What is the difference between HRIS and a benefits administration solution?

Does your accountant draft your contracts for you? Then why is your payroll provider supporting your benefits?

As a technology provider, we are often asked ‘what is the difference between your ben admin solution and what we can get through our payroll or HCM provider.’  Here is a simple explanation that will help guide you through this decision.

In the simplest of terms, what it comes down to is majors and minors or breadth vs depth between systems?  Evaluating what the platform’s core competency consists of and determining whether or not the applications that are not part of their focus can support my organization’s needs?  Invariably, most HR professionals face this very question; do I want one system that claims to be able to manage all HR related tasks or do I leverage point solutions to help support the roles they were meant to serve?  In concept, having all of your HR related applications run off of one system IS ideal.  However, as you will learn there is more to it than that.

When making this evaluation it is important to consider that all HCM applications have their roots in something other than benefits, most having started as a payroll solution then evolving from there.  Realizing they have an audience of economic buyers (heads of HR and the C-suite) they decided it would be a good idea to capture more market share and tie the customer to their organization by bringing Ben admin within their portfolio of products.  From a practical and business perspective this makes sense but let’s discuss why, in many cases this simply doesn’t work.

1. With eligibility management being THE most important component to administering your benefits, if you have any complexities to your benefits program, then you must consider a point solution to manage your benefits.  Remember the primary function of your benefits application is to apply the business rules that your organization has set forth and properly apply effective dates to each of your plans based on the ‘reason’ an employee goes into the system.  Managing these complexities and ensuring your system is set up properly during implementation will either leave you to fix not only the system configuration issues but all of the downstream effects which results in bad data and don’t enable you to leverage the tool as intended.

2. The next most critical function of your ben admin platform is how it manages your EDI, which stands for electronic data interchange also known as carrier feeds.  Many HCM and even ben admin platforms struggle with getting this pivotal aspect of benefits administration off the ground, let alone accurately.   Setting up an EDI with the proper structure codes, formatting it to be a full file or a changes only file and managing ongoing discrepancies can be very complicated and requires a seasoned system to help support and manage this process for you.

3. The next aspect to consider is implementation.  Managing the onboarding of any benefits platform is cumbersome and can take a significant investment of HR resources to get the system up and running.  Are you doing the build out?  Has your HCM provider built a team internally to do the build out for you?  Will additional outsourced implementation resources via a third-party be required?  Regardless of the approach, it certainly won’t support the implementation as well as someone that focuses solely on benefits.  That being said, if they provide as a service the setup your initial platform, it is likely that after the initial installation that their default is to educate then enable you to make ongoing changes in their system on your own.

4. Another pivotal function of your platform is the ongoing system management and service. Immediately following implementation, you should of course expect to have the necessary training to guide you through utilizing the tools available.  Ask what is the service model, do I have dedicated resources?  Is their sole focus to support the benefits platform or are they cross trained to support multiple applications?  Whatever the model, be sure that service is fundamental to the platform’s delivery mechanism, otherwise you will be left to leverage the forums and user manuals to guide you through their tools.  Think about what YOUR team looks like and who you can call on when you have questions.

5. And the 5th element is reporting, what access to you have to your data?  What formats are you able to extract the data in?   And how flexible are the tools available so you can set up, run and save the specific queries that are important to you? The capabilities via a reporting suite within a ben admin point solution will be far more extensive and expansive than those found in the native HCM or payroll applications.

Now that we have taken a deeper dive at some of the core elements that you should consider, lets look at what most of the HCM platforms are actually doing.  To reiterate the core problem most are trying to solve for is the fact that the single biggest reason why we hear employers are leveraging their payroll / HCM platform is wanting everything in one place on one integrated solution.  When you evaluate this further, in actuality, only a small segment of payroll providers have their own working benefits module that can support both smaller, under 100 life market segment and the larger 500+ market employer groups and everyone else partners with a company like WBD to serve their customers ben admin needs.

Many HCM platforms have once tried to develop their own benefits modules only to learn how challenging the this can be.  Many have opted to sunset these applications or only use them for the simplest of client installations, then turn to a stand-alone benefits administration provider who specializes in benefits to focus on the integration (more to follow on this with the vendors you are reviewing).  Why is this?  As you probably have gathered, by far THE most complicated component within the HCM ecosystem is the benefits application.  With rules varying from employer to employer (and even within employer’s classifications themselves) and the need to communicate externally with anywhere from 2-10 other providers, you need a solution that has a focus on serving the needs of their customers in this very way.

Now that we have all of this newfound knowledge, is the single source solution the most important thing?  Or is an integration the most important question to be considered?  Unfortunately, there is not a yes or no answer here and much will depend on your specific situation.  However, we do urge you to consider having your cake and eating it too by bringing all the best solutions together to fit your needs and then integrating them.

What does integration in these terms mean, I thought you would never ask?  An integration consists of two facets.  The first being the employee facing integration, also known as a single sign on (SSO).  This level of integration enables the employee to login to the HCM platform and click on a benefits button.  The action directs them to the point solution, bypassing the login and making the EE experience seamless between the two systems.  The second component is the data integration on the back end. Here the ben admin system and the payroll / HCM solution are able to share key data elements and general deduction information without the involvement of you, the end user.

You may be wondering, if the integration is already in place with the payroll provider, I trust this company because they told me they can do it.  Fair point, but you are still using a third-party middleman application.  To further uncover what typically happens is the payroll provider is simply licensing the ben admin platform and then creating an infrastructure around building, servicing and updating that third-party solution something that they are likely not experts in.

Why wouldn’t you want to work with the experts directly? We could discuss further the idea of insourcing vs outsourcing or licensing vs partnering but that is another subject altogether.

To frame this concept up with other industries you may be familiar with, look at your cable provider.  You have traditionally gone to them for your TV service and they have branched out into the Internet, which to the general public has made sense.  Now that they have your attention and trust (and hard earned paycheck) they are moving into areas such as home security and even mobile phone services.  Do you think that you cable company has gone around the country building their own cell phone tower infrastructure?  No they are using what already exists?  Payroll companies are doing the same thing with Ben admin. Do you have all of these with one provider at home?

Likely not and here is why:

1. You have had a defragmenter specialized approach and it is too hard to switch.

2. You value what each point solution brings in and of itself.

3. You understand that they are simply white labeling another offering and don’t want to sacrifice the quality that you are receiving through your current provider.

Look, Ben admin is very complicated and very complex, especially as an organization gets larger. Many payroll providers have tried to create their own solution only to realize that it is too difficult and look to partner with another provider that they can integrate with.  Does your accountant draft your contracts for you?  Then why would you expect your payroll provider to handle your benefits administration?   Everyone wants easy and everyone want a turnkey solution. Let us help get you there.

Additional topics that we can discuss

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2. Didn’t discuss how the broker could be getting a kickback

3. Didn’t discuss how the payroll could be