Should Handling Employee Benefits Be Handled by HR?

Maximizing benefits

I have been having a debate with myself. It’s becoming both annoying and non-productive. So I thought I would invite you all into the dialogue.

As I speak and write about how HR can become a business accelerator, one of the biggest obstacles is time. HR has such a full plate, that we just run out of time.

While the work of talent development, organizational dynamics and change and solving real business problems related to human behaviors is exactly what will position human resources as a business accelerator, there is too much other work that zaps the available time.

2 roles that don’t accelerate the business

So I think about what roles HR plays that really don’t accelerate business, and come up with two:

  1. Employee relations; and,
  2. Employee benefits.

Employee relations is non-negotiable; there is too much risk involved, and it truly is a leadership and people issue. Where HR can shift to business acceleration is in developing leaders that inspire commitment rather than demand compliance. That would free up a lot of time in “discipline,” but that’s a topic for another day.

Here’s my internal debate: Are employee benefits really appropriately assigned to HR, or would benefits be better as a finance role?

WorldatWork will probably consider this a blasphemous question, but I think it does merit discussion. Benefits, in particular, is (in my experience) 20 percent strategic and 80 percent administrative and financial — and that 80 percent takes a lot of time.

As the profession of HR emerged, health and pension plans were largely unregulated, and the design of the plans was part of the strategy of attracting and retaining employees. As regulators prescribed more and more restrictions and as the question of whether to have benefits and how to structure them became less flexible given the competitive requirements, the discipline of employee benefits became overwhelmingly complex and relatively fixed. But the complexity required more skill and more time: administrative processing, financial analysis and reconciliation, and compliance.

My debate with myself: One side

HR departments spend several months each year tweaking plan design, usually with a financial objective in mind. They spend another several months in open enrollment, chasing and policing compliance so that employees didn’t miss the chance to enroll or change.

They focus time and attention in testing defined contribution plans to avoid discrimination and ensure adherence to plan documents. They develop and produce plan documents that generally require partnership with finance and legal. They build out call centers and intranet portals to answer a wide range of questions for employees and employee families.

As HR struggles to add value to the organization, they spend an inordinate amount of time doing work that is neither strategic nor flexible. The skill set required to do this well is not necessarily the skill set that will help to shape human behavior in such a way as to drive organizational performance.

Given that this latter role is so critical, does it make sense to weigh down HR with the responsibility for the administration of employee benefits?

My debate with myself: The other side

What gets in my way of agreeing with the first argument is relinquishing control of such an important element of the decisions around how to attract and retain the workforce.

Total rewards, as defined by WorldatWork, is the overarching offering made to current and prospective employees, including compensation, benefits, talent development, performance management, recognition and work-life effectiveness. Yes, benefits looms large in this definition.

Additionally, I advocate the role of HR to be “all things people,” so therefore why would benefits be housed in a different department and subject to a “non-people,” financial-only focus?

There is also an element of employee advocacy in the administration of employee benefits. When benefits are handled smoothly by the organization, the workforce is better able to focus on performance, and not diverted by concerns over health care or retirement. That is a good role for HR.

And of course, given that benefits administration is usually integrated into the HRIS, it would be really difficult to separate the functions. Giving access to anyone outside HR provides confidential information on employees related to salary and other sensitive data. That could be a deal breaker.

Given that the cost of benefits is huge, this is also a chance for HR to add value by impacting the cost of benefits through negotiation and auditing. Taking away this lever takes away a large contribution.

Please weigh in

So you see why I need help here. I can effectively argue both sides. But my question remains – is the administration of employee benefits something that a strategic HR team should accept?

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Eek, I just realized that I may be making Ram Charan’s argument that we should split HR. But not really.

He advocates HR-Administration take over Benefits and Compensation. In no way should HR relinquish Compensation – it is a highly strategic element of “all things people.” Yes, there is administration but unlike benefits, the strategic part is big, real and important and needs to align to performance and development.

Something in the middle?

What I struggle with is the administration of employee benefits. It just doesn’t seem like a role that does anything to help HR in our quest to be strategic.

In fact, it takes precious time that could be used to lead change, develop talent and solve real business problems, and if we don’t get better at that, we will continue to struggle with credibility.

