Executive Summary:
- Benefits administration is the management of your business's benefits plans.
- Benefits administration costs are the expenditures associated with this management, not the premium admin fees administered by your insurance provider.
- Small business owners can reduce benefits admin costs by aligning with brokerages that offer administration at no additional charge.
Benefits: the question on every new hire's mind. In a competitive job market, having comprehensive employee benefits can be a great way to attract and retain a strong workforce. Your employees get security for their personal life, and you get an engaging work environment: it’s a win-win. However, properly enrolling, applying, and deducting benefits for your employees can be a serious undertaking. Constant deadlines, mountains of paperwork, ACA and COBRA requirements - to the untrained eye, all of this is another drop in a bowl of alphabet soup.
This is where a benefits administrator comes in: acting like the humble spleen in your business anatomy, benefits admin works to bolster and safeguard all major arteries, funnelling information down the pipeline in a palatable way. Although the body can still function without a spleen, it is highly prone to infection and longer lasting damage. A business without benefits admin struggles in much the same way, trying to support the whole and mend compliance gaps with an incomplete system.
Our benefits team at Payday HCM acts as the spleen for all of our clients, supporting communication, compliance, and accurate deductions on a daily basis. We know the importance of the benefits department for growing businesses, but we also know that cost factors greatly when SMBs are making benefits admin decisions. So, in this article, we are going to take a closer look at:
When you’re finished reading, you’ll have a better understanding of what you’re paying for when you sign on with a benefits admin provider, and how the Payday benefits team can protect your employees.
What Benefits Administration Does
As aforementioned, having a strong benefits administrator is key to employee retention, ultimately setting your business up for long term success.
Benefits Admin: An Overview
A benefits administrator manages group programs within a business; when we’re talking about benefits admin, we’re talking about what a provider's benefits coordinators can do for your business. On the employee-facing side, this would look like educating your staff about their benefits plans, monitoring their eligibility, updating their records, and managing their enrollment. On the back end, benefits admin also handle reimbursement procedures, track leaves of absence, process claims and pay monthly premiums in a timely manner, and ensure accurate deductions are being processed.
Overall, benefits administration supervises the many moving parts of your employee benefits plan, keeping everything accurate and compliant. They function as an intermediary between you and your insurance provider, handling communication to provide you clear and direct answers. But, above all else, they are pushing to construct a strategic benefits plan so your business can save money while protecting its most valuable assets.
The Benefits of Benefits Administration
As your employee headcount grows, your benefits needs grow in turn, becoming more complex and more demanding. This means an increase in paper work, HR team time spent handling benefits processes, and a serious increase in compliance risk. When it comes to benefits compliance, the penalties can be substantial, with failure to meet certain ACA standards costing over $5,000 annually. Having a team that is trained specifically in the plethora of benefits compliance codes is invaluable.
Open enrollment is another instance when having a benefits administrator is incredibly useful. Oftentimes, employees feel like they have a lack of knowledge surrounding their plan and are ill prepared to make decisions due to a lack of information. Employees may end up not utilizing their plan to its full extent because they’re unsure of what’s being offered. This is when benefits admin would step in and explain exactly what their plan entails, fielding any further questions your employees may have.
The Hidden Costs
With so much at play in the benefits department, it can be difficult to pin down what exactly you’re paying for, and where money could be saved. Here, we will differentiate between benefits premium costs and benefits administration costs so you can better understand your budget.
Benefits Premium Costs
For most businesses, benefits costs tend to be the second highest behind actual payroll. Although having a good benefits plan can help with employee retention and satisfaction, it can be expensive to maintain, with an average salary of $60k annually turning into $78k-$84k after including benefits.
The bulk of this goes towards your benefits premium, the monthly rate you pay your insurance provider for their services. Insurance premiums have been on the climb, going up 6% between 2025 and 2026. There is no one specific reason for this: economic inflation, insurance trends, and declining national health all play a part. It can be a lot to take in, which makes it all the more important that you have a dedicated administrator who can navigate this landscape for you. Without benefits admin, many businesses resort to hiring full-time, in-house HR managers, which means another payroll and benefits plan you have to find the budget for.
Benefits Administration Costs
As we have outlined, benefits administration is the practice of managing your employee benefits plans, so when outlining costs of benefits admin, we’re talking specifically about the money involved in this coordination. The leading benefits admin cost is time: especially when working with hourly employees, time is money. When your business is dedicating copious amounts of time to benefits administration, you end up losing company resources, HR resources, and days that should have been spent on bigger picture projects.
