LINCOLNSHIRE, Ill. — While the current recession is putting additional pressure on human resources (HR) departments to lower program costs, companies don't expect the economy to change their strategy towards outsourcing HR services, according to a new survey by Hewitt Associates, a global human resources consulting and outsourcing company. In fact, Hewitt's survey shows that outsourcing HR services has helped companies reduce costs and become more efficient.

Hewitt's survey of more than 100 mid- and large-sized companies found that the majority of organizations (55 percent) are experiencing more cost pressures on benefits programs compared with 12 months earlier. Nevertheless, 71 percent of organizations do not anticipate that the current economic conditions will change their HR outsourcing strategy. About a third (34 percent) of companies said they are more inclined to outsource than they were two years earlier.

Overall, 82 percent of companies that are able to measure the success of their outsourcing initiatives believe they have realized the expected benefits. Nearly two-thirds (62 percent) of survey respondents for whom cost savings is a primary outsourcing objective said they met expected cost reduction targets through their existing outsourcing program. When asked to assess the success of outsourced HR services, at least 89 percent of respondents rated nearly all services as being effective or highly effective. Almost all (98 percent) organizations that outsource their defined contribution administration rated their program as effective or highly effective; 88 percent rated their outsourced health and welfare services as effective or highly effective; and 100 percent rated their defined benefit programs as being effective or highly effective.
 
"HR outsourcing was on the rise before the economy slowed, but current economic conditions are creating a new demand for these services as companies look for ways to further reduce costs," says Mike Wright, a leader in Hewitt's HR Outsourcing business. "Because HR outsourcing can provide companies with significant cost savings, new capabilities and improved services for employees, it will continue to be attractive to most businesses as the economy recovers."

Ninety-four percent of companies in Hewitt's survey outsource at least one HR function or program, with the majority of companies outsourcing traditional benefit programs: defined contribution (89 percent); defined benefit (72 percent); and health and welfare (61percent). Other commonly outsourced HR functions include flexible spending accounts (94 percent); self-directed brokerage windows (78 percent); and dependent audit services (68 percent). Absence management (17 percent) and dependent audit administration (9 percent) top the list of HR-related services that companies plan to outsource in the near future.

Choosing and Measuring Outsourcing Initiatives
According to Hewitt's survey, nearly two-thirds (65 percent) of companies believe that outsourcing can lead to lower costs. As such, "cost savings" topped the list of companies' reasons for outsourcing HR (78 percent). Other top reasons companies choose to outsource their HR services include, access to outside HR expertise (78 percent), service quality (74 percent), and the ability to realign resources and focus on core business (72 percent). One factor that appears to be growing as a motivating reason for companies to consider outsourcing is the opportunity to alleviate regulatory/administrative burdens, with 70 percent of survey respondents citing this as a key reason to outsource, compared with just 46 percent who took a similar Hewitt survey in 2006.

Hewitt's survey also revealed that 83 percent of companies that outsource one to two single HR processes are actively measuring the success of their outsourcing initiatives, up from 46 percent in 2006. In addition, nearly all companies measure the return on investment (ROI) of their outsourcing program using at least one of five standard measures: improved service quality; improved operational efficiencies; reduced operating costs; improved employee satisfaction; and HR staff realignment and/or reduction. Twenty-two percent of participants use all of the top five measures, while 27 percent use at least four of the metrics to gauge their outsourcing success. At least 75 percent of companies indicated that they met or exceeded their set objectives for each of the measures used to gauge ROI. 

"It's critical that companies continually evaluate how well their current outsourcing initiatives are working. In doing so, they can uncover new ways to drive further improvements in their outsourcing programs, which often results in additional cost savings," states Wright.

About Hewitt Associates
Hewitt Associates (NYSE: HEW) provides leading organizations around the world with expert human resources consulting and outsourcing solutions to help them anticipate and solve their most complex benefits, talent, and related financial challenges. Hewitt consults with companies to design and implement and communicate a wide range of human resources, retirement, investment management, health management, compensation, and talent management strategies. As a leading outsourcing provider, Hewitt administers health care, retirement, payroll, and other HR programs to millions of employees, their families, and retirees. With a history of exceptional client service since 1940, Hewitt has offices in more than 30 countries and employs approximately 23,000 associates who are helping make the world a better place to work. For more information, please visit www.hewitt.com.

Catherine  Brandt

,  Hewitt Associates,  (847) 883-1000

MacKenzie Lucas

,  Hewitt Associates,  (847) 883-1000