HR Solutions

Benefits Administration in a COE Environment

Shaka Maharajh Tony Dowd

Breakout 3:

HR Solutions

Overview

3

In the beginning….

Mind the Gap!

A view from our clients

Typical Benefits Management Models and a focus on Administration

Aon’s Approach

Wrap-up

HR Solutions

In the beginning …

4

There was a professor called David Ulrich In 1996, he developed a new model for corporate HR functions The model proposed a differentiation of HR activity, dependent on the extent to which each role was process-

or people-oriented and strategically- or operationally-focused

David Ulrich - Human Resource Champions: The next agenda for adding value and delivering results (1996)

Strategic Partner

Change Agent

Administrative Expert

Strategic Partner

Future / Strategic Focus

Day to day / Operational Focus

People

Process

HR Solutions

HR roles in the Ulrich Model – ‘Three Legged Stool’

5

Work in partnership with operational managers within a business unit to influence and steer strategy and strategy implementation

Deliver competitive business advantage through HR innovations in areas such as reward, learning, engagement and talent management

Provides low-cost, effective administration for all the routine ‘transactional’ services across the business

Centres of Excellence

HR Linked through HRIS

HR Business Partners

Shared Services

HR Solutions

Benefits administration – defining the scope

6

Member queries

Invoice tracking

New joiner enrolment in

programs

Member life event

updates

New member briefing

Member forms

distribution

Leaver removal from

programs

Social security and other filings

Invoice processing

Benefits administration covers a wide range of potential activities The key administration functions which arise with our clients are:

HR Solutions

Mind the Gap!

7

Traditional

Local Client

Local HR/ Ben Admin

Local Insurer

Ulrich

Insurer is still looking for

‘local admin’

Adm

inis

tratio

n G

ap

COE

Shared Service

Local Client

Local Insurer

The implementation of the Ulrich model has removed local HR/Benefits Admin resources Intention is to provide transactional (admin) services from Shared Service functions or sometimes the COEs Overall the Ulrich model lacks clarity on how / where administration services should be delivered Insurance market is still very much locally focussed, leading to the ‘Administration Gap’

HR Solutions

Administration – a view from our clients 1

8

HR Solutions

Disconnect between where expertise sits and plans are managed

9

Strategic benefits decisions Local business leaders

Corporate level

Corporate benefits leader Different leaders for material benefits

One corporate leader responsible for all benefits

Corporate leader for international benefits (if applicable) Separate individual manages in international locations

One corporate leader responsible for home country and international locations

Regional leaders (if applicable)

Concentration of benefits expertise At geographic levels

Global centre of expertise

Benefits management in local country HR/finance leaders manage benefits as additional responsibilities

Dedicated benefits leaders with requisite skills in local countries

Outsourcing benefits manager. function Not outsourced Outsourced with exception of countries with large operations

Reporting relationships for benefits mgrs. Local benefit leaders report into local mgmt.

