Employee benefits administration is a critical component of the human resource function — it’s essential for HR to successfully hire, onboard, and care for employees. If done efficiently and effectively, benefits administration can improve the employee experience, help retain talent, and save the organization money.
It’s critical not to underestimate the importance of good benefits. Nearly 80% of workers would prefer new or additional benefits to a pay increase and 88% of employees would consider a lower-paying job over a higher-paying one if it had better quality health benefits. As a result, your employee benefits administration has everything to do with keeping your people happy and healthy.
Benefits Administration Defined
So what does benefits administration entail? It’s the process of designing, managing, and implementing employee benefits in a company. Benefits range from health insurance to retirement planning to perks. It usually involves evaluating benefit options, finding the right mix of benefits, and working with employees to review options and make selections.
Often companies will designate an internal employee or hire an HR professional to function as a benefits administrator. But you can also hire a benefits administration company or HR partner to handle the responsibility. Whoever they are, the administrator has primary responsibility for everything that goes into employee benefits management, including:
- The ability to ensure compliance with federal, state, and local legal requirements that impact benefits
- Understanding the platforms and procedures for managing benefits enrollment and changes
- Expert knowledge of benefits and the different types of offerings and the ability to communicate with employees about them
Whether you have a benefits administrator or not, here’s how you can improve upon the process and make sure you and your employees’ benefits experience is quick, easy, and cost-effective.
Steps to Improve Your Employee Benefits Administration
The most important thing to keep in mind when improving your benefits administration is how you can select the benefits your employees want at a value your business can afford. If you can do that efficiently and effectively, then you can have more time to communicate your benefits and educate your employees.
- Understand what benefits you can offer. The first step in the benefits administration process is assessing existing or new benefit options. Know the types of benefits you can offer and what makes the most sense for your business’s demographics and bottom line. For example, if you’re a business in downtown Denver, offering commuter benefits would be more relevant than if you’re a business located in the suburbs. So only consider those benefits that make sense.
- Before selecting benefits, gather feedback from your employees. Getting feedback from your employees on what benefits you can offer further narrows the scope of your benefits evaluation. Plus, you wouldn’t want to select benefits that are more costly to your organization and not valuable to your employees. Of course, some employees will want everything, but have them prioritize options to give you a clear idea of what they need versus what they want.
- Select benefits that you can afford to offer based on the size of your business and what employees value most. At this point, conducting a cost analysis to find the cost of each benefit per employee will make it easy to see what you can afford right now and help you plan for the future. It’s also helpful to know where to go to get quotes and assess your options. Note that any benefits you choose to provide will be hard to take away later. So choose carefully. And if you don’t feel financially comfortable with providing certain benefits now, consider substituting them with perks until you can.
- After selecting benefits focus on controlling costs through cost-saving strategies. There are a variety of things that impact the cost of your benefits. Namely, the size and health of your organization. However, as you grow your benefit costs grow too. As you offer perks or supplemental benefits that have a flat cost per employee, the more employees you hire, the more your costs go up. When building out your benefits budget, factor in your hiring plan and growth expectations.
Cost-saving strategies that can help:
- Use a unique contribution strategy: For example, you could choose to contribute a higher amount (i.e. a 401(k) match or percentage of healthcare premiums) to higher-level employees while contributing a lower percentage to lower-level staff with higher turnover.
- Provide time off, bonuses, etc. based on years of service — similar to providing more vacation time as employees stick around. This kind of approach can be useful in building loyalty and employee retention in a way that controls costs.
- Clearly communicate your benefits and educate your employees. The most important component to a successful benefits administration program is making sure your employees actually understand and use your benefits. Unfortunately, 41% of employees find their companies’ open-enrollment process extremely confusing and 55% of workers don’t recognize their employer’s contribution to the cost of health insurance.
Using the steps above can streamline the process so you spend as much time on this aspect as possible. Here are some ways to communicate and educate your employees on your benefits:
- Schedule time with your employees. Don’t just send out an employee email with a package of benefits information. Chances are employees won’t take the time to read through things in-depth and often the content is too complicated to impart through email.
- Share information in bite-size chunks. Breaking your time down by each benefit offered or in several, shorter allotments of time can make the content more digestible for employees. Cramming everything in all at once over a two-hour meeting can be overwhelming and exhausting. Additionally, breaking things out by the benefits you offer will allow employees to only go to the sessions they care about or that are relevant to them — based on the benefits they may enroll in.
- Keep communication open all year round. Schedule time each quarter or whenever makes sense for your organization to talk about benefits. Checking in regularly provides employees opportunities to ask questions. This time can also be combined with your onboarding process for new hires. If this is too much to do, you can create a designated chat or communication thread to notify employees about updates to their benefits and provide a means for them to ask questions whenever it’s convenient.
- Last, make it fun! Benefits administration is a lot. Possibly the most tedious and least fun aspect of providing HR is administering benefits. Business owners and HR professionals understand the time and effort involved beyond just offering benefits. Each year requires careful consideration, evaluation, and education through open enrollment time. The whole process can leave everyone feeling stressed and confused. So promote open enrollment like an event — order food and find some ways to get your employees involved in the process. And when it’s all said and done, reward yourself or your team for a job well done.
Employee Benefits Administration Never Ends — Let Obsidian HR Help
It takes a lot of time and effort to build a benefits program and administer it. Many maintenance activities go into administering benefits, such as:
- Making appropriate deductions in payroll and monthly reconciliations
- Filing necessary forms and distributing required notices
- Establishing and maintaining plan descriptions
- Facilitating enrollment and updates based on employee life changes
- Complying with regulations such as ERISA, ACA, COBRA, and other state-required benefit continuation laws
Obsidian HR can handle all of the maintenance activities noted above. And provide access to richer, more quality benefits — particularly when it comes to health care plans. With the rising cost of premiums and limited plan options for small to medium-sized businesses, this can be a huge advantage.
To learn more about how we can help with your employee benefits administration, download our eGuide. You’ll also learn more about what benefits you can offer and how to select and assess the right mix of benefits for your employees.