The ultimate guide to employee benefits administration

Employee benefits are a vital part of any organization. From health insurance to retirement savings plans to time off, benefits play a significant role in people’s lives. For many, benefits are just as valuable as compensation. In fact, one in ten respondents would take a pay cut in return for better benefits, according to a Forbes Advisor survey of 1,000 employed Americans and 1,000 business owners. 

Benefits packages can also have a big impact on recruitment, retention, and your organization’s brand reputation. For this reason, effectively managing employee benefits administration is a fundamental function of business. 

Overseeing benefits for hundreds to thousands of employees can be a daunting task. From planning your benefits offering, managing compliance, guiding employees through open enrollment, and more, your team might feel weighed down with manual tasks. 

Rather than persisting with outdated processes, there’s new opportunity for HR teams to reduce administrative burden, empower employees to make informed benefits decisions, and generate valuable insights into cost improvements to support larger organizational goals. 

This guide will dive into common challenges of managing employee benefits administration and how to overcome these obstacles with employee engagement strategies and tools for looking ahead.  

Chapter 1: Complexities of employee benefits administration

What is employee benefits administration? 

The process of creating and managing the variety of benefits in an organization falls under employee benefits administration. 

The scope of what is covered under employee benefits administration can be extensive. It includes:

• Creating benefits packages
• Assessing and updating current offerings
• Supporting employees during open enrollment
• Applying benefits administration requirements
• Overseeing elections
• Researching benefits
• Negotiating contracts
• Educating employees

Traditionally, the responsibility of managing these tasks falls onto the HR or benefits team. But many organizations also use benefits administration software to help automate much of the process.

What are the common challenges of overseeing employee benefits administration? 

Managing employee benefits administration can be challenging no matter how big or small your organization. Let’s jump into some common challenges that your organization might be facing. 

Determining which benefits are the most valuable and attractive

Since the pandemic, shifts in employee needs and expectations have altered the way organizations view employee benefits. In 2020, the increased focus on well-being drove the higher demand for mental health resources and flexible work arrangements. Now, it has become an ongoing task to understand what employees need and expect.

But developing a well-designed and balanced benefits package is not an easy feat. The range of benefits is continuously growing, and employee preferences are constantly evolving.

There are many factors to consider when creating benefits packages, such as multigenerational differences, rising insurance costs, different cultures, labor markets, the economy, and more. And, for global companies, the range of benefits grows across regions and countries. 

Without the proper tools to research the hundreds of options available and understand what aligns with employee preferences, your organization might find it challenging to balance competitiveness and affordability. 

Managing compliance requirements

Navigating changing compliance laws can be a complex task that may increase the workload and stress for your HR team. With laws and regulations constantly changing and differing across regions and countries, staying up to date with compliance requirements takes time away from core parts of the business. However, failing to comply with these requirements could also lead to miscalculations and costly legal issues.

Plus, falling out of compliance can be harmful to your organization’s brand. Compliance errors can be damaging to your reputation as an employer and can make it difficult to hire and retain talent.  

With so many different requirements, being diligent in a changing landscape and decreasing your risk profile can be challenging. 

Employee communication 

Imagine it’s open enrollment period but employees in your organization lack confidence in their benefits knowledge to make informed decisions on their own. Suddenly, the HR team is overwhelmed with many benefits-related questions and emails, forcing them to spend more time supporting employees, and less time focused on important administrative tasks.

Overseeing a benefits administration system is complex enough but when you add individual communication and education to the mix, it can become even more difficult to efficiently manage. 

Benefits options are difficult to understand, and it’s not surprising that employees find it challenging to navigate. According to a Justworks study conducted by the Harris Poll on health insurance knowledge, 72% of respondents wish they could be told what health insurance option is best for them, and 44% of respondents expressed feeling uncomfortable asking HR questions about health insurance enrollment. 

Research also shows that there is a wide benefits knowledge gap. In a Forbes Advisor survey, of 2,000 Americans with health insurance, 77% of respondents were unfamiliar with the term “co-insurance,” and almost 50% incorrectly defined “co-payment” and “deductible.” 

Without proper communication or informed decision-making tools, open enrollment can be a tough time in an organization, lowering engagement and leading to a loss of productivity.

Rising costs

Keeping costs within budget when managing employee benefits can be a challenge. Businesses spend time and resources hiring the right talent who can operate complex benefits systems, have adequate compliance knowledge, and have the experience to manage benefits-related tasks.

Plus, manual and labor-intensive processes can impact productivity. The more time your people spend on inefficient tasks, the more focus is taken away from strategic objectives for the business. 

In addition to administrative costs, benefits costs are on the rise. A Mercer survey revealed that U.S. employers are expecting a 5.4% increase in the cost of health benefits in 2023 and costs will likely continue to rise in 2024 and beyond. Organizations need visibility into data to forecast enrollment trends and labor costs, but without the right tools, identifying opportunities for cost savings can become difficult.

Time management

Managing employee benefits administration can be a tedious, ongoing process. Your team might face a range of challenges from managing multiple systems and communicating with different vendors to negotiating contracts and building packages.

