benefits management, when entrusted to a reputable third party expert, can help prevent expensive mistakes. It can also give employees access to a richer array of benefits than what your business could offer. All this is in addition to the money you’re saving by not having to pay for this expertise in-house.
Want more? Ready to experience the advantages of outsourcing employee benefits administration at your small business or startup? Escalon’s PeopleOps is one of our most popular Essential Business Services. Talk to an expert about it today.