There are also hidden costs tied up in ACA administration. The ACA states that all employers must offer benefits plans at an affordable rate, using their lowest wage earner as the baseline and covering the remainder. With the cost of premiums going up out of time with wages, this remainder that employers are required to cover is growing. Failing to meet ACA standards results in an incredibly steep fine, not to mention the cost of any vendors you may have in place for ACA processing. With a benefits administration provider, you are able to consolidate these many expenditures with a single, affordable position, ensuring your business compliance.
The Payday HCM Approach to Benefits Administration
Every benefits admin provider has a slightly different approach to the process and a slightly different array of offerings. We can’t speak to how other platforms operated, but we can detail exactly what to expect if you chose Payday HCM as your benefits administration provider.
What to Expect When Signing On
Operating within the iSolved platform, we assign a team of benefits coordinators to sit behind the iSolved tech and take action on anything benefits related. We start with building out the benefit enrollment or waiver process, allowing your employees to login and construct their plan based on your offerings. Once their selection is complete, we receive an alert to go into your carrier portals and process the chosen enrollments. This means filing them in the carrier systems and committing them to the payroll department in order to ensure accurate deductions.
With open enrollment recurring annually and any life events that may occur for your employees, benefits plans are constantly changing. Keeping track of the many facets and staying on top of enrollment deadlines can be exhausting, which is where we come in. No matter what happens in your employees lives or business environment, we’re always sitting behind the system to take action.
A List of Our Guaranteed Service Offerings
- A full team of benefits coordinators assigned to your account for day-to-day benefits administration.
- Benefits deductions in coordination with payroll.
- Carrier processing through carrier representative, carrier portals, or EDI (Electronic Data Integration) live feeds.
- Employee terminations with carriers as they occur.
- Month-to-month benefits invoicing, enrollment, and payroll deduction reconciliation.
- COBRA notification triggers with TPA.
- Direct engagement with your employees for escalated claims.
- Annual open enrollment, new hire enrollment, and qualifying life event portal for employee self-service online benefits enrollment.
- Proactive compliance, i.e. Affordable Care Act (ACA), COBRA, and other compliance milestones.
Payday HCM’s Service Model
We understand that although employer provided benefits are non-negotiable, they can be expensive, especially for small businesses. Which is why, at Payday HCM, we provide our benefits admin services at no cost to the client. Our benefits administration fee is commission based, paid by the carrier we align our clients with.
Our primary goal when partnering with clients is figuring out how to go above and beyond without adding line items to their admin costs. Typically, clients come to us after administering their benefits in house, a stressful, time consuming process. What we offer is taking on this work load, clearing your plate entirely, at no additional charge. Our administrators ensure compliance, accuracy, and accessible communication 100% of the time.
Safeguarding Your Business Anatomy
The world of benefits is incredibly complex. With federally mandated compliance requirements, employee satisfaction and retention, confusing insurance jargon, and steadily climbing costs, maintaining your plan can be overwhelming. If you are running your benefits department without an administrator, you're losing time, you’re losing money, and you’re running a high risk for error and underutilized benefits packages.
For all businesses, big and small, having a dedicated benefits administrator can be the difference between a clean bill of health and an underlying infection. At Payday HCM, we work tirelessly to ensure your benefits plans are properly explained, administered, documented, and deducted, all while meeting compliance standards. We know how much budget can factor into decision making, especially for those small businesses, which is why we offer our services at no cost to the client. Our bottom line is securing your benefits plans so you can focus on the bigger benefits of running your business.
Frequently Asked Questions (FAQs)
Q: How do benefits brokers get paid, and how do I know I'm getting the most value?
Benefits brokers are typically compensated through commissions paid by insurance carriers—usually a percentage of the premium. This means broker advice can sometimes be influenced by which plans pay the highest commissions rather than which plan is the best fit for your workforce. When working with a broker, ask upfront how they are compensated and request a transparent breakdown of all fees. A good broker will present multiple options, explain the pros and cons of each, and advocate for your employees' needs as well as your budget.
Q: Why do employee benefits matter for my business?
Employee benefits are one of the most powerful tools you have for attracting and retaining top talent. In today's competitive labor market, a strong benefits package can set your company apart from competitors offering similar salaries. Beyond recruitment, benefits impact employee morale, productivity, and loyalty. Employees who feel financially secure and physically well are more engaged and less likely to leave. A robust benefits package also signals that your company values its people—which strengthens your overall workplace culture.
Q: Can the Payday HCM system handle ACA compliance reporting (1094/1095 filing)?
Yes. PaydayHCM tracks ACA eligibility, generates 1095-C forms for employees, and files 1094-C with the IRS electronically. The system monitors full-time equivalent counts and alerts you if you're approaching ACA employer mandate thresholds. Read our ACA compliance guide.
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