As health care reform provisions are coming down, human resources and finance departments are practicing an increasingly shared role when it comes to benefits, rewards and compensation, says Randall Abbott, senior health and group benefits consultant at Towers Watson, a global professional services company in New York City. While health care reform and associated costs are not the only factors influencing this stronger partnership, they are catalysts because they are issues that affect an employer's HR department as well as its finance department. For the HR department, health care reform affects the budget for compensation and talent management while overall business costs are impacted by the upcoming provisions, which is a concern for the finance department.
"Many organizations are seeing health care reform increasing their costs from 0.5 percent to 4 percent for health care, and that's just in the most recent times," Abbott says. "In the longer term for 2014 and 2018, various health care reform mandates are being created that add costs that will affect compensation and the financials of a business."
This is especially true as the work force is shifting its demographics, Abbott says. Many employers are facing the challenge of training and developing the millennials as older workers with unique skill sets are preparing to retire. While HR is responsible for managing talent, there is also a large associated cost with doing so, and the finance department should be included in the planning and transitioning processes.
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"Work force management requires a financial investment," Abbott says. "If you have to hire different kinds of people or skill sets, it affects the cost structure, and that affects financial decisions, such as the prices of the goods and services you sell and whether you offer domestic jobs or move those functions overseas."
Besides health care reform, this stronger partnership is growing because senior executives are more open to including HR departments, which is a change from the past, Abbott adds. In today's economy, productivity in the work force is more important than ever, and managing that productivity is a primary task of HR. As productivity increases, the overall health of the business is impacted; thus, senior executives are beginning to see the importance of encouraging a partnership between HR and finance.
"It's important for businesses to optimize productivity," Abbott says. "Naturally, HR needs to be involved from productivity perspective. HR keeps employees engaged and on the job. HR is there to make sure the work force is as productive as it can be, and finance is interested in productivity because that makes for more effective business."
Looking forward, HR and finance professionals expect this greater partnership to continue. In fact, according to a recent Towers Watson survey, 38 percent of finance executives say strategy development will be much more of a shared role in the future. That number, however, is lower among HR professionals at 24 percent. Instead, most HR professionals believe they will continue to drive the process with little involvement from finance executives. Regarding budgeting, 53 percent of finance executive respondents anticipate taking on the primary responsibility while 40 percent of HR respondents expect budget setting to be a shared duty.
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