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Selective Benefit Outsourcing
Larger U.S. employers continue to take a selective approach to outsourcing their benefits administration, recruiting, payroll, and other HR functions rather than relying exclusively on a single provider, according to research by consultancy Watson Wyatt.
“Over the last few years, we’ve continued to see tremendous growth in selective outsourcing,” says Richard Hubbard, director of Watson Wyatt’s U.S. technology and administration solutions practice. “The economic strains some companies are facing will only add to the reasons to choose selective outsourcing. Selective outsourcing provides employers a lot of flexibility and helps them keep their options open.”
Selective outsourcing is popular because "it can be tailored to meet an organization’s exact needs,” Hubbard says. For most organizations, this means outsourcing routine, transaction-oriented processes while refocusing the HR department on strategic planning. "Many companies report that selective outsourcing best meets their needs for access to leading-edge technologies, while improving employee experience and service levels," he adds.
"The key to successful outsourcing is finding the solutions that fit the organization’s needs and culture,” Hubbard notes.
Changing Strategies in HR Technology and Outsourcing survey of 182 U.S. companies found that many expect to do more outsourcing in the future, in areas such as health and welfare programs.
HR Functions Outsourced Now or Likely to be Outsourced in Near Future
Plan To Bbe Outsourced This Year or Next
Define contribution retirement plans
Health and welfare plans
Defined benefit retirement plans
Source: Watson Wyatt
However, few companies (21 percent) automatically direct their HR function to outsource programs. The majority (63 percent) look to use their internal or enterprise resource planning (ERP) systems whenever possible to deliver HR services.
Among other key findings in Watson Wyatt's research:
The technology research firm CedarCrestone also found growth in selective outsourcing. In its
2007/2008 HR Systems Survey, the firm found that selective outsourcing is preferred to total business process outsourcing in most HR categories. The firm forecasts that selective outsourcing will continue to grow in 2008, particularly as small and medium-sized organizations adopt the strategy.
Stephen Miller is manage/editor for SHRM Online.
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