Retirement Plan Administration Most Outsourced HR Function

Most companies that outsource part or all of their human resources (HR) function give the experience high marks, according to Aon Consulting, a human capital consulting firm.

Aon Consulting’s survey of 1,071 U.S. employers shows that 68% of companies are very satisfied or satisfied with their HR outsourcing arrangement, while 30% are somewhat satisfied and 2% are gaining very little satisfaction from their agreement. What’s more, 84% of organizations say they will continue to outsource their HR function, while 14% are unsure and 2% would decline the opportunity to outsource again.

“This market has matured significantly during the past several years, as more organizations understand and realize the true benefits of outsourcing HR,” said Steve Lutz, executive vice president with Aon Consulting. “As a result, companies have increased their expectations, requiring service providers to develop higher-quality and more mature service platforms. Bringing outsourced tasks back in house is not an option for most companies, so one thing is certain: Only those providers that can meet the constantly changing needs of clients will survive.”

Companies have realized a number of benefits by outsourcing their HR function, according to the Aon Consulting study. In fact, 36% achieved enhanced service from HR outsourcing, 31% experienced better quality and 28% realized improved productivity. This is consistent with the reasons companies cited for initially outsourcing HR, as the majority of organizations (65%) ranked the expertise gained as the most important factor influencing their decision to enter an HR outsourcing agreement. Other factors include reduced costs (31%), access to leading-edge technology (27%) and more time to focus on strategic issues, as opposed to administrative tasks (27%).

In addition, this study shows that three-quarters of organizations currently outsource at least one HR function. Meanwhile, 22% of companies have no plans to engage in an HR outsourcing agreement, while 3% plan to outsource at least a portion of their HR function in the future.

The following list shows which HR functions are outsourced the most:

401(k), 403(b), 457 plan administration, 87%
FSA administration (health care, dependent care, and/or transportation reimbursement), 84%
COBRA/HIPAA administration, 75%
Health and welfare administration, 47%
Payroll, 42%

Aon is located online at http://www.aon.com/.