Insourcing vs. Outsourcing: Should You Invest In Leave Management Software Or Outsource?
Managing leave is no easy task, with challenges including knowing which leave laws apply to a leave request, eligibility and entitlement calculations, sending timely notices, and monitoring for intermittent Family and Medical Leave Act (FMLA) abuse. Leave case managers need to face these complex elements and more, all while ensuring compliance with over 450 pieces of federal and state leave legislation across the United States!
Historically, employers have had two options for leave management: either manage it manually with pen, paper and spreadsheets or outsource. The manual in-house approach is error-prone and time consuming, but allows employers to be on the front-lines with their employees, and have control over their workforce management. The outsourcing method means leave is out of sight and out of mind, but can be frustrating for employees and hard for employers who like to know what’s happening with their workforce.
Over the past several years, innovations in leave management technology have added another option - cloud-based, in-house leave management! In a way, you “outsource your technology” and gain a solution you can use to administer leave in-house that keeps all of the federal and state leave regulations continuously up-to-date for you. This approach overcomes the many errors that can occur when an employer is trying to manage FMLA leave manually, including:
- Violating the FMLA by denying eligible leave or requesting prohibited medical information from employees.
- Inaccurately tracking employee leave, resulting in too much or too little time given (this can be especially difficult when it’s intermittent leave).
- Being unfamiliar with what constitutes an FMLA qualifying event.
- Miscommunication between managers, when they fail to immediately notify HR about their employee’s leave.
With this newer option for leave management available, we thought we’d look at the pros and cons of the insourcing vs. outsourcing debate, and share them with you!
All About Outsourcing
One of the main reasons organizations gravitate towards outsourcing leave management is that they feel they don’t have the resources to manage their leave internally. Resources can mean that an organization’s staff doesn’t have the knowledge or skills to handle the complexities of an insourced leave management program, that they don’t have technology in place, or are simply understaffed. Some companies also choose to outsource based on their company culture - they simply want to take a hands-off approach when it comes to managing their employees. That being said, even when outsourcing, there is still a need for their participation and oversight as they field employees’ questions and monitor their absence management program.
Although there are benefits to outsourcing, including legal compliance, there are also some downsides. One huge drawback of outsourcing is that the employer doesn’t have total control over their leave program. Employers don’t have as much control over issues and complaints from employees, which may result in lawsuits. And, even if an error is made on the vendor’s side, the employer may still be responsible for any FMLA violations.
The ability to customize and tailor the leave management process to an employer’s unique requirements also varies with outsourcing. Examples of customization include adding company leave policies, integrating with other systems (such as payroll and time & attendance systems), the ways in which employees can report their leave (i.e. telephone, web, mobile), whether the leave management system provides self-service information, and reporting. Some vendors take more of a one size fits all approach which can be a challenge for many employers.
It’s also a cultural change for an employer who may not be accustomed to outsourcing. Even though the technology and staffing will be provided by the vendor, there is still a high degree of employer involvement. For example, employers will still be involved with the policy review, data reporting, internal strategy, and communicating with the vendor.
In-The-Know With Insourcing
The 2018 DMEC Employer Leave Management Survey found the services, information management and retail & wholesale industries are most likely to insource, at rates of 81%, 73%, and 70%, respectively. In our own experience, we’ve seen a lot of other industries look to insourcing, with healthcare leading the charge, but also including restaurants, retail, education and many more!
There are countless benefits for employers who choose to manage leave in-house with technology, such as:
- Employers have access to leave data in real-time, so they can get the full picture of their employees and each leave event.
- Employers can respond quickly and accurately to their employees’ questions when they come looking for help, whereas with outsourcing, employers become the middleman. This in turn helps to build positive organizational values and relationships!
- Most leave management software solutions, like Presagia, manage all federal and state leave and accommodation laws, so the hassle of compliance and knowing the ins and outs of every law is gone.
- Managers can easily get updates on their employees’ upcoming and current leaves.
- Employers are in control of the timeline. Leave management solutions provide reminders when tasks are due and generate notices on time, so employers meet their compliance requirements and create a better experience for their employees.
- Employers own their data and can report on leave trends and operational metrics at anytime.
While all of these benefits are powerful, it’s important to note that getting the right system in place is critical! This involves both proper planning and selecting a system that will meet the vast majority of your requirements, ideally out of the box.
You should look for a solution that has all of the 450+ federal and state leave rules, and which can have company policies added. Workflow automation is an important factor too, as the more there is, the less time you’ll spend on manual tasks. Reporting is another area to focus on - you want a solution where you can build your own reports. It’s your data, so you should be able to report on all of it, without having to go to your vendor.
Once you’ve selected a system, you should partner with your vendor to plan a strong implementation. Remember that the fastest implementation is not necessarily the best - there’s a lot that goes into setting up a compliance system and you need to work with your vendor to account for all of this.
At the end of the day, it’s been shown that organizations who insource are more satisfied overall, compared with organizations who outsource their leave management. Additionally, approximately 81% of organizations who insource are satisfied with the technology they are using for leave management!
Should You Insource Or Outsource?
While we are obviously a cloud-based leave management company, we also know that this isn’t the right fit for everyone. So, here are some of the factors you should consider as you start moving down the insourcing vs. outsourcing path:
1. Evaluate your company culture
Does your company have a very employee-centric culture in which employees expect that they can approach your HR/Benefits team with questions about their leaves? Or, do you take a hands off approach?
2. What are the goals for your company?
It’s important to know what’s a priority for your organization. For example, you may consider some of the following elements: complying with federal and state laws, managing intermittent leave, effectively tracking leave, incorporating company policies, integrating with current technology, reducing lost workdays, maintaining company culture, etc.
3. Assess the capabilities of your company
You will need to assess a few things within your company - do your staff and managers have the capacity to manage leave? Do you have a dedicated leave management software, or are you willing to invest in one to support your staff?
4. Know the costs associated with insourcing and outsourcing
When outsourcing, costs typically include an implementation fee and a charge per employee/per month, which vary based on company size, leave volume and other factors. Insourced leave management software typically includes a one time setup fee and then a recurring annual fee, either charged per employee or per user.
Bear in mind, companies who choose a leave software gain efficiency, which may allow them to reduce staffing costs. For example, they can process more cases per case manager, potentially reducing workload and allowing additional staff to take on other tasks. Typically, insourcing becomes less expensive than outsourcing once you have more than a couple hundred employees.
5. Research the vendors to find the perfect fit
Do some research on the various vendors that are available to handle your leave management needs and find one that matches the goals your company is trying to achieve. For example, does this vendor also deal with organizations from your industry? Will they have specific staff members to help your organization? How adaptable are they, and are they willing to understand your organizations’ needs? Does their technology integrate with your HR systems? Can their current clients speak to their abilities?
After reviewing your options and having a clear idea of your leave management goals, along with what would work best for your company culture, you are ready to make a decision! Considering how far leave management technology has come, it’s no secret that choosing software that helps you manage leave efficiently and compliantly - while providing better customer service to your employees - is a very appealing option!
Founded in 1987, Presagia has a long history of helping organizations solve complex business problems with easy-to-use solutions. Today, this means providing cloud-based absence management solutions that enable organizations to be more efficient, control lost time and risk, and strengthen compliance with federal, state and municipal leave and accommodation laws.