Solid line reporting into corporate benefits leaders

Different regional leaders for material benefits

One regional responsible for all benefits

Somewhat like A Very much like A

Somewhat like B Very much like B

-25%

-8%

-23%

-17%

-26%

-16%

-17%

-21%

-38%

-35%

-22%

-28%

-31%

-15%

25%

35%

26%

34%

25%

34%

30%

38%

33%

42%

19%

32%

10%

18%

20%

36%

35%

54%

34%

45%

32%

41%

31%

38%

27%

44%

7%

15%

6%

8%

20%

34%

-15%

-17%

-8%

-23%

-19%

-6%

-35%

-18%

-62%

-46%

-29%

-15%

Current +3 years

Current +3 years

Current +3 years

Current +3 years

Current +3 years

Current +3 years

Current +3 years

Current +3 years

Benefits managed locally by generalists

Benefits expertise sits globally

HR Solutions

Operational responsibilities typically sit with local HR

-8%

-6%

-12%

-17%

-44%

-55%

-61%

-54%

-6%

-13%

-2%

-17%

-10%

-6%

-5%

-9%

-11%

-15%

-12%

-10%

-6%

-1%

-5%

-11%

-6%

-6%

-12%

-14%

-25%

-23%

-19%

-14%

-21%

-6%

-19%

75%

55%

72%

72%

57%

37%

53%

50%

52%

57%

48%

62%

43%

27%

34%

37%

14%

10%

14%

12%

31%

31%

33%

26%

53%

35%

30%

42%

9%

18%

17%

14%

64%

64%

74%

57%

Market competitiveness

Emphasis on individual responsibility

Harmonisation

Efficient design of benefit plans

Efficient financing

Investment management

Pension de-risking

Externalisation of liabilities

Administration

Legal and regulatory compliance

Employee communications

Vendor management

Corp Finance Corp HR Local HR Regional HR Regional Finance Local finance

Des

ign

Fina

ncia

l mgm

t. O

pera

tions

10

Admin, communications and compliance typically managed by local HR

HR Solutions

The administration status-quo seems unlikely to change any time soon

11

Defined Benefit Management

Defined Contribution Management

Multinational Pooling and insurance broking

Asset pooling

Captive and pooling strategy

Multi-country fiduciary asset management

Cross-border financing of European pensions

Multi-country administration solutions

Administering flexible benefits

Outsourcing solutions for benefit functions

Data and information management solutions

Technology platform for financial management and risk insights

Flexible benefit platforms

Total rewards platform

37%

38%

42%

19%

32%

20%

19%

18%

16%

16%

40%

41%

22%

38%

24%

23%

19%

15%

12%

3%

3%

6%

7%

7%

28%

17%

7%

17%

24%

24%

23%

10%

19%

8%

4%

5%

3%

6%

17%

11%

8%

4%

13%

7%

14%

4%

8%

5%

2%

Very effective Important Very important Effective

Clients not typically looking for support with administration of benefit plans

HR Solutions

Global Benefits Management Models and a focus on administration

2

12

HR Solutions

Global Benefit Management Models

13

Decentralised Model

Loose Corporate Oversight

Centre of Excellence model

Outsourced benefits management

Reviews are initiated & decisions made locally

No global philosophy or guidelines

Some design decisions are made by HQ

Region heads may influence decisions

Philosophy and Guidelines provided but not enforced

Philosophy and guidelines are enforced

Major decisions come for global approval

DoA matrix in place for decision making

Strict global design frameworks

Core benefit components set globally

All design decisions taken by COE

Fully insured contacts No multinational pools No global funding or

investment guidelines Risk is measured locally

Multinational pooling but decision to pool may be made locally

Global investment policy and funding guidelines (but not strictly enforced)

Active pooling strategy Regional solutions in place

as appropriate Global tracking of premium

spend and savings

Effective pooling frameworks

Alternative financing explored

Global purchasing deals

Choice of providers insurer, broker, actuary, administrator, etc., left to local management

