HR Outsourcing Contracts Need to Focus on the Future

September 1, 2004 ( - With the end of many first-generation benefits and HR outsourcing contracts in sight, employers risk sub-optimal renegotiation terms if they do not utilize past data and demand new and cheaper services, according to a press release by human capital consulting firm Watson Wyatt.

“Many of the first generation total benefits outsourcing contracts negotiated five to seven years ago are up for renewal. While most companies are likely to renew their deals, doing so without significant renegotiation could be a financial mistake,” said Robert Crow, a senior consultant at Watson Wyatt, in the announcement. “Employers have more leverage and information than when they negotiated their first contracts and they should capitalize on this opportunity to reduce costs and improve customer service.”

With years of service and data behind them, employers should be more aware of their needs and renegotiate accordingly, according to Watson Wyatt.

The consulting firm offered tips on negotiating new outsourcing contracts:

  • Focus on service needs, and look at new services being offered when renegotiating contracts.
  • Use the data acquired over the past years to negotiate a contract that is more aligned to a plan’s needs.
  • Solicit stakeholder input in order to negotiate for the best possible services in the required areas.
  • Consider shorter contract lengths so as to not be tied into a contract that in five years may not fit a plan’s needs.