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Are You Spending Too Much on Benefits Administration (and Not Enough on Talent Management)?

Best Practice HR Spending

Best practice HR organizations spend 30% of their budget on Talent Management

With annual enrollment coming to a close, and 2013 right around the corner, this is the time of year for HR leaders to consider this question.

Unfortunately, for most HR leaders the answer is you probably are spending too much on administration (and not enough on talent management).

So what should you be spending?

According to Bersin’s HR Factbook 2011 Best Practice HR Organizations spend about 60% on HR and Benefits administration, about 30% on Talent Management and about 10% on strategic HR applications like workforce planning and HR scorecards.

However, many organizations don’t come close to these percentages. Recently we worked with a client who had a more typical HR spending allocation: roughly 80% administrative, about 20% on an applicant tracking application, and no spending allocation for employee performance or other strategic HR applications.

This was a problem.

When we looked at the numbers and started breaking down the administrative spending, we found that they were spending roughly twice what they needed to be spending in a couple of administrative areas. However, when we asked their line managers (Dir. and VP) what they really needed from HR to drive the business, the answer was: more automated and integrated talent management processes.

In summary, they were spending more than they needed to on HR administration, and not as much as they needed to on talent management.

Improving Service Delivery Value

When we looked at the administrative spending we found they were spending about twice what they needed to ($7.00 per employee per month) for H&W administration. This was for a fully outsourced model including an HR call center, which their employees rarely utilized. In other words they were paying top dollar for a service employees and managers rarely used and didn’t value highly.

We worked with them to move to a co-sourced model, which includes a small internal employee service center (providing more HR services with the same staff), combined with outsourced technology for administration using a cloud based SaaS delivery model. Using this approach we were able to cut their spending by about 50% ($3.50 per employee per month).

The other area of concern was leave management, which was being done internally. We were able to outsource this process and redeploy internal resources, reducing costs substantially (by at least 50%).

Taking a More Integrated Approach to Talent Management

On the talent management front, we found they were spending more than needed for an applicant tracking system that wasn’t really meeting their needs. We then worked to develop a more integrated approach to talent management and to review the market for best-fit providers. We wanted a talent management solution partner that could provide a an integrated talent management application, single sign-on, intuitive manager access, a unified data base and robust talent analytics. We selected Halogen software for hiring and on-boarding, employee performance management and pay, and employee job descriptions. We also helped develop an outcome based HR scorecard.

At the end of the day we were able to reduce HR administrative spending significantly, freeing up investment for talent management applications. While we did increase our overall investment in talent management technology, organizational leaders approved the increase as part of a business case to realign the HR spending profile to better meet the needs of the business. After all that’s what the leaders told HR they wanted.

HRMpact specializes in helping organizations achieve a higher return on their people. We work with business and HR leaders to integrate and automate talent management processes, build leadership capability and transform HR service delivery with resource-saving HR technology solutions.

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HRMpact works with HR and business leaders to develop Human Capital Management solutions that meet your specific business needs. More

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Media & Events

Webinar 11/7/12: How Integrated Talent Management Can Improve Your Return on People

In partnership with Halogen Software, Gary Kilzer, Managing Consultant of HRMpact, explores  Integrated Talent Management. More on the event