“My company is about to sign a contract with a service provider for a 5-year term. Is this a reasonable term?”
– Sandra K.
Glad you asked Sandra! You’re about to make a major commitment regarding the management of your employee’s data, so you want to be sure the term of the contract is beneficial and fair. I recommend an initial term of three years with an annual renewal option. Given that you typically need to begin researching a service provider a year or more before you go live with a new system, any term less than three years would barely provide time for the new system to be in place beyond the first full enrollment cycle before you’d need to consider the decision to stay with that provider. An average notice for non-renewal is 60 to 90 days. Introducing a new system is a complex process; you need to allow a little time for you and the service provider to adjust to one another and implement changes to the system to accommodate your needs.
Longer than three years, however, creates the potential for you to be locked into a relationship that is not working and can’t be fixed. While I never recommend casually walking away from a service provider (you’ve invested in that relationship so you want to give it time and care to try and make it work), there are times where it’s just not the right fit and you need to move on. After a year or so you should know if there are problems and you then have time to work on the problems and/or explore alternative service provider options before you must make a decision regarding contract renewal.
If your company is planning to bring in a new service provider to manage your online benefit enrollment system, Rhonda Marcucci and her team of industry specialists are available to assist with any or all phases of the project—from needs assessment to product selection and implementation support. Contact Rhonda at Rhonda@gruppomarcucci-usa.com or call GruppoMarcucci at 1.312.690.2690.
Gruppo Marcucci (GPM), a division of Gallagher Benefit Services, Inc., provides outsourcing intelligence and associated consulting to stakeholders in the Benefits and HR Technology & Outsourcing industry. Our in-depth understanding of the service provider market and our vast experience sourcing and implementing solutions is key to our clients achieving full operational success.
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