Employee benefit service providers price their services differently as per their customer’s requirements. Two of the most commonly used pricing scheme is fixed pricing and per-employee per-month pricing. However, these are applied for projects that are small and not complex in nature. Depending upon the complexity of projects, outcome-based or value-based pricing is applied. This pricing scheme is applied mostly for customers with a larger pool of employees and higher complexity in maintaining and formulation of employee benefits
An employee's cost to the company includes their wage as well as other non-wage compensations which are provided to the employees in addition to the normal wage or salaries. These non-wage components are a part of the employee benefits services. Employee benefits form an integral part of the value proposition for the employees apart from their wage as it is used as a tool to increase the economic security of employees and improve retention policies.
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Demand Outlook
The global market for employee benefit services was valued at USD 39.1 billion in 2020 and is expected to grow at a CAGR of 5.2% between 2020 to 2025 and reach an estimated value of USD 50.3 billion in 2025. North America is the largest market for employee benefit services. It accounts for over 40% of the global market share. APAC is comparatively a new market for employee benefit service providers. The APAC market is expected to see the fastest penetration of employee benefit services. Several Fortune 500 companies are entering into multi-country BAO (Benefits Administration Outsourcing) engagement with global and regional service providers. This is helping the penetration of employee benefit services in the Asia-Pacific market.
Cost Drivers
The changing dynamics of employee engagement have led companies to focus on non-wage parameters for employees. However, not all companies’ core competencies lie in managing employee benefits. Therefore, this service is often outsourced to service providers who manage employee benefit services. Over the years, the contract period for these service periods has, on average, increased from 2 years to 3.5 years. The increase in contact periods helps the employee benefit service providers improve their ticket value and secure future business.
Other drivers that make companies approach employee benefits service providers are cost savings opportunities like the implementation of captive benefits, multi-national multi-currency pooling, and discounted pricing on long-term contracts.
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