Pro-Employee Leave Laws Lead to Increased Outsourcing

Even with the remorseless rise of artificial intelligence (AI) and big data in contemporary workplaces, human capital remains a key contributor to an organization’s success.

Our turbulent business environment poses new challenges in managing talent as fresh organization priorities continue to emerge. Increasingly we are seeing the prevailing rules of human capital management bring rewritten. While this brave new future emerges, managers are still left to navigate an increasingly complex annual leave ecosystem.

Employee Leave Is Increasingly Complex

Most managers agree employee leave is becoming increasingly complex. In the last decade, employers have had to cope with a plethora of legislative requirements at both the state and local levels. This has been exacerbated by employee leave benefits emerging as a key battleground as employers compete for a shrinking pool of top-tier talent.

Seven Key Factors Driving Outsourcing

1. Talent Shortage: Large multinationals, especially technology firms, find themselves in a global war for talent
2. Cost Economics: As the wage gap between major outsourcing locations and high-cost countries endures, outbound retains its appeal
3. Learning Shift: Over one million jobs in IT, call centers, and business processes have been outsourced from the U.S. alone over the past decade
4. Globalization: Major corporations regardless of their origins are increasingly global in their scope of operations. IBM is now India’s second-largest private employer, just behind Tata Consulting Services
5. Politics: While a push to repatriate jobs back to the U.S., the politics have proven to be an inadequate incentive for business to disrupt their service delivery simply to return jobs. Moreover, widening deficits reduces the government’s ability to fund anti-outsourcing programs
6. Data Security: Technical solutions have contributed to overcoming many of the security-related concerns around outsourcing, while the global nature of today’s economy continues to drive outsourcing activity
7. Outsourcing Is the New Normal: As the effects of globalization have taken hold, outsourcing is increasingly a strategic decision to identify what services should be retained in home markets in comparison with what geographic locations make the most sense for hosting outsourced solutions.

The value of outsourcing today is a fundamental strategic component in many organizations’ delivery strategy. Increasingly, activity will be determined by a combination of market pressures and internal needs.

Is Leave Management Driving Outsourcing?

One of the emerging pressure points for stimulating outsourcing is the issue of leave management. Whether dealing with mandated leave or leave provided as a discretionary benefit be the enterprise, smaller organizations are typically opting to manage employee leave internally, while larger companies have turned to established practices in outsourcing to absorb leave management.

A recent survey of employer leave strategy by the Disability Management Employer Coalition (DMEC) found employers approach in meeting the challenges inherent in managing their employee’ leave entitlements continued to evolve.

Employer Leave Management Survey Statistics

The 6th Annual Employer Leave Management Survey probed the responses of 1,132 U.S. employers of all sizes to leave management issues confronting them.

The survey found a steady pattern of growth in outsourcing administration of the Family and Medical Leave Act (FMLA):

• 34 percent of employers with 50 or more employees outsource FMLA leave to third-parties
• 45 percent of employers with 1,000 and more employees also outsource their FMLA leave management requirements
• 80 percent of employers are outsourcing their management of both short and long-term disability (STD and LTD) through their established third-party contractor managing their FMLA leave requirements on their behalf.

Clearly, this data is revealing a strong, sustained trend towards adopting an outsourcing base strategy as part of their overall talent managed approach.

What is also striking, is how this trend is not dependent on factors such as company size, with 27 percent of businesses with 50+ employees and 40 percent of organizations with 1,000 or more employees bundling short-term and long-term disability for outsourcing to a sole vendor according to DMEC.

Another interesting trend influencing the emergence of outsourcing in this the Human Capital arena is the increased use of brokers and consultants to assist with the outsourcing process. This suggests outsourcing is becoming a widely accepted option for managing this requirement.

Increased Reason For Outsourcing

The increasingly routine nature of outsourcing-based Family and Medical Leave Act (FMLA) and Americans with Disabilities Act (ADA) leave management slowly but surely being integrated with many employee assistance programs (EAP).

As the trend by management to converge these programs gathers momentum, the role played by outsourcing in helping with the overall process of managing employees’ return to work can be expected to gather momentum.

With the ability of cloud-based management systems to provide a line of sight across all aspects of employee leave, outsourcing can bring not only low-cost benefits to the table but also the ability to piggy-back on existing employee record keeping systems to provide a comprehensive solution, incorporating self-service elements, regardless of geographic location.

These leave tracking and management systems hold out the potential to be seamlessly integrated with, and source data from, existing HR information platforms, time and attendance databases and payroll systems.

Outsourcing typically brings with it a range of adaptable data streams and enhanced functionality to enable key stakeholders in the leave process to upload and view reports, helping to solve some of the more complex and recalcitrant leave-tracking issues.

Managing Discontinuous Leave Requirements

Regardless of the organization’s size, there is an emerging consensus on the part of employers that managing sporadic leave continues to be the most problematic and complex aspects of FMLA implementation-related activity for their HR departments.

That DMEC survey insight resonates with the findings of similar research. The Littler Mendelson Annual Employer Survey 2017 found employers view managing intermittent FMLA requirements more complex and challenging than managing all comparable aspects of the federally mandated provisions.

Littler’s sixth annual survey completed by 1,229 C-suite executives, human resources professionals, and in-house counsel explored the technological, legal, and social issues representing the greatest impact on today’s workplaces.

The magnitude of change emanating from both Washington, D.C. and local governments, together with accelerating technological progress and the significant evolution like work and how it is performed, is creating an unheard-of level of uncertainty among employers.

Fast-Tracking Results and Efficiencies by Training Managers

In the survey, employers both large and small reported problems in training their supervisors on the often-complex leave requirements. They also identified having to rely on managers to implement the effective enforcement of leave-related protocols and to put in place measure to ensure employees did not abuse their leave provision as being two areas that represented substantial challenges for them.

While the increasing preponderance of outsourcing in this area had undoubtedly contributed to increased employer finesse in their approach to managing leave, the survey identified a continuing need for, “additional tools, resources, and training are needed – especially for the more complex aspects of intermittent leave and the ADA.”

Final Word

The DMEC survey discovered many employers were opting to provide leave packages that offer more benefits than stipulated by the law, to avoid encountering compliance issues with the host of different federal, state and local requirements. One of the emerging opportunities for outsourcing to unlock value for their clients is in offering assistance in dealing with these systemic complexities as well as providing a low-cost range of online tools to manage the programs reporting and compliance-based information management tasks.

– Back Office Pro