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Study Confirms That Employers Save Money and Increase Efficiencies Through Benefit Outsourcing
The study found that through outsourcing, employers are able to offer employees a more comprehensive benefits program with additional service options. For example, companies outsourcing to ADP are more than four times more likely to offer Web-based annual benefits enrollment, and more than 18 times more likely to offer Web-based enrollment on an ongoing basis to manage status changes and year-round benefit options. Web-based benefits give employees the tools for managing their health and welfare benefits, significantly reducing administrative burdens for internal payroll and HR departments.
"Many organizations are required to make a business case to support purchasing decisions," said Regina Lee, President, ADP National Account Services. "This study enables them to assess and evaluate the health and welfare administration solutions available in order to determine the best approach to meet their needs. We're proud to offer our clients the widest range of benefit administration solutions, from employee call centers to Web-based enrollment, in a cost-effective manner."
Sourcing Analytics also discovered an additional cost savings for organizations that utilize multiple services from a single outsourcing provider. The study found that when employers integrate call center support within their benefit outsourcing arrangement, the TCO decreases further to become 24 percent less than in-house administration.
Additional findings from the study include:
-- The average annual total cost of ownership for in-house benefit administration is $199 per employee, compared to $165 per employee when outsourced to ADP. -- Companies outsourcing benefit administration to ADP reported low or no costs related to Sarbanes-Oxley compliance. -- The cost savings achieved through outsourcing were true for all organizations that participated in the study with a range of approximately 1,000 to 15,000 employees.
"As a client of ADP, we have experienced cost savings and efficiencies that mirror the results provided by the study respondents. Since making the decision to outsource benefit administration, our 25,000 associates are receiving new plan and service options that we would never have been able to offer internally without extensive capital and ongoing expense," said Kimberly Dwyer, Benefits Director, Advocate Health Care. "They can go on the ADP-hosted Web site at any time to get up-to-date benefits information and manage personal selections. ADP's solution has been a cost- and time-effective way to manage our health and welfare, and retirement administration. Not only are we able to provide conveniences to our associates, but our HR staff now has more time to focus on core initiatives instead of administrative tasks."
This is the third TCO outsourcing study commissioned by ADP. The first study measured the total cost of payroll and HR administration and the second focused on time and labor management. All studies have revealed significant savings achieved through outsourcing.
Additional survey results and a white paper prepared by Sourcing Analytics entitled, "Benefits Administration -- The Impact of Outsourcing on the Total Cost of Ownership" are available by visiting, http://nas.adp.com/files/TCO_benefits.pdf.
About the Study
More than 35 companies participated in the study between July and August 2005. Approximately half of the companies were administering benefits in-house, and the other half were in an outsourcing relationship with ADP. These companies represented a broad range of industries, and had an average number of 4,155 benefits-eligible employees.
For the purposes of this study, the TCO of health and welfare benefit administration was defined as the processes of: determining eligibility for a set of benefit plan types; communicating eligibility and plan options to employees; managing enrollment for benefits at hire, during open enrollment and upon a status change; managing the flow of data to the network of carriers/benefit providers; and, managing the flow of benefit deduction information to the payroll system(s).
Sourcing Analytics developed and administered the surveys to calculate the total costs for health and welfare benefits including medical, dental, vision/hearing, basic life insurance, short- and long-term disability, personal liability, accidental death and dismemberment, flexible spending accounts, commuter benefits, long-term care, supplemental insurances, and voluntary benefits. Clarifying calls were made to review and normalize against other responses based on many factors including company size, operating environment, and benefit process complexity.
Automatic Data Processing, Inc., with $8.5 billion in revenues and approximately 590,000 clients worldwide, is one of the largest providers of a broad range of premier, mission-critical, cost-effective transaction processing and information-based business solutions. ADP Employer Services (ES), a division of ADP, Inc., offers the widest range of HR, payroll and benefit administration solutions from a single source, to meet the extensive business needs of employers worldwide. Built with more than 50-years of industry experience, ADP ES' cost-effective, easy-to-use solutions provide superior value to companies of all sizes. More than 518,000 companies trust ADP ES for unparalleled service and compliance expertise, which allows them to focus on other core activities. For more information about ADP ES or to contact a local ADP sales office, reach us at 1.800.225.5237 or visit the company's Web site at http://www.adp.com/.
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