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What is Benefits Outsourcing and Is It Right for You?

June 7, 2023
Kenny Keller
Timer  Read Time: 6 minutes
benefits outsourcing
In light of health pandemics, economic unease, high rates of inflation and tight labor markets, outsourcing has proven to be a reliable solution for addressing these challenging situations. And it’s not without good reason.

Outsourcing — the practice of contracting out tasks or processes to external service providers — can be a game-changer for businesses of all sizes and across industries, especially those looking to streamline their operations and processes. Human resources is no exception.

According to The Society for Human Resource Management (SHRM)’s 2022-2023 State of the Workplace Study, 70% of HR professionals feel that they are overloaded and working either too long or too hard. Further, 61% of HR professionals surveyed said that there are not enough staff for the workload.

When you consider the role HR plays in an organization’s ability to retain and attract top talent in an already tight labor market, it’s not surprising that companies that lack the necessary resources (typically, staff and technology) are leaning on employee benefits outsourcing. Without that assistance, functions critical to the company’s longevity would fall by the wayside.

Keep reading as we define what benefits outsourcing is, the reasons why businesses opt for it and what benefits are ideal for outsourcing.

Benefits outsourcing defined

Benefits outsourcing is the process of transferring responsibility for benefits administration to a third-party provider. This can range from fully outsourcing all aspects of benefits administration and management, such as payroll, COBRA administration and claims processing, to outsourcing pieces of it, including employee recruitment, open enrollment, communication and compliance.

Some employers opt to contract out only specific services within their existing benefits package, such as employee wellness programs or financial planning assistance.