The Pros and Cons of Moving to Zenefits from a Traditional Broker
by Jenny Clark, SPHR
Amid the bad press Zenefits has received in 2016 I have admittedly second guessed the decision to switch our benefits broker from a traditional broker over to Zenefits in 2015. (Especially since I have learned the sales representative threatened to charge a phony implementation fee as a lever to close the deal.) However, they started corrective action by placing a new CEO to head the company and with business loss occurring I’m confident they will get their compliance ducks in a row moving forward.
Summary of Zenefits
Just in case you haven’t heard of Zenefits beyond the recent news, here’s a brief description.
- When you sign up for Zenefits they become your benefits broker and they act (and get paid) accordingly, but they go a step beyond a traditional broker.
- They have an online platform that empowers employees to manage their benefits and HR related information and an on-boarding tool to get new employees hired in seamlessly.
- This is a perfect solution for small to mid-size companies because it’s not necessary to use valuable resources to purchase other tools to handle this.
Pros
One thing I haven’t had any doubts about is how much Zenefits tools are taking on administrative tasks freeing me up to focus my attention elsewhere. I hold the role of head of people which, includes hiring and retaining the best and brightest folks. Considering my company is currently in growth mode, taking proactive steps to streamline processes is so important. Frankly, the administrative burdens that come along with a new hire can be a barrier to growth. Previously our onboarding process was very old-school — making copies of forms and policies for the new employee to spend the entire morning of their first day completing.
This is not a good use of my time or the new employee’s time.
It takes a little work up front to customize your onboarding process in Zenefits but it’s simple. You upload your documents and Zenefits handles the rest. I have nearly every piece of the offer through those traditional first day tasks formatted entirely online. The new employee can decide when it’s convenient for them to complete and I don’t have to keep bothering them for paperwork. Additionally, employees update their profiles within the system (address update, tax withholding changes, etc.) and I receive a summary of changes each week.
It is truly a win-win scenario.
Getting these tasks off my plate allows me to reinforce the ways I truly add value — partnering with my company to effectively architect, scale, and develop the growing and changing organization.
Clearly, pros for Zenefits include the onboarding feature and employee self-service model.
Cons
One may presume the strong suit for a benefits broker would be handling benefits but, unfortunately, that has proved itself to be a con. They do send changes to carriers automatically, which is a time savings on my part. However, I was sold on the theory the Zenefits team would also provide support for employees and I was encouraged to provide the customer service contact information to them.
Sounds great, right? Wrong…
Zenefits DOES NOT assist with claims issues and/or questions. Therefore, any issue an employee has with actually using their benefits must be handled solely by the employee or requires my attention. Therefore, it appears customer service is really related to using the software itself and not using benefits.
Even the software itself has some limitations I just don’t like. For example, there is not the ability to provide a contingent/secondary beneficiary for life insurance, which frankly is a life insurance basic. When I specifically asked about the lack of functionality there I was informed, again, to have the employee handle it by reaching out to the carrier.
Not great…
Open Enrollment
Having worked with about a half a dozen benefits brokers in the past I have fairly strongly rooted expectations of what to expect during open enrollment, the annual renewal period. Ordinarily the process goes as follows prior to the new plan year starting:
- Around 90 days before you begin to go out to bid to get quotes for new or different lines of insurance and/or you start to obtain renewal rates for existing coverage
- Around 60 days before you begin making selections of changes
- Around 30 days before employees select changes
- Around 15 days before insurance carriers are provided updated enrollments and a quick internal company audit occurs to ensure everything is done
- Around 30 days after the new plan year starts another audit occurs and any errors are corrected
For the most part this process was followed by Zenefits. However, the con is that personal touch with other brokers I have worked with is just not there.
I had to reach out to get a meeting set-up to get the renewal process started. Then, the representative really didn’t know much about the plan during the call. (Admittedly, she did follow-up very quickly, addressed all my questions and was great to work with through the process.) They do not come on-site or provide any web-based sessions for communicating changes to plans or new lines of insurance. All that communication must come from me and/or the employee actively seeking information on their own. (They do have some helpful resources available to make the process smoother.)
One thing about open enrollment I did like is I didn’t have to provide them a census to start the process. The pro is they sent me a census and it included the renewals rates, a few other plan options with rates, and their recommended selections. (They also did negotiations on our behalf to get better rates.)
Another pro, is the process was significantly faster than with other brokers I have worked with. Granted, the decision-making process on my end went rather quickly, which did help this.
Payroll
When making the decision to switch to the Zenefits platform I hoped we could use their payroll. Unfortunately, that portion of the software is not sophisticated enough to meet current needs. (It does not provide general ledger/GL mapping for finance/accounting and it does not properly calculate taxes for all employees outside California.)
Essentially, this leads to another con — I have to manually update our payroll and 401(k) providers with changes employees make to their profile (address changes, tax changes, benefits updates, etc.)
Conclusion
Zenefits has its pros and cons and all things considered I admittedly don’t love it. However, I do feel the decision to switch was right for current needs. I save more time utilizing the onboarding feature, employee self-service model, and automatic updates to insurance carriers than I spend working with claims issues, so overall it is a time savings on my part.
Frankly, at this point there’s just not enough broken with it to deal with switching again. We even decided to start using them for our Flexible Spending Accounts (FSAs) and Commuter Accounts for the new fiscal year so all benefits (except 401k) will be on the same platform. From that perspective, it really does make things more user-friendly — for me and employees.
I would have very much appreciated being more fully informed with making this switch so hopefully this information will help others in that position.
The views expressed here are mine alone and do not represent company views.
