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WASHINGTON- According to Watson Wyatt experts, now is the time to start reviewing human resources outsourcing contracts, otherwise employers risk leaving “money on the table”. “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,” says Robert Crow, a senior consultant at Watson Wyatt, who advises large companies on their contract renewals. “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.” Crow says many employers experienced higher than expected outsourcing costs because of certain elements in their original contracts. Locking in long terms, for example, prevented employers from negotiating lower rates after just a few years. Not including reasonable transition fees in the event the employer’s population size changed also benefited vendors. “Employers are in a much stronger position today,” says Crow. “Consolidation in the outsourcing market, combined with the availability of important usage trends and other data, give companies the leverage they need to negotiate more favorable terms.” To get the most out of the next generation of outsourcing contracts, Crow offers employers these negotiation tips: * Focus on service needs: With advances in technology and growing employee comfort with web-based transactions, many of the service provisions necessary five years or so ago may no longer be needed. “More workers now use the web to conduct benefits-related transactions. This means fewer employees are calling outsourcers’ customer service call centers than in the past, lowering the vendor’s staffing requirements and costs. Companies must capture these types of shifts and potential savings during contract renewal negotiations,” says Crow. * Use acquired data: Original outsourcing contracts were negotiated without much information on potential usage levels and other factors. Now, after years of data collection, companies have real numbers at their fingertips to help them negotiate contracts that closely align with their needs. By looking at measures such as call volume, content and call resolution rates over a period of time (12-24 months), companies can better predict future service center usage for leveraging in the negotiations. * Get input: Input from employees, benefits staff and other key stakeholders can help companies get a better perspective of actual service quality and cost savings and translate this knowledge into action. If, for example, employees report frustration with long wait times during service center calls, the new contract should modify existing performance guarantees to address the changing requirements. * Consider shorter contract lengths: By negotiating shorter contracts or contracts that allow for mid-term renegotiation, companies can obtain the flexibility they need to update their contract terms to reflect the changing environment. “It’s important for companies to have the option to adjust their outsourcing strategies to use new technologies, incorporate new groups of workers added through mergers or acquisitions, and capture any benefits and savings associated with further consolidation within the outsourcing industry,” said Crow. “We have seen a continued reduction in various service charges over the last six years. Because we expect this trend to continue, locking into a long-term contract may not provide the best deal.”

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