This internal debate is driving me crazy and I need your help. What are your thoughts?

This originally appeared on Carol Anderson’s blog @the intersection of learning & performance. Her new book is Repurposing HR: From a Cost Center to a Business Accelerator.

  • http://sassy1hr.blogspot.com/ Julie Waters

    It is my belief that benefits discussions, particularly one on one, can give you some insight into the employee. This is in line with your concern about access to confidential information to people outside of HR. Short-term disability questions, FMLA questions, family health coverage questions, often start a conversation as to something that is going on at home that may explain problems with some on-duty behaviors. Knowing about sick parents, bad backs, special needs child, etc. will allow HR to better advise team managers on dealing with employee requests for leave and managing their departments. And you have the opportunity to remind the managers about discrimination laws BEFORE they make a bad decision. Employees should have a comfortable report with HR that they might not feel with the people in Finance when it comes to their health and the health of their families. Benefits should stay with HR. IMHO! 😉

    • Carol Anderson

      You raise a good point, Julie – employees should have a comfortable relationship with HR, but so many tasks that HR drives can put a dent in that relationship – employee relations and discipline pops to mind. I think that so much of what HR is to the organization should be carefully designed, rather than left to chance. What do we really want HR to be?

  • quietype

    Thought provoking article. I know this because my first reaction was guttural and a bit angry. I pride myself on all that I have been able to achieve as a benefits professional in the HR community. My nearly 20 years in HR dealing with benefits at all levels wants to fight any thought that benefits should be run from outside of HR. When I settled down after reading your thoughtful comments, Ms. Anderson, I realized that we do need to question what we do on a regular basis. If we do not, we will have this important work removed from our capable hands. Let me break down my thoughts on this into three points that support HR managing employee benefits:

    1) Employee Benefits are strategic: The work we do as HR professionals around employee benefits should align directly to company strategy, support people strategies like retention and recruiting, and need to comply with legal and regulatory issues ruled by people focused organizations like the DOL and the EEOC. Placing employee benefits outside of HR changes the focus and would risk the richness that is provided by aligning to these areas. Not to say that our fine Finance colleagues cannot manage to these goals and strategies, it is just not their focus nor training. Compare this to HR taking over a tax practices simply because it is not strategic to their mission. Not practical and not realistic.

    2) Employee Benefits are a people thing: Offering benefits to employees, taking out the legal requirements, is really a people thing in that it directly impacts that well-being of a workforce in how benefits are designed and offered to employees. Careful design and communication is essential to the success of any health program. Again, not that our fine Finance colleagues cannot do this, I would argue it is not in their wheel house. Touchy-feely belongs to HR. What is more touchy-feely than benefits? A focus on the financial aspects of employee benefits without also considering the people aspects can be a dangerous recipe leaving employees floundering and possibly violating key regulations now imposed on employers under the ACA.

    3) Employee Benefits are multivariate: By this thought I mean that they are more than just health coverage. We need to look beyond basic financial aspects to the real people and behavioral aspects of the well-being of our workforce. This is squarely on HR.

    While there may be an argument (albeit weak) that benefits could be off-loaded to finance to free up HR resources, I also know if my heart that if/when this occurs the focus on people will be lost and the benefits will not have the great value that an HR professional can bring to them and also help align the benefit goals with the company strategy.

    • Carol Anderson

      Oh good – that’s what I wanted to accomplish – provoking a different way of thinking. Regardless of the answer to the question, to have thought it through is critically important. Too often today we go merrily on our way with programs that have existed since before our time, rather than questioning, once again, the purpose and value. Thanks for your comment.

  • surprised

    I’ve held Benefits positions that reported to HR, as well as Benefits positions that report to Finance, and find it surprising that the author believes that moving Benefits out of HR will make HR perceived as more strategic. My experience has been the exact opposite. The C-suite has dealt with Benefits professionals for years and sees Benefits as a strategic partner: whether it’s to support holding cost down with Healthcare design while remaining compliant with legislation; or helping Finance evaluate the cost of mergers and acquisitions through the due diligence process; or making hard business decisions around migrating from a defined benefit to a defined contribution approach; or outsourcing Benefits administration as part of a broader restructuring and automation business case … These are all difficult dilemmas that the Benefit professional is
    expected to handle, both with business acumen and the caring required
    from an HR professional. We haven’t had to ask for a seat at the table: it was understood that we needed to be included. A word of caution, based on my own experience: when the critical Benefits function is aligned to Finance, the remaining relevance of the broader HR function as a strategic business partner can be diluted as “nice to have, but costly”.

