Benefits outsourcing on the increase

23 July 2010

23 July 2010 | Lindsay Clark

Buyers are increasingly outsourcing the administration of employee perks such as health services and this trend is expected to continue, according to research firm Everest.

Benefits administration outsourcing (BAO) is forecast to grow by between 12 and 18 per cent this year, the Everest report found. This involves a third party managing the administration of employee benefits, such as health and welfare services.

Meanwhile, the offshore sourcing of these services is also increasing. More than 60 per cent of such deals signed since 2006 have an international element, according to the worldwide survey of suppliers.

Buyers have been attracted to outsourcing these functions because of increased administrative challenges caused by imminent US healthcare reforms, better global sourcing opportunities that can reduce costs, and quicker decision-making in an improving economic climate.

“Buyers are also increasingly looking to BAO to better manage the complexities and burdens associated with compliance issues, and provide improved employee engagement and communications platforms that help employees make better healthcare and retirement decisions,” said Rajesh Ranjan, Everest research director.

While North America continues to be the dominant market for BAO, activity is increasing in Europe, where the UK is the most dominant market. Most buyers are signing deals for single-country operations to achieve cost reductions more quickly, the report found.

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