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Human Resource Outsourcing

Regulatory changes in benefits administration solutions to stay compliant

Employee benefits administration is a crucial element of the HR policy of every organisation, irrespective of its size. It involves creating and managing the various benefits of employees of the organisation. Typically, benefits involve paid time off, insurance, financial security, retirement, etc. These benefits keep changing over time to cater to the changing expectations of the employees, the industry trends and the regulations. As such, benefits administration can be complex and challenging. It can impact critical business aspects such as employee satisfaction and retention, employer branding and success. Let us delve deeper into employee benefits to understand why their administration can be complex.


The dynamics of employee benefits

A McKinsey survey found that employee benefits are as important, or even more so, than salary for most Americans. The survey also found that ancillary and voluntary benefits have become crucial for talent attraction and retention over the last five years. But sadly, most organisations do not have a system that could help employees easily understand their benefits, resulting in underutilisation. And that defeats the purpose of having benefits for both employers and employees.

A few trends from the 2023 Society for Human Resource Management (SHRM) employee benefits survey can help us better understand this ever-evolving landscape:

  • Employers reimbursing domestic and international travel expenses related to medical care stood at 11% and 6%, respectively
  • About 28% of employers offer coverage for weight loss surgery
  • About 20% of employers offer pet insurance, and
  • 78% of employers cover certification/recertification costs.

If you study these trends closely, you will understand the challenges around employee benefits. In the last year, there has been an increased focus on health, mental wellness, skilling, etc., and the benefits reflect the same. Additionally, the retirement plans in the U.S. are set to change substantially as the Secure Act 2.0 comes into effect. Every geography and sector will have similarly changing trends and regulations. Organisations must keep up with these to attract and retain talent. Only an efficient benefits administration system can ensure that benefits are utilised and have served their purpose. More importantly, the system must ensure compliance.

Let us now look at the importance of compliance in employee benefits administration.


Understanding the implications of non-compliance

What happens if organisations are non-compliant? Here are some possible consequences.

  • Legal consequences
  • Regulatory agencies or employees can initiate legal actions against employers for failing to comply with regulations related to benefits such as leave, remuneration, etc. It could result in lawsuits, governmental actions, investigations and more.

  • Financial implications
  • Lawsuits have multiple financial implications, such as legal fees, damages awarded, reduced revenue, etc. Regulatory bodies may impose fines and penalties for non-compliance. Sometimes, the fines can go up to millions of dollars depending on the nature and severity of the violation. Businesses may also lose out on some tax benefits due to non-compliance.

    During long-drawn legal processes, there can be negative media coverage too. In today’s highly digitised era, social media posts, especially negative ones, go viral instantly and can impact the reputation of businesses significantly. Customers may avoid purchases from your company to take a stand on issues that matter to them. In a few cases, non-compliance can even result in business closure if the regulatory agencies direct it. Sometimes, the business fails to regain the trust and reputation lost in legal exercises. All of these can impact the financials of the company severely.

  • Employee implications
  • If a company is undergoing litigation for non-compliance regarding benefits, imagine its impact on employee morale. They will doubt the intent and integrity of the management in providing benefits. It will probably trigger employees to explore other opportunities with a vengeance if only to find safer pastures. At a time when attracting good talent is challenging, retention is even more critical and non-compliance can put paid to that. More importantly, employee turnover has other cascading effects.

    The solution is to ensure compliance as an uncompromising feature of the benefits administration system. How can organisations go about it?


Implementing benefits administration

Businesses can ensure an effective employee benefits administration in three possible ways.

  • They can periodically seek legal help by consulting experts to understand how to ensure compliance in benefits administration.
  • They may engage HR consultants to help create, implement and manage their benefits administration.
  • The third option is to outsource the benefits administration to third-party administrators, who will ensure compliance. The most significant advantage of outsourcing is transferring compliance liability to the benefits administrator to protect yourself from legal hassles and associated risks. Improved efficiency and employee satisfaction, reduced turnover rates, enhanced employer branding, etc., are other advantages.

How can Infosys BPM help?

Infosys BPM’s Benefits Administration Outsourcing is an integrated set of services that drives employee engagement and benefits promotion through dedicated account teams, support staff and custom-designed solutions covering the entire hire-to-retire cycle to deliver value.


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