Should Benefits Be Part of HR?

Shared Leadership Carol Anderson[su_dropcap style=”flat”]I[/su_dropcap]HAVE BEEN having a debate with myself. It’s becoming both annoying and non-productive. So I thought I would invite you all into the dialogue.

As I speak and write about how HR can become a business accelerator, one of the biggest obstacles is time. HR has such a full plate, that we just run out of time. While the work of talent development, organizational dynamics and change and solving real business problems related to human behaviors is exactly what will position HR as a business accelerator, there is too much other work that zaps the available time.

So I think about what roles HR plays that really don’t accelerate business, and come up with two: employee relations and employee benefits.

Employee relations is non-negotiable; there is too much risk involved, and it truly is a leadership and people issue. Where HR can shift to business acceleration is in developing leaders that inspire commitment, rather than demand compliance. That would free up a lot of time in “discipline,” but that’s a topic for another day.benefitsHere’s my internal debate: is employee benefits really appropriately assigned to HR, or would it be better as a finance role?

WorldatWork will probably consider this a blasphemous question, but I think it does merit discussion. Benefits, in particular, is (in my experience) 1/5 strategic and 4/5s administrative and financial and that 4/5s take a lot of time.

As the profession of HR emerged, health and pension plans were largely unregulated, and the design of the plans was part of the strategy of attracting and retaining employees. As regulators prescribed more and more restrictions and as the question of whether to have benefits and how to structure them became less flexible given the competitive requirements, the discipline of employee benefits became overwhelmingly complex and relatively fixed. But the complexity required more skill and more time: administrative processing, financial analysis and reconciliation, and compliance.

My debate with myself: One side

HR departments spend several months each year tweaking plan design, usually with a financial objective in mind.  They spend another several months in open enrollment, chasing and policing compliance so that employees didn’t miss the chance to enroll or change. They focus time and attention in testing defined contribution plans to avoid discrimination and ensure adherence to plan documents. They develop and produce plan documents that generally require partnership with finance and legal. They build out call centers and intranet portals to answer a wide range of questions on the part of employees and employee families.

As HR struggles to add value to the organization, they spend an inordinate amount of time doing work that is neither strategic nor flexible.  The skill set required to do this well is not necessarily the skill set that will help to shape human behavior in such a way as to drive organizational performance. Given that this latter role is so critical, does it make sense to weigh down HR with the responsibility for the administration of employee benefits?

My debate with myself: The other side

What gets in my way of agreeing with the first argument is relinquishing control of such an important element of the decisions around how to attract and retain the workforce.  Total rewards, as defined by WorldatWork, is the overarching offering made to current and prospective employees, including compensation, benefits, talent development, performance management, recognition and work-life effectiveness. Yes, benefits looms large in this definition.

Additionally, I advocate the role of HR to be “all things people,” so therefore why would benefits be housed in a different department, and subject to a “non-people,” financial-only focus?

There is also an element of employee advocacy in the administration of employee benefits – when benefits are handled smoothly by the organization, the workforce is better able to focus on performance, and not diverted by concerns over healthcare or retirement. That is a good role for HR.

And of course, given that benefits administration is usually integrated into the HRIS, it would be really difficult to separate the functions. Giving access to anyone outside HR provides confidential information on employees related to salary and other sensitive data. That could be a deal breaker.

Given that the cost of benefits is huge, this is also a chance for HR to add value by impacting the cost of benefits through negotiation and auditing. Taking away this lever takes away a large contribution.

Please weigh in

OPINIONSo you see why I need help here. I can effectively argue both sides. But my question remains – is the administration of employee benefits something that a strategic HR team should accept?

Eek, I just realized that I may be arguing Ram Charan’s position of splitting HR. But not really. He advocates HR-Administration take over Benefits and Compensation. In no way should HR relinquish Compensation – it is a highly strategic element of “all things people.” Yes, there is administration but unlike benefits, the strategic part is big, real and important and needs to align to performance and development.

Somewhere in the middle?

What I struggle with is the administration of employee benefits. It just doesn’t seem like a role that does anything to help HR in our quest to be strategic. In fact, it takes precious time that could be used to lead change, develop talent and solve real business problems, and if we don’t get better at that, we will continue to struggle with credibility.

