Offering a competitive total compensation package is the top challenge to ensuring employee engagement and satisfaction for organizations of all sizes (See Figure 1). On the other hand, nearly half of employee benefits decision-makers say that cost is a major factor when offering benefits.1
Figure 1. Top challenges to employee engagement and satisfaction. Source: Aflac
Benefits management can be complex and time-consuming for HR administrators, with daunting data entry tasks and numerous laws to comply with. Automation can help organizations
- Decrease the cost of benefits administration
- Reduce the workload on the HR department
- Ensure employee satisfaction
In this article, we’ll explore what benefits administration automation is, how it works, the challenges of manual benefits administration, and the benefits of automation.
What is benefits administration automation?
Benefits administration automation is the practice of streamlining the process of managing employee benefits, such as:
- Health, dental, or life insurance
- Retirement plans
- Paid time off
- Remote work
- Parental leave
- Disability insurance
Benefits administration automation aims to make the process more efficient and to reduce the administrative burden on HR professionals. This can help save time and money and makes it easier for employees to access and manage their benefits.
How does benefits administration automation work?
Automating benefits administration involves using either specialized benefits administration software or tools such as RPA and intelligent automation. Latter tools often leverage emerging techniques such as artificial intelligence, natural language processing (NLP), and computer vision to automate processes involving unstructured data. This allows organizations to automate benefits administration tasks, such as:
- Onboarding new employees
- Enrolling employees in benefits plans
- New hire reporting
- Calculating premiums and contributions
- Managing paid time off
- Medical bill reconciliation
- Managing changes to employee benefits, such as when an employee gets married or has a child
What are the challenges of manual benefits administration?
The traditional, manual open enrollment process involves the following steps:
- HR team notifies employees about the open enrollment period and provides information about their benefits options
- Employees review their current benefits, decide if they want to make any changes, and submit their benefits elections or changes
- HR staff processes the employees’ elections and makes any necessary changes to their benefits.
Tedious administrative tasks take up more than 70% of HR professionals’ time, and managing employee benefits is one of the most time-consuming tasks.2 And due to open enrollment’s limited time and time-intensive tasks, employees may not have time to review their options and select the most suitable plan. This can result in employee dissatisfaction.
According to Standard Insurance Company, 65% of payroll files loaded to their retirement plan system had at least one error or warning.3 Like any other manual process, manual employee benefits administration is prone to errors, such as:
- Incorrect data entry: Benefits administration process involves lots of data entry, and HR employees can make mistakes or omit important information in paper or electronic records. For instance, a benefits administrator can forget to add or remove employees and their dependents from benefit plans.
- Miscalculations: Manual calculations are also prone to errors, especially when dealing with complex computations related to benefits. For instance, a benefits administrator can erroneously exclude bonuses when calculating contributions.
It carries compliance risk
There are many regulations related to employee benefits in the US, such as:
- Internal Revenue Code (IRC)
- Affordable Care Act (ACA)
- Health Insurance Portability and Accountability Act (HIPAA)
- Employee Retirement Income Security Act (ERISA)
- Consolidated Omnibus Budget Reconciliation Act (COBRA)
- Americans with Disabilities Act (ADA)
- Family Medical Leave Act (FMLA)
Keeping up with the ever-changing regulatory landscape and avoiding non-compliance with these HR regulations can be challenging and costly for businesses. For instance, a single ADA noncompliance case costs an average of $500,000.4
What are the advantages of benefits administration automation?
Some key benefits of using an automated benefits administration system include:
- Improved accuracy: Benefits administration automation can help ensure that employee benefits are processed accurately and efficiently, reducing the risk of errors. For instance, integrating automated HR, payroll, and benefits systems provides a single source of truth, enabling automation tools to migrate and process data across these systems with minimal errors.
- Increased efficiency: An automated system helps reduce the amount of paperwork and manual data entry involved in managing employee benefits, saving time and effort for HR staff. Even transitioning into an online open enrollment process from a paper-based one can reduce the enrollment time from 6-8 weeks to 3-4 weeks.
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Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 60% of Fortune 500 every month.
Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.
Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised businesses on their enterprise software, automation, cloud, AI / ML and other technology related decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.
He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.
Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.
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