Our Wired World

The Rising Star of Human Capital Management

Delivering on a benefits technology strategy – It’s all about efficiency

by Wendy Carberg

Ms. Carberg is Customer Experience and Digital Lead, at Guardian Life Insurance Company of America. Visit www.guardianlife.com

The digital transformation of companies is both exciting and daunting for many employers. It’s exciting because the opportunities to digitize one’s business to create enhanced customer experiences and improved processes can be a game-changer. It’s also daunting because the digital investments required, coupled with the speed at which it all needs to happen puts pressure on a company.

One function that is undergoing its own digitalization is human resources and employee benefit functions. The growth of human capital management technology is making it possible for companies to consider implementing a benefits technology strategy. With companies under pressure to control costs, provide affordable benefits, and recruit and retain talent, it’s becoming a strategic imperative to digitize this part of a company’s processes.

And the availability of technology is exploding. Since 2012, investors have been steering more than $14 billion into software and platforms for human capital management. Investment has grown 21 percent annually over the past five years and much of this growth is in integrated platforms for mid-size companies (100 to 1,000 employees).1

Our 5th Annual Guardian Workplace Benefits Study found many companies are moving away from paper
based systems in HR and benefits in order to recruit top talent, increase productivity, and enhance the employee experience.2 The future is digital, but this can be daunting for employers in terms of integrating new systems with existing systems and how much it costs to do so. As advances in technology and cloud-based solutions continue to permeate the marketplace, companies – especially small to mid-size employers – need help navigating this new digital ecosystem. Consequently, brokers should be thinking about how to support employers in developing and implementing a digital benefits strategy that will improve the company’s overall bottom line.

It’s all about efficiency

The role of human resources is evolving with a greater emphasis being placed on the function becoming a more strategic business partner. This shift, along with digitization, is causing employers to find more innovative ways to integrate their human capital management systems. Everyone is realizing that traditional, administrative HR work like payroll, onboarding, and benefits administration can be simplified and more efficient by adopting new, integrated benefits technology.

Our Guardian study found that nearly one-third of employers report that their core HR and benefit systems are at least partially integrated. The most common use of technology is for benefits administration with 54 percent of employers stating that this is externally outsourced. However, many smaller companies are still dependent on paper and manual processes. For example, 56 percent of employers with 1,000+ employees reported having either full or partial HR systems integration compared to 34 percent of employers with 100-499 employees. This number further decreases for an employer with less than 100 employees. This stems from smaller employers believing that they are not large enough or that it’s too expensive, which is further from the truth.

It also isn’t surprising given that the larger a company is the more likely it is to fully outsource or co-source their HR and benefit functions. However, what this does tells us is that small-to-midsize companies need more education on the advantages of embracing digital benefits and how it can improve their processes.

Compliance and benefits management is more challenging than ever

In addition to the day-to-day operations of running a business, employers need to keep up with an ever-changing regulatory and compliance landscape. Local paid-sick leave laws, healthcare reform, and complying with state and federal laws make it challenging for companies to manage compliance. A 2017 report by the ADP Research Institute found an increase in midsize companies experiencing unintended penalties from noncompliance, and a decrease in company’s overall confidence to stay compliant.3

Pressure is also mounting for employers to reign in benefit costs, while managing a widening array of benefit offerings and improving employee productivity and engagement. It’s a lot for employers to juggle so not surprisingly, our study found that 58 percent of employers say managing their benefits program has become increasingly complex. We found that mid-size companies (100-1,000) and younger firms (i.e. in business 5-10 years) are the ones most likely to feel challenged in managing their benefits programs.

It’s also interesting to point out that progressive, high growth companies – in other words, companies anticipating aggressive revenue growth and significant change in the workplace due to automation and artificial intelligence – were more likely to adopt benefits technology as a solution. The same applies to tech companies who embrace these type of benefit solutions from the beginning to help control costs and create efficiencies.

nearly one-third of employers report that their core HR and benefit systems are at least partially integrated. The most common use of technology is for benefits administration with 54 percent of employers stating that this is externally outsourced. However, many smaller companies are still dependent on paper and manual processes

This presents another opportunity to educate employers that it’s not only tech companies who should be embracing technology, but that overall digitalization, is the future for any company in every industry.

