Question

Many companies are choosing to partially or totally outsource their retirement and benefits functions. What are the positives and negatives of making such a choice? What could a company do to mitigate the negatives?

Answer 1

By creating the required processes in order to outsource the compensation benefits, a company can make sure that their future prospects are in order, especially since the company can create their investments strategy better when a third party is involved taking care of the process. We can say that a company might not have the required competency when it comes to creating compensation plans as well as utilizing the proper functions necessary to create them. When a company can outsource process it does not have the required affinity for, the processes become much more organization and more probability for success is created as a result. A third party can also conduct a better, fairer audit process which can help the company gain objectivity when it comes to determining their own needs.

But, there are a number of problems that can occur as a result of reliance on another company in order to create the benefits for us. While the process requires good metric values and needs determination, the compensation plans created as a result might not be feasible as a result. A third party exposes our company to error which can be caused due to communication problems, unjust service prices as well as the ability of the third party to provide the required framework for the processes. It depends on their ability to provide the required functions as well as a company’s ability to find the best match for their needs.

In order to make the best if the process, a company needs to make sure that their finances are in order. There is a need for proper assessment, internal needs-based assessment as well as data collection process which can determine the need for the process of outsourcing in the first place. This helps a company make better decisions since they have a better understanding of their own needs and the market.