The True Cost of Manual Benefits Administration (and How to Eliminate It)

Manual benefits administration is sometimes thought to be “free.” Just because finance doesn’t see a specific bill for entering employee elections, updating spreadsheets, and emailing carriers doesn’t mean this work is actually no-cost. Just ask anyone in human resources who’s tasked with reconciling deductions and troubleshooting errors; there’s a lot of work that goes into manually managing employee benefits. That work has associated costs.

Eliminating the hidden costs of manual benefits administration can substantially reduce this part of a business’s overhead. Even when finance sees a direct charge for benefits automation software or a third-party administrator, those charges are often much less than the hidden costs of doing everything manually.

Here’s a look at the hidden costs of manual benefits administration, and how to reduce them.

The Real Cost of Manual Benefits Administration

The costs of manual benefits administration are very much real. There are both concrete costs and more intangible costs.

Where Benefits Administration Costs Add Up

The trust cost of inefficient benefits administration isn’t just one expense. It’s a cumulative expense that adds up across many small inconveniences and possible mistakes.

HR Time Lost to Repetitive Tasks

The intangible costs are easy to recognize, even if they’re sometimes difficult to calculate exactly. The time that HR reps spend transcribing data, sorting through spreadsheet columns, and updating employee elections is time that could otherwise be spent on other tasks. Same when emailing carriers about routine matters, showing employees plan comparisons, and notifying payroll of withholding changes.

HR reps’ time is worth something, and the cumulative time spent on 5-minute tasks adds up.

Potential Overpayments

The concrete costs are sometimes harder to see, even though they have specific associated costs. These include expenses like premium overpayments made to carriers, and also premium leakage due to processing delays after employees leave. Even just a “small” overpayment can be hundreds or thousands, which is no small amount for businesses trying to navigate the current economy.

How Manual Benefits Processes Create Bigger Business Problems

In addition to the aforementioned costs, manual benefits processes can create major problems if something goes awry.

Payroll Errors and Data Mismatches

Every time an HR rep has to manually update benefits information is another chance for human error. An overlooked deduction, mistaken enrollment or missed deadline can have serious consequences for employees. Additionally, it’s a nightmare to reconcile such mistakes when you have to check multiple forms and reconcile several spreadsheets.

Compliance Risk for HR and Finance Teams

In the most severe cases, a mistake brings compliance and liability risks. When teams do not have a reliable system of record, it becomes harder to prove what was offered, when employees were notified, who enrolled, who waived coverage, and whether payroll deductions matched plan rules. This can create regulatory and reporting violations, not to mention legal liability if an employee doesn’t receive their coverage.

Limited Visibility Into Benefits Spend

One of the most unrecognized costs is simply not knowing details about benefits spend. How are HR, Finance or Senior Leadership supposed to understand enrollment trends, employer contributions, plan participation, or upcoming cost changes if reports aren’t available? At the very least, there’s a delay in getting this information. Sometimes the information is altogether unknown.

Why Manual Processes Break Down as Companies Grow

Many small businesses start out with manual benefits administration. Admittedly, manually entering benefits details for just one or two employees can make sense. When staff grows to be 5, 10, 50, 100 or more employees, however, there comes a time to transition toward automated benefits solutions.

More Employees Mean More Exceptions

Staff growth inherently creates more benefits-related exceptions. Employees have different hire dates, eligibility dates, dependent needs, and qualifying life events. Manual tracking simply creates too many opportunities for an employee to fall through the cracks.

Open Enrollment Becomes Harder to Manage

Open enrollment is already one of the most demanding times of the year for HR. Manually managing communications, obtaining elections, tracking incomplete submissions, updating payroll and answering basic questions will have HR reps working overtime. They might still be pulling long hours after open enrollment, as they have to chase down employees and clean up data.

Hybrid and Multi-State Teams Add Complexity

All of the aforementioned generally assumes an HR team is in one office. Introduce hybrid workers or teams in multiple states, and the complexities further compound. Just managing spreadsheet formulas might require a different sheet for each state or locale.

How Benefits Automation Software Helps Reduce Administrative Costs

Benefits automation software reduces administrative costs by replacing manual tasks with connected workflows. Instead of relying on spreadsheets and emails, HR teams can manage data, enrollment, compliance, payroll updates, and reporting from a centralized platform.

Centralized Employee Data

A centralized system gives HR one place to manage employee benefits information. There’s no need to sort through multiple spreadsheets or review email threads. All employee benefits information is there, in one place, which can be easily checked or updated. In many cases, employees can check and update their information themselves without bothering someone in HR.

Automated Enrollment and Payroll Workflows

Automated benefits management platforms instantly communicated any updates made in the system. Payroll deductions are immediately adjusted, and plans with carriers get amended. Often, this all happens without an HR rep’s involvement if employees update their selections themselves.

Along with streamlining the process, automation is also how businesses can reduce premium overpayment, premium leakage, and compliance and liability risks.

Built-In Compliance Support

Regulatory compliance becomes much easier when all the needed information is readily available. Automated systems maintain records, track reporting deadlines, and apply liability rules so that regulatory and liability risks are greatly reduced. Of course, there are plenty of details available should they ever be needed during an audit or legal claim.

Employee Self-Service Tools

Employee self-service tools are one of the biggest time-savers for HR reps. Employees can research plans, get answers to most questions, and update their selections without interrupting anyone in HR.

This is also a benefit for employees, as they’re able to research and make selections whenever it’s a convenient time for them. They aren’t limited to just when HR is in the office.

How PBS Helps Eliminate Manual Benefits Administration

At Progressive Benefits Solutions, we’ve helped many businesses make the transition from manual to automated benefits administration. We understand the costs of doing everything manually, how to evaluate whether an automated system would be better, and how to make the transition between the two. If you’re still sorting through spreadsheets, contact us to learn more about how our particular benefits automation systems could help your business’s HR.