Multiple vendors

Preferred provider network established globally

Global advisors used for specific projects

Preferred-provider network mandatory

Active relationships with key providers

Global consultant advising HQ

Global MSA and SLA with key providers

Global pricing and discounts

Multi year contracts

Administration managed locally to suit plans

No central payroll or HRIS systems

Flex and other portals determined locally

Administration managed locally to suit plans

No central payroll or HRIS systems

Flex and other portals determined locally

Administration managed locally to suit plans

Administration processes streamlined at local level

Shared service support for some activities

Outsourced administration model

Centralised payroll and HRIS system

External providers and shared services managing administration

Administration

Design

Financing

Providers

Administration

Most prevalent today Observed Trend

HR Solutions

The spectrum of benefit administration models

14

Local administration Central / outsourced administration

Headlines Administration is run in-house locally to

suit local plans

Little or no involvement from global teams

Administration is centralised wherever possible

Administration is outsourced to 3rd parties where possible

Typically linked to global payroll or admin system

Some administration still remains locally

Typical Company profile

Decentralised global operating model

Relatively small global headcounts

In-country administration resource

Centralised global operating model

“Centres of Excellence” in place to run functions

Comfortable with outsourced functional teams

Relatively large global headcounts

Rationale for this approach

Inertia

Lack of scale to change

Strong in-country administration resource

Global objective for centralisation

Improved efficiencies from outsourcing / centralising

Improved governance

Leverage scale

Administration has typically been delivered within country to suit the local market programs In recent years the global trends of outsourcing and centralisation have led to the emergence of other models The table below shows the “book ends” of the spectrum Many other permutation sit within this spectrum that fit with a company’s organisational structure

HR Solutions

Benefits administration – where can it be done?

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Item Can it be delivered locally? Can it be delivered out of market?

In-house 3rd party In -house 3rd party

New joiner enrolment in programs Yes Yes Yes Yes

Leaver removal from programs Yes Yes Yes Yes

Invoice processing Yes Partial Partial Partial

Invoice tracking Yes Yes Yes Yes

Member queries Yes Yes Difficult Difficult

Members forms distribution Yes Yes Difficult Difficult

Social security and other filings Yes No No No

Member life event updates Yes Yes Yes Yes

New member briefing Yes Yes Difficult Difficult

HR Solutions

Administration Model 1 – Classic local in-house administration

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Description All benefits administration is owned and managed by the local in-house client teams

The local broker / consultant / 3rd parties will support on activities as agreed locally

Key parties involved The local HR team is the key stakeholder – in many cases a dedicated administration resource

For small headcounts the administration maybe owned by a generalist or someone in a finance role

Aon role Minimal – if Aon is the broker or consultant locally then they may support on admin as requested

Pros

Natural alignment with the administration requirements

Close relationship with employee needs

The model can handle ALL of the local administration

Fits with local benefit provider and third party operating models

Cons

Inefficient and expensive delivery model

Key man risk linked to the local administration team

Role misalignment for small headcount companies (eg finance or market leaders taking responsibility)

No centralised risk oversight

Suited to Decentralised organisations with critical employee mass in most countries

Organisations without global payroll and/or HR systems

HR Solutions

Administration Model 2 – Streamlined local in-house administration

17

Description Benefits administration remains local but third parties take on as much responsibility as possible

Administration processes are reviewed to ensure maximum efficiency

Key parties involved Local HR continue to own the administration processes

The delivery of administration delivered between HR and third parties

Aon role Aon acts as the broker and supports the administration for the programs managed wherever possible

Pros

Natural alignment with the administration requirements

Close relationship with employee needs

Efficient delivery of administration

Low frictional costs of implementation

Fits local insurers operational model

Aon can provide centralised information where they are supporting

Cons Change management of moving to the new model

Key man risk linked to the local administration team

Local client teams involved in a lot of administration

Suited to Organisations without global payroll and/or HR systems

Works with small or large headcounts in country

HR Solutions

Administration Model 3 – Partial centralised and outsourced administration

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Description The ownership for benefits administration now split between the local and global client teams

Suitable tasks (eg leaver / joiner transactions) dealt with globally

The remaining local tasks delivered as per models 1 or 2

Key parties involved Local and global HR teams manage different aspects of the administration

Third parties often involved as per model 2 and in support of the administration delivered centrally

Aon role Aon typically acts as the broker as per models 1 or 2

Aon can additionally support the administration managed globally / secure transfer of data

Pros

Can provide efficient delivery of administration

Economies of scale by delivering administration globally

Can fit local benefit providers and third party operational model

Global oversight of data protection can be provided

Cons

Responsibilities can be confused with multiple owners of different administration tasks

Model is immature and not suited to all local insurance markets

HR locally still involved in the administration

Implementation costs

Suited to Centralised organisations with global HR and / or payroll system

In-country headcounts large enough to justify the change management and implementation costs

HR Solutions

Administration Model 4 – “Fully” outsourced administration

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Description

To the extent possible the benefits administration is managed by a third party

The administration is delivered by a combination of central teams (as per model 3) and a local third party

Some residual administration still remains with the local client teams

Key parties involved Usually a single third party is appointed to manage all of the administration around the world

Local subsidiaries of the third party (and / or others) deliver the local administration

Local HR still involved as escalation and residual tasks

Aon role Aon would act as the local broker.

