TPA guide for implementing leave administration services

In the competitive landscape of Third-Party Administrators (TPAs), distinguishing your service offerings is crucial for growth and sustainability. Leave administration services represent a significant opportunity for TPAs to extend their portfolio, enhance product lines, and secure a competitive edge. But is this the right move for your TPA business? This article explores the critical aspects of integrating leave outsourcing services into your business strategy, from alignment with your current offerings to the implementation of technology that serves both you and your clients efficiently.

1. Is employee leave administration services right for your business?

Complementary service offerings

Integrating leave administration services can be an ideal complement to your existing suite of services, offering your current and prospective customers an opportunity to easily transition this increasingly complex human resources activity to a trusted partner. Whether your TPA business is seeking to modernize, extend product lines, or increase recurring revenue, adding a leave administration service can enhance the value you provide—making your services even more indispensable.

Scalable and profitable product line expansion

For TPAs looking to expand their product suite with a growing source of recurring revenue, leave administration services can be ideal. Before taking the leap forward, it is important to ensure your financial model aligns with your growth aspirations. Define a sustainable pricing model—especially when considering your target market, the complexity of FMLA, ADA, state-specific leave laws, and ongoing (and typically increasing) costs of sales and marketing, labor, and technology.

Refresh outdated leave administration service offering

For TPAs already offering leave administration services but struggling to maintain a competitive position, this may be a great time to assess how to push the reset button by identifying strategies to improve service quality, efficiencies, and customer experience. Changes in the regulatory landscape and new leave management software choices can result in long-standing services becoming stale and inefficient.

2. How will you acquire leave administration customers?

Targeted sales and marketing strategy

When defining your approach to attracting new customers, take time to define a strategy that leverages your organization’s strengths. For example, if your customer base is concentrated in a particular region or industry, it may be helpful to focus your resources on establishing a strong market share in those areas first before expanding into other markets. Alternatively, leverage where your organization has already differentiated itself in the market. For example, your organization may be a preferred partner for an HRM or PEO platform, and having leave management software that can integrate with that platform will enable you to extend your leave administration services to this audience easily.

Emphasize your differentiation

What makes your leave administration services unique? Is it the technology you use, the level of support you offer, or your expertise in compliance? Identifying and communicating your unique selling proposition (USP) is critical to capturing the attention of potential clients. If you are focused on technology, choose a leave management software that can be highlighted on your website and provides an outstanding user experience. If focusing on compliance, consider opportunities to highlight your organization’s expertise, such as having a staff of certified leave management specialists, hosting educational workshops, and publishing informative content and resources on your website.

3. What is your leave administration service offering?

Scope of leave services

When selecting which leave types to support, consider your organization’s ability to keep up with changing laws and adhere to a wide range of employer policies. Your organization may choose to start by supporting FMLA and the laws that are relevant to the region your organization is targeting. For TPAs providing leave administration to employers throughout the U.S., be prepared to support ever-increasing and changing state and local protected leaves. TPAs will also want to consider if they will support employer-offered unprotected leaves, general employee absence management, and ADA cases. Whatever your decision, be prepared to monitor changing laws, keep your staff trained, and have processes and systems that support your services.

Identifying roles and responsibilities

As a third-party administrator, your organization is likely accustomed to thoughtfully defining where roles and responsibilities start, sit, and stop between the employer and TPA. Leave administration services will be no exception—needing to define areas such as who is responsible for:

  • Interaction with employees requesting or on leave, including activities such as receiving leave requests, providing notices, and fielding questions
  • Leave administration, including activities such as reviewing medical certifications, distributing compliant and timely forms and notices, determining leave eligibility, and monitoring leave usage
  • Communicating with managers to inform them of leave status and coordinate return-to-work
  • Coordinating with payroll and benefits regarding employee leave status and usage
  • Facilitating short-term disability and administering workers compensation claims
  • Engaging in the ADA certification and interactive process

Choosing support levels

If this is your organization’s first foray into leave administration, you may want to be particularly thoughtful about whether you will be dipping your toe in the water, wading slowly in, or jumping into the deep end.

  • Reseller with support. Rather than providing leave administration services, it may be best to start by establishing a technology partnership to provide leave administration software to your clients. As a reseller, you can add services for leave compliance or consulting rather than taking on the entire leave administration process. This approach also allows your organization to increase its understanding of the market before providing leave administration services.
  • Limited scope of leaves supported. This approach targets a specific set of leave types or activities that align well with your target market or internal expertise and resources. For example, you may choose to specialize in supporting only California employers.
  • Comprehensive leave support. Whether your organization starts here or works its way up to it over time, supporting a range of employer sizes located throughout the U.S. with leave administration services for all federal, state, and local laws is a big on-taking. This level mandates a commitment to the right strategy, processes, subject matter expertise, and leave management software.

4. How will you select the right leave management software partner?

Choosing the right software is pivotal. Essentially, your leave management software is a key partner to your organization’s ability to consistently deliver quality service and experience in a compliant and efficient manner. Beyond what an employer would typically consider, TPAs need to look beyond mere leave processing to the unique requirements and differentiators of a third-party administrator, including:

Designed for TPA leave administrators

The software should be designed to enable TPAs to set up and configure different client portals with custom domains, company-specific policies, settings, and role assignments tailored to their customers’ needs.

Priced for TPA leave administrators

Leave management software pricing is typically based on per employee per month (PEPM) because their primary target market is employers. However, a TPA needs to be able to increase profit as they scale their business—allowing for growing revenue without software costs rising at the same rate.

Employee friendly

Ultimately, your ability to deliver and scale profitable services relies upon employees navigating the leave process without having your team continuously handhold. This is why user experience is paramount. Your leave management software partner should prioritize providing an intuitive and modern experience to employees.

Tailored to your client’s needs

Employers come in all shapes and sizes. Having leave management software that embraces this reality is vital. Whether your customer has multiple FEINs, location-specific policies, or the need for various roles to access leave data and reports, a software solution that prioritizes the unique needs of TPA will be critical to your success.

5. Establish leave administration processes

Once you have defined your leave administration service offering and selected your leave management software, it is time to operationalize your service.

Standard operating procedures

Ensuring your service is delivered in a manner that is consistent, compliant, and efficient depends on not only defining your processes and procedures but also ensuring your employees have proper training and are equipped to uphold these procedures. Categories to consider addressing include:

  • Leave administration
  • Regulatory compliance
  • Customer service
  • System utilization
  • Customer onboarding

Regulatory compliance

When it comes to regulatory compliance for leave administration, TPAs need to be prepared to dedicate ongoing resources to staying abreast of new laws and changing regulatory requirements. The Disability Management Employer Coalition (DMEC) reported 19 new laws, ordinances, or regulations going into effect in the first quarter of 2024 alone. With five additional states implementing their own protected leave laws over the next three years, employers’ compliance needs will continue to rise.

Quality assurance

Similar to keeping a close eye on leave laws, TPAs need to be mindful not to take their eye off quality and compliance. When implementing a quality assurance program, TPAs will want to consider addressing areas such as monitoring the quality of customer service, verifying adherence to operating procedures and customer policies, and ensuring regulatory compliance.

In conclusion, integrating leave administration services into your TPA business can significantly enhance your service offering, making your business more competitive and profitable. By carefully considering the alignment with your current offerings, developing a solid strategy for attracting customers, defining your service offering, selecting the right technology, and establishing robust processes, you can successfully implement leave administration services and unlock new growth opportunities for your business.