When a company chooses to outsource business functions, the decision is often made from a cost-reduction standpoint. However, outsourcing and offshoring are often used interchangeably, although there are distinct differences between the two. Outsourcing is the process of transferring work to an external partner, often to reduce costs and increase productivity and efficiency. Offshoring is a form of outsourcing, the difference being that with offshoring, work is outsourced to workers in countries other than where a business’s primary operations are. While outsourcing to countries where the cost of living–and thus the cost of labor–can be attractive from a cost perspective, companies often make substantial sacrifices. Especially when it comes to something as critical as human resources, companies benefit by ensuring they utilize American benefit administrators instead. Let’s dive into the reasons why.
- Time Zone Differences
When you offshore benefits administration to a foreign country, it immediately puts you (and your employees) at a disadvantage. There often is a significant time zone difference, and offshore partners can operate at as much as a 12-hour difference. This means that you’ll likely have to wait long lengths of time to get a response.
In contrast, American benefits administrators are generally not separated by more than a 3-hour time difference. At the same time, choosing an outsourcing partner located within your same time zone enables smooth communication without inconvenient delays.
- Language Barriers
Have you ever called a support hotline and been frustrated when the support agent could only speak minimal English and wasn’t able to effectively understand your problem? When you outsource to another country, there is a high probability that your offshore partner’s employees don’t speak English as their first language. This means that whenever your employees call in for benefits-related questions, they may find it challenging to get the information they need. In turn, this can create negative experiences that can harm retention.
On the other hand, outsourcing to an American benefits administrator means that there is no language barrier that could prevent them from understanding your needs. In turn, your HR department and employees will have a much easier time resolving issues and answering questions.
- Cultural Differences
Even if the language barrier is minimal, you still need to consider the impact of cultural differences. For example, other countries have different public holidays that might not correspond with US holidays. As a result, there could be a greater number of days where benefits administration is not being attended to. Similarly, there may be cultural differences when it comes to workplace interactions. In the US, there may be certain attitudes or business practices that are common, expected, and accepted. In other places of the world, these same interactions could be seen as disrespectful. When an American company outsources to an American benefits administrator, this risk diminishes.
- Data Security and Compliance Risk
Benefits administrators deal with a significant amount of sensitive employee information. In the United States, there are federal and state laws designed to protect personal information. Internationally, some countries may not have laws that protect data in the same way or to the same extent, which can create unwanted vulnerabilities. Additionally, there may be other compliance issues that could arise by working with an offshore benefits administrator, especially if they are unknowledgeable about laws that affect US companies.
- Diminished Job Opportunities
Almost a decade ago, before the explosion of remote work and the tools that make it possible, there was concern that offshoring HR functions would diminish job opportunities for the US workforce. In a survey conducted by the SHRM in 2004, nearly half of surveyed HR professionals thought that offshoring would reduce the number of job opportunities available to them.
- Political Unrest
When offshoring, there is the risk that political unrest will affect your outsourcing partner’s ability to carry out their duties. For example, Ukraine is a popular place to outsource IT and software development talent, but the Russia-Ukraine war threw this into disarray. Other things like government shutdowns or election disputes can pose a real threat to benefits administration. This can be a challenge faced in many developing countries where labor is inexpensive.
Outsource, Not Offshore
Companies looking to control HR costs can do so without offshoring benefits administration. Outsourcing to an American benefits administrator allows companies to reap the many benefits of outsourcing without sacrificing quality. Here are some reasons why:
- There is no language barrier that could result in errors in benefits.
- US-based outsourcing partners pose fewer compliance risks.
- There is no significant time zone difference, thus reducing communication bottlenecks.
- Confidential employee data remains in the US, reducing the risk of it being compromised.
Additionally, there is affordable labor within the US as well. With the explosion of communication and collaboration tools, workers can work from anywhere in the US. Smaller, rural towns are becoming more of a draw as the cost of living in major metropolitan areas continues to climb. With these rural areas offering a lower cost of living, companies seeking American benefits administrators can search these areas as well.
While offshoring can seem like a good way to control costs, when you look below the surface, the potential risks begin to emerge. Not only is it harder to manage communications with workers on the other side of the globe, but offshoring poses compliance and other risks that can cause greater headaches down the road.
Instead, an American outsourcing partner can become a valuable, trusted asset for your company’s HR department. With no language, cultural, or time barriers, you can outsource your benefits administration without compromising on the quality and reliability of the services you receive. At the same time, you’ll also help to keep more jobs in the US for talented HR professionals.
Corban OneSource is a 100% USA-based company that can provide all your HR outsourcing needs, from payroll and benefits administration process flow. If you’d like to learn more about our benefits administration services, contact us to get started today.