The Why and How to HR System Outsourcing

Defined Contribution and Pension


Defined contribution plans are the cornerstone of most current retirement benefit packages and are critical part of employees' retirement security.  These plans are complex and demand a high level of specialized knowledge, legal expertise, and technical accuracy.

Employers face an evolving and increasingly aggressive compliance environment. Legislatures and regulators are challenging the transparency and fairness of fees and the investment choices provided to participants. Litigation involving plan sponsors and their fiduciary obligations to protect participants' interests has increased dramatically.  And, uncertainty over the financial security of an aging workforce is causing broad concern.

Pensions administration involves maintaining membership records, and handling any requests from scheme members and changes of member status within a scheme. It also involves collecting contributions, paying benefits and communicating pension information to members. The majority of the work is conducted with the help of software, which also needs maintenance and are usually carried out by HR deparments.


As pensions get ever more complicated and there are more pressures on costs, the trend to outsource has hastened. Here are the key reasons why business’s outsourcing HR decide to outsource Defined contributions and pensions.


  1. Price is being driven down by fierce competition among third-party administrators (TPAs);
  2. Outsourcing removes the requirement to invest in infrastructure and keep systems up to date, releasing cash flow to employer


  1. An outsourcer takes on the burden of risk in relation to compliance and service standards and this is bound by contractual terms;
  2. The administration operation has a supporting infrastructure to ensure compliance through processes, technology and expert knowledge.



  1. Outsourcers have access to technical expertise from professionals; Succession planning and technical training are part of the approach;
  2. Up-to-date systems technology has inbuilt processes to capture and retain scheme knowledge.

Best practice

 A good outsourcer providing services for defined contribution and pensions demonstrates:

  1. improvements, especially around member experience;
  2. Technology and regulation at the heart of its services;
  3.  Processing platforms regularly updated to cope with scheme changes and regulation.

The first step towards outsourcing requires an assessment and understanding of the current cost and time devoted to in-house administration. Establishing some benchmarks in-house can prove difficult as service levels are not typically monitored as rigorously and the cost of infrastructure can be hidden in the wider operation – but it is a good start. Data integrity should also be considered as this may impact the cost of migration to a TPA, although all good administrators will have the tools and approaches to cleanse data as part of the client integration programme and if there is a problem with data quality, addressing this should be a priority.

The next step is to talk to TPAs. There is currently an oversupply in the TPA marketplace and this means providers will be consolidating and may leave the market in the next few years. A good outsourcer will work with you to tailor a solution as individual as each scheme. Some schemes choose a halfway house to outsource a section of membership, or certain bulk tasks. Systems can be hosted by the outsourcer and access provided online. Others look to outsource the entire operation.

Certainly all employers and trustees should at least consider outsourcing. In the current economic climate everyone is looking for ways to boost productivity, work smarter, stick to their knitting – a good administrator will let you do all of this and more.

HR System Outsourcing 

Ask yourself the following questions

  1. Are you over-reliant on a few, key staff and their availability (IT, System Supervisors, Administrators)?
  2. Do you have a disparate HR function?
  3. Are you looking to optimise cost?
  4. How many HR projects are on the go or in the pipeline?

Why outsource HR tasks? - There are many reasons and no one solution fits all

  1. Absence : a reduction in problem absence levels through pushing absence information and ownership to managers and employees
  2. Management Information : better, more timely and flexible decision-assistance through an interactive, skilled and focused management information service
  3. Cost Savings : reduction in need for HR administration focus, as managers and employees own more information administrative time is reduced. The leads to a reduction in fixed overhead costs and headcount.

How HR system outsourcing can help?

  1. Adoption of data maintenance tasks
  2. Management Information generation and reporting (including interactive sessions each month)
  3. scheduled tasks
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HR Business Process Outsourcing

HR Business process outsourcing is basically a combination of business process outsourcing and human resources outsourcing. We are basically talking about an action that will improve your company’s overall service. If you choose to use it you will gain from using both human resources services and business process outsourcing services. The company you run will immediately improve its efficiency and cost transparency through a simple contract. Keep in mind that now we are talking about buying a package that includes both BPO and HR outsourcing and not hiring two different companies to do it.


Although this is also an option, if you want to outsource both a business process and HR we recommend that you consider working with just one outsourcing provider. This improves communication and reduces the time needed to talk about anything that is linked with projects involved.



HR business process outsourcing is basically a process that will shift responsibilities of 3 or even more transactional processes. This includes payroll, call centers and benefits administration. In order for this to happen there is a need to hire a single vendor with a good reputation. In most situations HR specialists end up free and can concentrate on various tasks involved with executive coaching or succession planning. HR business process outsourcing is nowadays considered by a lot of companies and they are planning ahead from this point of view. We expect that in the near future most medium sized businesses in some industries will use HR business process outsourcing services.


HR business process outsourcing brings in a lot of advantages. The most important one stands in letting you eliminate repetitive, important, transactional and low valued HR parts so that you can easily focus on essentials. At the same time the company that uses HR BPO will gain immediate access to technology that it can not really afford. You thus gain cost transparency and an efficiency that you simply can not afford in another way.


HR business process outsourcing companies will offer you at least the same level of quality that you are used to but at a lower price tag. This basically means that we are saving time and improving productivity. The immediate result is an increase in profits. The only real problem that can appear is hiring a provider that can not deliver. This can offer money loss so we do recommend that you keep a close watch for this fact. Learn what it is needed to find the best provider and only after that start your search


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