Manual work can also be time-consuming. Often, managing employee benefits can be an inefficient process with a heavy administrative burden because employees have limited access to manage their own benefits. Admins may find themselves researching hundreds of new benefits plans, fixing incorrect data entries, processing any necessary changes to plans, and handling large amounts of data without automated tools. 

During open enrollment, HR and benefits admins are faced with an influx of tasks that come from supporting and communicating with employees. Without automating processes, your team might feel overwhelmed and less productive with their time that could be spent focused on engagement and retention.

Chapter 2: Solutions to managing your benefits adminstration

Although managing employee benefits administration can feel challenging, there are solutions that can improve the experience and optimize efficiency. Let’s dive into some solutions that can help to streamline operations and support employees.

User surveys to get meaningful feedback

A solid benefits strategy starts with understanding the diverse needs and expectations of your workforce. But uncovering the right mix of benefits for your workforce can be challenging. Your people can give you the answers directly with the use of surveys.

Employee surveys are a powerful tool that gives people a voice and the opportunity to share their valuable opinions. By gathering employee feedback, you can better understand your workforce and address their needs with data-backed decisions.  

Targeted benefits questions can provide meaningful insights into the effectiveness of your current benefits options, areas for improvement, what to offer in the future, and opportunities for cost savings. 

Questions to highlight opportunities for improvement and help you take action may include:

• “What benefits would you like to see?”
• “Do you find value in the current benefits offerings?”
• “Do you feel supported during open enrollment?”

With the right answer data, you can assess and revamp your employee benefits to create an attractive package that is cost-effective and valuable. Plus, understanding what motivates people could help improve performance and reduce turnover. Knowing what to offer and how to improve makes it easier to manage employee benefits. 

Improve communication 

Surveys can also be used to help ensure employees are informed about their benefits and determine whether better communication or additional training is required. With a series of questions, you can help uncover the extent to which your workforce understands the benefits options offered to them. Plus, HR teams can identify how to improve communications by asking employees what methods they prefer such as email, landing pages, calls, Q&A, etc.  

How to create surveys? 

To create benefits surveys, you can research your benefits administration system provider to see whether they provide engagement tools that can help you create, administer, and analyze survey feedback across your workforce.  

There are many tools available to help build surveys and release them within your organization. 

Read more on how to create employee engagement surveys.

Empower employees with easy communications 

Open enrollment is a stressful time for everyone in an organization. With so many options and complex benefits jargon, it’s easy for employees to feel lost. During open enrollment, 47% of respondents in a survey conducted by LegalShield revealed that they didn’t feel prepared enough to make informed decisions. 

But open enrollment can become an engaging experience. With a combination of communication and technology, organizations can empower employees and optimize efficiency.

Make communications regular and strategic

Regular communications help keep employees informed and reduce the burden for admins. According to Benefits Pro, frequent benefits communication can improve employee satisfaction, and 71% of respondents in a LIMRA study said they felt highly satisfied when they receive benefits communications throughout the year. 

It’s a best practice for businesses to release information year-round so that employees feel more informed and understand the true value of their benefits.

Examples of short and sweet regular communications may include:

• Simplifying hard-to-digest benefits terms
• Breaking down the enrollment process into easy-to-follow steps
• Posting video tutorials

Additionally, uninformed employees can also mean that your benefits aren’t being marketed effectively, which may result in overspending on unused benefits or losing talent to competitors who better advertise their benefits package.

Think about your messaging and how it can be improved to help boost interest and engagement and change the way employees respond to information. For example, people might feel more excited about open enrollment if they see that gym memberships, massages, or even pet insurance are covered as these may be valuable parts of their life outside of work. Plus, effective marketing of your employee value proposition is an essential strategy for attracting and retaining talent.

Learn more on how to boost engagement during open enrollment

Centralize information 

House all benefits information and news on a centralized page that acts as a one-stop source, helping eliminate the need for employees to navigate through scattered web pages or ask HR for help.

Create a Q&A document or page that answers common benefits-related questions and ensure that it’s easily accessible on your company intranet. Hosting Q&A sessions, webinars, or office hours before and during open enrollment that are advertised through your benefits page can also give employees a chance to ask questions and get real-time answers. 

Leading companies use HR technology to create personalized homepages that house important information and tailor-made content with intelligent search features so that employees can easily locate relevant information.

Effective and regular communication can help bridge the benefits knowledge gap and empower employees to make informed decisions without relying on admins. When admins aren’t overwhelmed by communicating benefits information, they can eliminate tedious tasks and be more efficient with their time.

Read more on how to improve open enrollment for your employees. 

Understand what your workforce values

A multi-generational and diverse workforce often comes with a variety of different needs – what one employee values might not be as important to someone else. 

Understanding the different values within your workforce is critical for creating a well-rounded benefits package that empowers and uplifts everyone. Because when packages don’t meet the needs of employees, it can create a disengaged workforce and lead to higher turnover, lower job satisfaction, and difficulties in attracting talent. A study from Consumer Affairs revealed that 42% of respondents’ top financial reason for leaving a job would be in search of access to better benefits.