This internal debate is driving me crazy and I need your help. What are your thoughts?


Carol Anderson
Carol Anderson
CAROL is the founder and Principal of Anderson Performance Partners, LLC, a business consultancy focused on bringing together organizational leaders to unite all aspects of the business – CEO, CFO, HR – to build, implement and evaluate a workforce alignment strategy. With over 35 years of executive leadership, she brings a unique lens and proven methodologies to help CEOs demand performance from HR and to develop the capability of HR to deliver business results by aligning the workforce to the strategy. She is the author of Leading an HR Transformation, published by the Society for Human Resource Management in 2018, which provides a practical RoadMap for human resource professionals to lead the process of aligning the workforce to the business strategy, and deliver results, and writes regularly for several business publications.

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  1. I never considered things like processing payroll as a duty/responsibility of HR. But, it seems some companies have shifted more and more “mechanical” functions to HR.

    Of course, some matters are relatively easy to farm out, such as payroll and even some legal compliance issues. While these issues certainly vary from company to company, there are two consistent problems, as I see it, in staffing HR.

    First the work load can and does vary significantly. Secondly it is very difficult to determine how much wood a wood chuck can chuck as it relates to HR. Many of the HR functions are impossible to define as to the amount of time it takes to do them. Functions in line jobs can be defined as to how many bolts and nuts can be attached in an 8 hour shift. How may rooms can be cleaned in a hotel in 8 hours. How many customers can be serviced in a shoe store. Not so simple though in HR matters. How long does it take to crate a training manual or survey benefit structures in competitor companies?

    The end result of that is often moving more duties to HR when management sees they had slack time last week.

    • Funny you should say that, Ken. As I was talking back and forth with Jane, and trying to write a follow on article, I’m still puzzled. The amount of minutia that HR takes care of, and does so with as lean a staff as possible, is really huge. In my tenure, my team tracked hours by project/assignment so that we could defend/justify our work and put a cost to our efforts.
      It just seems like such as waste of time for HR to get wrapped up in administration, but outsourcing almost always costs more in the long run. If the HR executive team doesn’t get too wrapped up in the administrative stuff, I can’t help but believe that you can’t extricate benefits from HR. There is no really good answer.
      Payroll, on the other hand, shouldn’t be in HR – at least in my opinion. HR is responsible for setting pay, but from a checks/balances position, they shouldn’t also be the ones effecting the pay. Each industry does it differently, but that one really does make no sense to me.

  2. I want to chime in here from an employee standpoint. To me benefits are part of caring for the whole person, present and future. When I think of the arms of HR, I think of Policies, Payroll (the paying of people), Benefits, Compensation, and Training. I can see how Payroll and Training take on a life of their own, but care and feeding of employees (Compensation policies and Benefits) seems like HR (Human Responsibility). I know this goes much deeper than who you hire to fill the roles, but if expense is the issue hire people who are passionate about HR and train them well starting with administration so they become experts in research, compliance, and policy making because they’ve been through the minutiae as they traversed the learning curve.

    • Hi Jane – of course, you know that I advocate HR moving from administration to performance improvement. I just wish there was a way that the highly labor intensive work of administering benefits could be handed off to a part of the organization that was already skilled in that type of work. I’m probably talking myself out of the very question I asked, but I still struggle with how much routine work that is very different from the skills that HR needs, is attributed to benefits.

    • Yes it does. I’ve been thinking about this topic based on all the comments, and arrived at a reality that, if HR were to “share” the administration of benefits with another area of the organization, thus freeing themselves to be more strategic, that other area would probably declare that they have to add staff. HR has gotten very good at administering in a lean mode, mainly because they are challenged annually to trim staff.

  3. If there is a union involved then benefit packages are in the contract negotiation package. Those not in the union largely are controlled by the package.

    However, in the absence of that, I see the benefit issue as 1/3 financial, 1/3 administrative, and 1/3 HR. Cut that pie any way you wish though, isn’t it really a matter of market? If you wish to attract and retain the best then you must be competitive in the job market place. If your benefit package isn’t competitive, you lose.

    • I agree with you Ken, and don’t in any way think HR should not have a role. But is there a way to free up time for the consulting and advisory role through either outsourcing or sharing the administrative burden.