Putting it all together

The reasons large companies outsource their benefits programs, such as administering Family and Medical Leave Act (FMLA) absences, are predictably obvious. In the case of FMLA administration, they may look for help in coordinating multi-state regulations or in meeting compliance issues. There’s the struggle in monitoring intermittent leaves, which may drive employers to seek assistance outside their organization. Regardless of the reason, many large employers are looking to outsource challenging benefit responsibilities they simply don’t have the capacity to manage in-house.

Certainly, benefit administrators also grapple with monitoring absences and allocating the appropriate type of benefits for those personnel. Combine that with the fact HR executives are seeing their peers and competitors outsource their leave administration, and it’s easy to see why this is becoming a standard in the marketplace.

While the trend for outsourcing is not surprising, the trend that is garnering more attention is the practice – mostly with mid to large-sized companies – of consolidating the number of vendors who administer their benefits management. In the past, employers would look for one vendor to administer their short-term disability program, still another vendor for FMLA administration, and so on. But, as employers become more savvy, the à la carte method of selecting benefit managers seems to be giving way to vendors that can deliver all services under one roof.

Nick Rodriguez, Senior Manager of Safety and Benefits Administration at telecommunications pioneer, Avaya, explains they look for vendors who can integrate programs in a way that will create value for their company. “Through program integration, we are better able to manage programs that naturally link together, such as short-term disability, workers’ compensation and FMLA administration. The results are an 8-10 percent reduction in lost workdays, year after year, as well as increased productivity and consistent program administration and compliance.”

There’s no doubt that integration is a key driver today. It’s more than just the desire for a one-stop shop, though clearly that plays into the decision-making process. It’s the ability to make various types of benefit administration products work together. It’s the inherent synergies that are created by sharing information and creating ease-of-use.

The 2004 Integrated Benefit Institute (IBI) report showed a positive correlation between the size of the employer and the desire to integrate their benefits. Leading the pack of reasons for this were cost savings and increased productivity. The study also identified manufacturing, transportation and utilities as the business segments showing the greatest interest in integrating their benefits management.

The advantages of integration

What are the benefits of having an integrated program? The direct and indirect costs of absenteeism are substantial, so any program that can reduce the number and duration of absences, such as linking leave administration with disability administration, should immediately benefit the bottom line. Having a universal intake for absences means that benefit administrators can intervene much earlier than they could if they were overseeing just one product line. Early intervention is remarkably important.

Having integrated benefits means higher productivity because employees return to work more quickly. There is less downtime, lower replacement labor costs and fewer benefit dollars paid out.

Viewed from the employee perspective, integrated benefits administration tends to increase employee satisfaction and morale. Thanks to regulations such as FMLA or various other leave benefit programs, supervisors don’t have the tools or expertise to be effective. Having a single source to call or notify for an absence of any type simplifies the process for employees – especially for concurrent absences. All affected parties are notified, including the immediate supervisor, payroll department, HRIS system and any applicable case managers.

Ultimately, benefit integration can have multiple positive outcomes for an employer. The challenge is to make sure your company’s business goals and priorities coincide with the vendor or vendors you select.