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
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 Benefit Management Models
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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?
15
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
18
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
19
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
Bridging the Administration Gap – Scope of Aon’s COE capabilities
21
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
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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