In today's world, employers must take advantage of their internal data to better understand employees and hear directly from them. With surveys and focus groups, you can uncover what employees within your organization value.

You might notice that some employees value health and wellness more than others who prioritize retirement savings plans or parental leave options. This might encourage your organization to offer more mental health benefits, student loan help, flexible work arrangements, greater health coverage, or even longer parental leave. With the right information, you can address a broader set of needs and improve engagement and retention.

Benefits are not one-size-fits-all, and when managing a multi-generational workforce, data can help you look for patterns and trends so that you can adjust plans, adapt to changing needs, and make strategic decisions that are within budget. 

Outsource your benefits administration 

When you’re juggling multiple tasks, dividing the work up can be more productive and efficient. The same can apply to employee benefits administration. By outsourcing to a managed service, you can bring focus back to business while building a process that’s scalable to support future growth.

Outsourcing your employee benefits administration allows you to partner with a specialized vendor to help manage benefits-related tasks on your behalf. With more time and less stress, your team can be more strategic with their time.

There are many reasons why you might consider outsourcing your benefits administration.

One of the most valuable reasons is saving time for the HR team. Teams can reduce their administrative workload, gain access to professional knowledge, and gain valuable insights into the impact of benefits elections. With a managed solution, fewer resources will be required, helping to reduce administrative costs. 

Another reason to consider outsourcing your benefits administration is to help support scalable growth. If your company is planning to expand into new regions, HR teams might feel unequipped to take on new regulatory environments. As a result, organizations often need to hire unplanned headcount, which costs time and resources. But the right vendor can help you simplify global benefits administration.

Read more on why your organization should consider outsourcing employee benefits administration

Chapter 3: Using technology to gain more value from your benefits adminstration strategy

Today’s workplace requires employers to evolve the way we work in order to be more efficient and more impactful across every aspect of operations. With the right technology, businesses can reduce the complexities that come with managing employee benefits with tools that help streamline processes and reduce the manual workload.

What is benefits administration software?

Benefits administration software is designed to centralize your benefits administration system. Technology empowers administrators to manage, forecast, and adjust employee benefits plans to control costs and maximize use. Automated tools help simplify and streamline many processes, taking the load off your team. By smoothly integrating with a variety of carriers, the right platforms can give your HR team a single place to create and assess packages, oversee benefits elections, and handle open enrollment for your workforce. The right software can provide you with a clear view of benefits data to help you stay within budget and stay ahead.

Key capabilities every organization needs

If your organization is interested in improving operational efficiency and empowering your people with the insights they need to provide value for both their employees and the company, there are some key capabilities to consider.

1) Integration with your current system

Benefits software is designed to simplify employee benefits, so selecting one that integrates with your current system helps ensure a smooth implementation from the start, making it easier to maintain down the line. 

Having a centralized system can help you to better manage your data in one place without having to use multiple platforms that don’t communicate with each other. With all data housed in one system, your team can easily view employee elections and enrollment data with more visibility to make smarter decisions.

Another capability to look for is a solution compatible with your payroll system. When your payroll and benefits administration are integrated, it can help streamline the management of deductions, contributions, insurance, and claims, and can help your team manage compliance requirements, which may eliminate duplicate data entry and rework.

2) Self-service for employees 

Guided self-service tools can cut through the complexity to encourage adoption and empower employees to choose the best option for their specific needs.

Often, employees can feel lost navigating benefits enrollment, but self-service tools can guide them through each step of open enrollment. Another useful way to empower employees is to make information accessible and comparable. With eligibility matching, employees are automatically presented with the benefits that they are eligible for, removing the guessing game. Not only does this empower people, but it also removes the burden from your HR team. 

The right technology supports your people and can help employees make informed decisions with prompts that ask targeted need-based questions and use this information to present recommended options based on their answers. 

To help ensure a successful open enrollment period, consider how self-guided enrollment can give more independence to employees and create more time for admins. 

3) Intelligent systems that support and forecast

When it comes to benefits administration, having access to the right tools can greatly streamline operations. When considering the right solution for your organization, it's crucial to look for benefits intelligence tools that can provide valuable insights into data to help you build smarter benefits portfolios and prepare for future enrollment with forecasting tools that simulate plans and project enrollment trends.

Some benefits intelligence tools help organizations design effective plans by identifying gaps and areas for improvement. With access to the right tools, your company can measure the utilization of your current offerings across your employee base and identify what is popular and what isn’t. These valuable insights can promote the creation of plans that align with employee needs and address strengths and weaknesses. 

Leaders can also use intelligent tools to save money by forecasting the financial impacts of plan adoption rates, identifying areas for adjustments that are within budget, and testing different scenarios that can help to design a plan that is both cost-effective and attractive to employees.

The path forward

Although managing employee benefits administration comes with complexities, the right tools can help organizations improve efficiency, empower their people, and generate valuable insights to make smarter decisions. By taking a strategic approach, organizations can create well-designed and cost-effective benefits offerings that align with the needs of both your employees and your HR team. With employee self-service, certain automated workflows, and benefits intelligence technology, your organization can offer an attractive value proposition for retaining your top talent while improving operational efficiency in your human capital management strategy.