Benefits April 29, 2002

Retirement Plans Top Outsourcing List

April 29, 2002 (PLANSPONSOR.com) - Human resources is the second most outsourced area at companies included in a recent Hewitt Associates survey, with defined benefit and defined contribution plans the HR area most frequently given to an outside vendor.

Reported by

Fred Schneyer

According to Hewitt’s poll of chief financial officers, their firms hire outside companies for:

information technology, 57 %,
human resources, 41%,
facilities management, 40%,
finance and accounting, 20%

Of the companies sending out HR functions, 64% hire a vendor to run their defined benefit pension and 401(k) retirement plans, the Hewitt survey found.

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Respondents also listed the following HR functions as possible outsourcing targets:

health and group benefits, was listed by 49%,
35% mentioned payroll,
23% said retiree administration,
16% listed staffing and recruiting, and
15% said organizational development

Outsourcing Reasons

More than eight in ten respondents said they sent HR outside to improve their company’s performance by enhancing the personnel function. Some 80% want to manage HR as a cost center while 73% admitted they outsourced HR under orders from their chief executive officer.

Generally, the CFOs believe that outsourcing increases shareholder value, but few actually measure that return on investment, the survey found.

The interest in outsourcing remains strong, at least in part because of the still struggling economy and efforts to restrain costs. Some 33% of respondents report that their interest in outsourcing has increased very much or somewhat, while 62% say that their interest has remained the same.

CFO Involvement

The CFO respondents say that they are heavily involved in deciding what to outsource and to whom, with 36 % advocating the idea of outsourcing, 41% evaluating outsource vendors and 25% approving the hiring of the outsource provider.

The Hewitt CFO study was conducted via e-mail with senior financial executives in companies with $1 billion or more in annual revenue.