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Consultants for Employee Benefits

Consultants for Employee Benefits

Employee Benefits

December 15, 2009

The recession has put the squeeze on some areas of employee benefits consultancy, but steps are being taken to meet employers’ changing requirements, says Sarah Coles.

The past 18 months have not been an easy time for employee benefits consultants to win new business. Cash-strapped employers are often in no position to splash out on new benefits initiatives, so expensive projects have been shelved in favor of downsizing, cost-cutting and simple survival. Spending in various areas has also fallen dramatically due to the recession, making it harder for consultants to attract new business.

Duncan Howorth, chief executive of JLT Benefit Solutions and president of the Society of Pension Consultants, says: “The industry has been affected dramatically by the slowdown. There has been a focus on cost control and less discretionary spend for things like HR. The sector is feeling all of that.”

Martha How, head of reward at Hewitt Associates, explains some employers are putting bigger projects, such as introducing flexible benefits on hold. “A number of clients are very keen to introduce flex, but because they already have salary sacrifice for pensions, they cannot make substantial savings from flex, so those projects may have been delayed for a year,” she says.

Another blow for consultants is that, unlike a few years ago, less work is being generated by mergers and acquisitions, when employers would sometimes set up flex, for example, to aid the harmonization process.

But employers still have an appetite for technology systems to administer benefits. Increased interest here has, in part, been encouraged by their procurement departments. However, the growing role of procurement in purchasing decisions can be a bone of contention for employee benefits consultants.

Role of procurement

“The presence and role of procurement departments in buying decisions is here to stay,” says How. “It can be a bit of a problem because consulting is quite a technical service and procurement people sometimes have no knowledge of HR and benefits. They do not understand why consultancy fees are so much more than the cost of technology. [It is like] they are comparing a leg of lamb from an organic butcher with lamb cutlets from a supermarket and they do not know about the differences.”

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