Enhancing the employee experience

If customers want a seamless digital experience when they shop or access information, then it shouldn’t come as a surprise that employees want that as well. Employee preferences and a changing workplace, such as a virtual and flexible workforce, are forcing employers to rethink how they engage with their employees. With employees being more mobile and tech-savvy, they are seeking a better end-to-end user experience when it comes to employee benefits.

Take into consideration that millennials now comprise more than half of the U.S. labor force, and they are projected to account for 75 percent of working Americans by 2025. Growing up in a digital world, they want their employee benefits experience to mirror what they are used to getting from other companies like Amazon and Netflix. This means a personalized benefits experience that is seamless, 100 percent digital, with an app that allows for customization, and all the information they need at their fingertips.

Companies are beginning to lay the foundation for an employee benefits model that is agile and meets the needs of their workforce; however, our study shows 3 in 5 millennials wish it were easier to learn about and access their workplace benefits. Unlike Baby Boomers, who most likely entered the workforce when an employee benefits packet was the way to educate oneself about benefits, millennials feel it is difficult to access and learn about their benefits. With artificial intelligence devices, it’s no wonder they want access to information as easy as possible – our study, for example, revealed that 42 percent of millennials use artificial intelligence (i.e. Alexa, Siri) for benefits or health-related questions compared to 26 percent of Baby Boomers. And let’s face it, this number will only continue to grow as new devices and inventions hit the marketplace.

Companies who digitize are reaping the rewards

Companies that have transitioned to more digital than paper-based systems report an optimistic outlook on their business in the next three years. They are also more satisfied with how well their benefits programs are running. For example, 81 percent of employers with highly digital benefits administration were “satisfied” compared to 56 percent of mostly paper-based.

The advantages of digitizing HCM functions is also resonating with C-Suite executives with many citing this as a top cost-containment strategy. Executives are realizing that tasks such as benefits enrollment, eligibility tracking, record keeping and leave management can be simplified, while at the same time, drive down costs and increase productivity. Many companies are allocating more budget, and 40 percent say that expanding their top benefit strategies is a top priority in the next five years.

Helping employers navigate their options

It’s evident that the time is right for employers to begin thinking about a digital benefit strategy, however, many find the options and overall process daunting. Our study found that 1 in 4 employers say developing a benefits technology strategy is a top challenge. And half of all employers – regardless of size – say they expect their benefits broker to come to them with recommendations on the best tech solutions to help meet their needs. What’s striking, however, is that 2 in 5 employers revealed that they have not spoken to a broker about their benefits. This presents an opportunity for brokers and advisors to be proactive and guide employers through this digital ecosystem.

To do this, we recommend developing a starter list of employer considerations that include the following:
1. Assess complexity of current benefit programs
2. Evaluate vendor models
3. Integration with other HR systems
4. Vendor software features
5. Assess current level of digital advancement

Finally, the growth of the software-as-a-service (SaaS) models enable large and small companies to gain more affordable access to cloud-based applications for handling human capital management. This means that employers shouldn’t feel benefits technology solutions are out of reach, too costly, or that they are too small to digitize. Having a partner who is there to educate them about the benefits of these digital solutions will help modernize their business operations, and most important, meet the needs of their changing workforce. ◊

1. Guardian Workplace Benefits Study 5th Annual, Game-Changer The Digitalization of Benefits Delivery, (2018), Page 2 (Source: CB Insights 2017: #HRWins 2017)
2. Guardian Workplace Benefits Study 5th Annual, Game-Changer The Digitalization of Benefits Delivery, (2018)
3. ADP Research Institute, Mid-Sized Businesses: Poised to Lose Balance in a Time of Uncertainty, (2017)