Aon is also able to work as the global administration partner under this model, utilising global technology platforms

Pros Efficient administration delivery

Local client removed from the administration to the extent possible

Opportunity for improved governance and reporting from the third parties

Cons

High implementation and ongoing costs

Significant change management and not suited to all local insurance markets

Local insurers not used to dealing with out-of-country teams – eg. local language only

Mismatch between global and local processes

Suited to Very large organisations with global or regional payroll / HR systems

Companies aligned to the outsourced delivery model for these non-core services

HR Solutions

Aon’s Approach 3

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HR Solutions

Bridging the Administration Gap – Scope of Aon’s COE capabilities

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Item Can it be delivered locally? Can it be delivered out of market?

In-house Aon In-house Aon

New joiner enrolment in programs Yes Yes Yes Yes

Leaver removal from programs Yes Yes Yes Yes

Invoice processing Yes Partial Partial Partial

Invoice tracking Yes No Yes Yes

Member queries Yes Yes Difficult YES (via GI)

Members forms distribution Yes Yes Difficult YES (via GI)

Social security and other filings Yes No No No

Member life event updates Yes Yes Yes Yes

New member briefing Yes Yes Difficult Difficult

HR Solutions

Global Administration solution summary

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Enrolment and Events Annual renewal Newly eligible Life events Status changes Dependant age out administration Beneficiary maintenance

Eligibility Plans and Costs Benefit follow-up processes Dependent collection Beneficiary collection Coverage termination

Customer Service Self-service for web

and mobile Customer service Call tracker Personalised communication

Employer Support Online reporting Employer tools Stewardship meetings Case management

Additional Services Supporting document upload* Claims management* Total Rewards Statements*

Messaging and Communications Benefits portal Online plan information Enrolment notifications

Data Transfer and Management HRIS and payroll

integration Ongoing carrier interface

management

*Optional service

HR Solutions

How it works

23

HRIS File Input Provide employee info Client sends

data to Aon

Aon loads data and identifies employee scenarios (new hires, transfers, salary changes, terms, etc.)

Eligibility Rules On-target Delivery Eligibility rules in

Greater Insight create a personalised experience

Applied real-time, rules adapt plan eligibility and site content as needed

Employee Portal Online Enrolment Employees learn about

their benefits and make their selections

Access to see current coverage and benefit info available any time

Provider/Payroll Files Provide election info Aon sends election

information to providers and payroll through electronic data feed

Reporting provided to client

Prov

ider

Payr

oll

Client Data

Greater Insight

HR Solutions

Wrap-up 4

24

HR Solutions

Wrap-up

25

The Ulrich model has been the bedrock of HR structures for c.20 years

The insurance industry still relies on local processes and interfaces to meet policy admin needs.

The resulting ‘Administration Gap’ leads to issues in a COE / SSU environment

A number of models have been deployed by companies to manage Benefits Admin

Aon can help to bridge the Administration Gap via utilising our global technology platform

HR Solutions 26

Aon plc (NYSE:AON) is a leading global provider of risk management, insurance brokerage and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 72,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative risk and people solutions. For further information on our capabilities and to learn how we empower results for clients, please visit: http://aon.mediaroom.com/ © Copyright Aon Consulting Limited 2016 No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any way or by any means, including photocopying or recording, without the written permission of the copyright holder, application for which should be addressed to the copyright holder.

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