When global HR consulting firm Mercer decided in November 2012 to transfer much of its Canadian pension and group benefits outsourcing business to competitor Morneau Shepell, it surprised many industry watchers. It also got them thinking. What prompts one consulting firm to invest in outsourcing and another to focus elsewhere?

Bill Morneau, executive chairman of Morneau Shepell, explains that, in the 1990s, the firm made a conscious decision to invest in outsourcing due to a “collision of factors that rapidly increased market demand.” These elements included increasing complexity of pension and benefits plans, growing conversion to DC plans, rise of flexible benefits plans, emergence of the Internet, generational change/turnover in internal HR staff and client desire to offload transactional work.

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Morneau acquires Mercer’s pension and benefits outsourcing business
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Large HR consulting firms aren’t the sole providers of outsourcing services, however, and employers appreciate having options. Insurance companies provide benefits administration services and dominate in DC pension plan outsourcing. Some smaller employee benefits consultants also offer administrative services, often targeting smaller or niche clients.

“We don’t focus on one market or geographic area and have clients in both the public and private sectors,” says Mark Hogan, senior vice-president with Coughlin & Associates, which has provided benefits administration services since 1958.

As the outsourcing market becomes more competitive, Canadians can expect more IT companies—including foreign-based firms—to offer their services here. Van Zorbas, a partner with Deloitte, cites Tata and Wipro, both based in India, as examples.

Xerox, which offers HR consulting services through Buck Consultants, already provides benefits outsourcing services in Canada and plans to expand. Angela Goodchild, senior vice-president and general manager, HR outsourcing and solutions, with Xerox, says, “Canada is a strategic market for our HR services as it has a complex pension environment from a compliance perspective. With multiple jurisdictions currently reforming their pension legislation, plan sponsors and employers depend on the experts to help them keep everything straight.”

Emerging trends
Towers Watson’s 2012 global HR Service Delivery and Technology Survey indicates a spike in the number of organizations adopting outsourcing—from 17% a year ago to 26% this year.

The survey attributes this jump to niche and single-function outsourcing of HR activities, including pension and benefits administration. Outsourcing frees organizations to “focus on core processes, realize related organizational efficiencies and maintain a level of effective governance.”

Alain Malaket, senior director, pension and benefits, with George Weston Ltd., doesn’t anticipate going the BPO route, but he sees its advantages. “Performing pension calculations is not our specialty. We rely on our outsourcing partners to provide that expertise and mitigate our liability.” Malaket offers further pluses: effective member communication, education and information; internal support for HR; and long-term administrative cost predictability.

Once the decision to outsource has been made, however, Malaket offers some advice. “Both client and provider need to invest the time upfront and on an ongoing basis to be clear with each other,” he says. “The two parties need to understand what they’re getting into and partner with each other.”

Copyright © 2018 Transcontinental Media G.P. Originally published on benefitscanada.com