Offering employee benefits is crucial for organizations seeking to attract and retain top talent and stay competitive. But before you design your compensation package, you need a plan for managing your benefits so you can maintain them properly. This is where benefits administration comes into play.
Benefits administration starts with choosing your preferred employee perks, but it doesn’t end there. The process can be challenging and time-consuming, particularly when it comes to following state and federal compliance laws.
In this article, we’ll describe the employee benefits administration process and how benefits administration software can help you manage it.
What is employee benefits administration?
Benefits administration is the process of managing a company’s employee benefits program.
The process includes various administrative tasks, such as:
- Designing the benefits package
- Determining a budget
- Educating employees
- Measuring results
- Tracking compliance regulations
- Making updates based on usage
Many organizations have an employee benefits administrator in their human resources department to run this process. They should be skilled in researching, understanding compliance and legal regulations, and working with benefit providers.
Additionally, many HR professionals use benefits administration software to make the process more streamlined and easier to manage. However, organizations can also outsource benefits administration to a third party.
Popular employee benefit options that require administration include:
- Health insurance
- Vacation time
- Paid time off (PTO)
- 401(k)s and other retirement benefits
- Parental leave
- Disability insurance
- Life insurance
- Dental and vision insurance
- Workers’ compensation
- Student loan contributions
- Fringe benefits, like stipends, wellness programs, student loan repayment, employee assistance programs, and more.
A robust benefits package is an effective way to show your staff you care. It reduces turnover, improves employee morale, and increases engagement. When you have a strong benefits administration process, you’ll be able to keep track of the benefits you offer and measure their success so you can make necessary changes to keep your employees happy.
What is the employee benefits administration process?
There are four critical steps in the employee benefits management process. We’ll review them below to give you a better idea of how it works.
1. Do your research
The first step in the benefits administration process is research. Before you design your benefits package, you must determine what benefits and perks your employees want. You can do this by surveying your employees for feedback and investigating your competitors' benefits.
Your employees will likely want some traditional benefits, like health insurance coverage. But there are less common ones, like pet insurance and tuition assistance, that your employees may value.
A competitive package should include a varied mix of benefit options that will make your company stand out to potential candidates and long-time staff members.
2. Set your budget
Once you’ve done your research, you’ll need to determine your benefits budget. Setting a budget will dictate how many benefits you can offer your employees. If you’re a smaller company, you may have a smaller budget. But remember, in addition to benefits that cost money, you can also offer a wide range of non-monetary benefits, like PTO or flexible schedules.
All your benefits should make financial sense for your organization. You can work with your financial or tax advisor to help determine a budget that will work for you. You should revisit your budget every quarter or year and adjust if needed.
If you switch to a more cost-effective benefit, such as moving from a low-deductible health insurance plan to a high-deductible health plan (HDHP), communicate that to eligible employees as soon as possible.
3. Manage your benefits
When your benefits package is complete, you can begin to manage it. First, you need to educate your employees on what benefits are available, how they work, and how they can enroll. Your employees are more likely to use and value their benefits if they understand how to enroll in and use them.
If your employees’ spouses or dependents are eligible to participate in any benefits, explain how they can add them. Lastly, your onboarding process and company policies should cover what happens to company benefits if employees leave your organization.
For example, if you offer a health savings account (HSA), make sure your employees know the account stays with them if they quit or retire, whereas a flexible spending account (FSA) would stay with you.
Once your employees enroll, you should track benefit usage, properly process payroll, stay updated with insurance carriers and other service providers, and answer employee questions or concerns. Your benefits administrator is not only the point person for your benefits providers, but they should also manage the employee experience.
4. Track your results
A major component of the administration process is reviewing your benefits regularly. It’s essential to know how your employees use the benefits and if they’re satisfied. If a benefit doesn’t get much use, consider dropping it the following year. You can also send surveys to measure employee engagement and gather feedback to tailor your benefits package better to meet your staff’s needs.
You also need to ensure that your benefits follow federal compliance rules regularly. The Employee Benefits Security Administration1 (EBSA) protects workers by ensuring benefits are fairly administered and employees understand their rights. Because government regulations can change frequently, review your benefits package regularly to ensure it continues to meet EBSA requirements.
Some benefits depend on company size or state regulations. For example, the Affordable Care Act (ACA) requires organizations with at least 50 full-time equivalent employees (FTEs) to offer their employees an affordable health benefit that provides minimum value and minimum essential coverage (MEC).
If you’re not offering health coverage and your company grows to 50 employees, you may be subject to a costly penalty if you don’t offer it the following year. So, your benefits administrator must monitor federal and state requirements when reviewing your benefits so you don’t run into compliance issues.
What is employee benefits administration software?
Benefits administration software is a valuable tool that enables organizations to automate and manage daily tasks. This type of software can help you optimize your benefits, identify ways to cut costs, assist your employees with enrollment periods, monitor federal regulations, track benefit usage, and more—all from one centralized location.
With a benefits software platform, you can communicate directly with service providers and insurance companies to quickly receive the necessary information. You can even use it to educate your employees about their benefits offerings so they can make the most of their perks. And to keep you safe from costly penalties, benefits administrators can help keep you updated with legal compliance issues.
Some benefits administration software is cloud-based, enabling you and your employees to manage benefits from anywhere. When looking for the best software solution for your organization, it’s important to check that it has protocols that ensure your employees’ information is safe from identity theft or hacking.
The software you need will depend on the benefits you offer. For example, if you’re offering a health reimbursement arrangement (HRA) or employee stipends, you’ll need to purchase software from a vendor specializing in these benefits—like PeopleKeep.
Determining how your HR team will manage them should be a priority if you offer comprehensive benefits. You may make mistakes with self-administration, so consider investing in effective benefits administration technology. While it may seem like a hassle, a streamlined administration process will help your employees better understand and use their benefits.
At PeopleKeep, we’re experts on personalized employee benefits. With our benefits administration software, you can easily offer your current employees an HRA or stipend and manage them in just minutes each month.
This blog post was originally published on February 22, 2023. It was last updated on November 20, 2023.
Elizabeth Walker is a content marketing specialist at PeopleKeep. She has worked for the company since April 2021. Elizabeth has been a writer for more than 20 years and has written several poems and short stories, in addition to publishing two children’s books in 2019 and 2021. Her background as a musician and love of the arts continues to inspire her writing and strengthens her ability to be creative.