Benefits Administration and Why It’s Important to Your HR Strategy
What is benefits administration?
Benefits Administration is one of the most important aspects of every company’s Human Resources portfolio. It can also be extremely intricate, and even confusing, for those who do not specialize in Benefits Administration. From creating an employee benefits package to Human Resources reporting, each facet must be addressed in detail for every employee. It is that reason why many businesses choose to outsource their benefits administration and payroll to a partner company that specializes in administration and compliance, thereby removing the hassle and time consumption that is typically required to maintain so many employee files. Your company is then able to focus on what it does well, while the outsourced company handles the time-consuming tasks of benefits administration and reporting.
Benefits administration begins at the pre-employment stage. Many companies are able to entice potential new hires by offering a comprehensive employee benefits package as part of the employee’s total compensation. The term “benefits package” refers to the various benefits that may be offered, including insurance, retirement, time off/leave, and flexible spending accounts. Employee benefits packages can be customized to accommodate a company’s size and budget, and employees may choose from among those options offered. Human Resources reporting is a vital part of benefits administration, as it follows the entire lifecycle of each and every employee’s data to generate reports and big-picture insights into productivity, growth and quality assurance. Manually entering and tracking this data for every employee is a daunting task, even for a small business. It therefore makes sense to invest in a partnership with a company that specializes in handling and reporting every aspect of employee benefits administration after initial entry. A few clicks of the mouse and you can generate a report for retention, new hiring, tax purposes and many other options that can be tailored to your industry.
Arguably, the most important feature of a benefits package is health insurance. Most applicants are likely looking for this benefit when applying for a new job. In a perfect world, industries would be able to offer a health insurance package with a low monthly premium and full coverage with no deductible. Unfortunately, it is far more complicated than that. With the passing of the Affordable Care Act and other laws regarding Human Resources reporting, employers struggle to understand the new laws and remain compliant. There are now new rules for businesses, depending on the number of employees and other data that can be extremely difficult to navigate. Small businesses, as well as larger industries, typically have to shop around different insurance agencies and negotiate to be able to offer the most comprehensive employee benefits package at the most affordable rates. Keep in mind that the employer usually pays up to three-quarters of the monthly cost for health insurance for each employee. Once an employee has chosen his or her package, the employer must submit the new hire information to the insurance agency of choice. Then the employee has the opportunity to drop, add, change or update that information annually, or any time there is a qualifying event, such as marriage or childbirth. Maintaining all of that ever-changing data can be daunting to many employers. Luckily, there is the option to partner with a payroll & HR outsourcing agency that will do the work for you!
What else is included in a benefits package?
Other insurances may be offered as part of an employee benefits package, as well. These might include dental and/or vision insurance, as well as short and long-term disability insurance and life insurance. Short-term and long-term disability insurance ensures that an employee will retain at least a portion of his or her income if they should fall ill or otherwise have an injury that prohibits them from working. Vision and dental insurance are usually more optional add-ons to an employee benefits package than, say, the highly sought-after health insurance. Life insurance is another benefit that may be offered by employers. It is a generous component that would take care of the practical expenses involved with the employee’s passing, helping the family in an emotional crisis.
Retirement plans are another attractive component of a comprehensive employee benefit plan. There are numerous options from which employers may select a plan. 401k retirement plans are defined-contribution pension funds that are automatically deducted from the employee’s paycheck pre-tax. Employees can choose how to invest those funds. Generally, the employer will “match” a certain percentage of the employee’s invested funds and sometimes only after an employee has worked at that company for a standard amount of time. There are also IRAs (individual retirement accounts), 403b plans, as well as other retirement options. Employers must have an accurate system for tracking these deductions and reporting taxes and contributions. Outsourcing to a partner payroll/HR company can keep track of this reporting data, in addition to other payroll deductions.
Let’s be honest. All work and no play is no way to live. Time away from work is incredibly important, so instilling a policy for paid time off is a highly attractive benefit to add to a comprehensive benefits package. More companies are moving away from the various classifications of time off, such as vacation days versus bereavement leave. Many employers now offer a certain number of paid days/hours off, to be used as the employee sees fit. This eliminates a need for the employee to explain why they requested off, while simplifying the process for Human Resources. Time off accrual may be contingent upon the amount of time the employee has worked for that company. This paid time off is usually in addition to paid holidays. Keeping up with accruals and time off requests can be overwhelming, especially for larger employers. Yet another reason to partner with an outsourcing agency.
As mentioned earlier, healthcare expenses are ever-expanding. Employers have had to shift some of the burden of rising premiums to the employee, with increasing co-pays, deductibles and other out-of-pocket expenses. To offset some of those expenses, employers may offer a healthcare flexible spending account. This allows the employee to pay for some of those uncovered costs with pre-tax dollars. Another benefit might be a health savings account, which allows the employee to contribute to a medical savings account. The contributed funds are not subject to taxation at the time of deposit, so those with high medical expenses could be helped greatly by this benefit.
Human Resources must report much of these benefit contributions for tax and regulation purposes. Additionally, you may want to be able to access your employees’ data in real-time and with accuracy, without having to pay someone to manually enter every single change or request. That is the beauty of partnering with an agency that specializes in just that.