    • Carol Anderson

      Interesting that you consider that Benefits might be the glue that holds HR to the organization. I suspect that you are right in many instances. That is a shame, but the question remains – how do we change that up? Thanks for your comment.

  • http://www.benzcommunications.com Jennifer Benz

    Benefits are too closely tied to the employee experience and culture of an organization for finance to be successful managing them. We just published this post that highlights two of the key reasons benefits belong in HR — they are all about people AND one of the most powerful ways to brand your organization and employee value proposition. http://www.benzcommunications.com/blog/three-things-we-wish-everyone-knew-about-employee-benefits-communication

    • Carol Anderson

      I absolutely agree that HR must be the front line when it comes to benefits. My musings are about what could be done in the backoffice that would free up time. Thanks for your comments.

  • WorldatWork_Len

    Employee benefits is an integral part of the employee value proposition and the overall employee experience. The discipline belongs in HR for a variety of reasons. First and foremost, HR exists
    to support the overall company mission, and its business strategy. In its role, employee benefits, like all
    aspects of HR, is a balancing act of talent and rewards strategies meant to align with the business, attracting, motivating, retaining, and engaging the right employees. From my perspective, that expertise clearly lies in HR.

    The author states that in her experience, benefits has been largely “20% strategic and 80% administrative and financial.” I think historically that may have been true, and probably for some companies today, that may still be very well true. However, I think that has greatly changed over the years, especially as the realization by others, including the C-suite, of the huge investment in people that employee benefits represents. For example, with the arrival of the Affordable Care Act, the importance of strategy was further elevated (do we continue to offer health-care or not? what is the future role of healthcare in our organization?). For those organizations that have recognized the strategic value of employee benefits, more professionals are attempting to focus their time on benefits strategy, a strategy that has become more complex in a globally competitive landscape.

    Second, although it is true that in the past the benefits function was focused on the administrative side of things, technology has realty greatly improved, and with that opportunities for greater cost-efficiencies and the ability to leverage this technology in a variety of ways, such as additional outsourcing
    arrangements, (without necessarily sacrificing the employee experience). As such, benefits professionals have been able to focus more on benefits strategy.

    I agree with the author when she states that “there is too much other work that zaps the
    available time.” With the many requirements of the Affordable Care Act, along with other laws and regulations, there is a greater demand these days for compliance duties without any additional
    staffing. This is certainly an issue as increased responsibility for government reporting, and other mandates does, indeed, distract professionals from focusing on strategic benefits design,
    employee education, and communications.

    Yes, benefits administration itself may not necessarily contribute to HR being more strategic, but certainly when these tasks are done well and efficiently, they effectively enable employees to focus on their jobs,
    the company saves money, and the employee experience is enhanced.

    Third, I don’t believe benefits would be better handled as a finance role. A focus on only the financial aspects of employee benefits, without also considering its impact on employee relations and the overall objectives of the various programs themselves, would be detrimental. I, also, don’t think that placing benefits in the finance function automatically classifies the work as being any more “strategic”
    in nature.

    Just as many aspects of HR have struggled over the years to be more strategic in nature and add organizational value, the “value-add” often depends on the organization itself, the expectations and perspectives of the C-Suite for the benefits role/function, along with the individual serving in the
    benefits role and what that person brings to the table. The skill set needed for today’s benefits
    professional is much different than years ago, and will continue to evolve, as will the profession, in the future.

    • Carol Anderson

      Glad to see W@W here and weighing in. HR will always share parts of their people role with others in the organization. Operational leaders really are those that manage performance, culture and change. HR is [or should be] the expert, ready to provide the tools, knowledge and resources for operational leaders to do this well. Could there possibly be a similar synergy with Finance, allowing them to take on the financial analysis and audit parts that require a deep and specific skill set, letting HR be active in or drive the design, communication and alignment? Just a thought. Thanks for your comment.