Look Before You Leap: Payroll-Ben Admin Tech API Considerations

By Kisha Moliere

Many employers’ tech stacks consist of disparate systems for payroll/HRIS and benefits administration (ben admin).  If connected at all, these systems have typically been integrated via weekly EDI file feeds which result in unsynchronized data and billing reconciliation challenges.  Consequently, establishing Application Programming Interfaces (APIs) between these platforms is becoming more popular – as the near real time data exchange made possible by APIs can theoretically allow employers to keep best in class technology in each area, while eliminating the clunky and inefficient weekly EDI files that often require manual review and intervention.  However, because of the relative novelty of APIs between ben admin and payroll providers there is no established standard yet.  As a result, you should thoroughly inquire about the following before saying yes to an API:

1. What are the costs?  

It is important to ask both your ben admin technology and payroll providers about costs associated with standing up an API.  While ben admin providers often do not charge for an API they’ve previously built for a particular payroll provider, the payroll provider may still charge fees.  That fee can vary based on many factors and may come in the form of a one-time “setup charge”, a PEPM (per employee per month) or a flat, recurring monthly fee.

2. Which data elements are exchanged and in which direction do they flow? 

It is easy to assume that establishing an API between platforms means seamless, real-time connectivity that will create efficiency in administering your employee benefits and payroll processing while eliminating duplicative data entry challenges.  However, in reality, the usefulness of an API will depend heavily upon what data elements are included and in which direction they flow.

For example, an API may allow you to make a change to an employee’s name, address, and email in either platform and result in both systems being updated within minutes.  However, elements such as “Hourly vs Salary” or “Effective date of compensation change” may only flow from the payroll platform to the ben admin platform.  This means if you change an employee from hourly to salary in the ben admin platform, the payroll system would not be updated.  Similarly, you’ll want to know if deduction information flows in both directions, or if it only flows from the ben admin system to the payroll system via the API.  

Understanding the above will ensure that you develop processes that keep your systems synchronized.

3. What data elements are not included in the API and are they relevant to benefits eligibility?

It is imperative that you inquire if there are any fields of information that are not included in the API and assess whether any of them drive eligibility.  For example, suppose an employee’s benefit eligibility is partially driven by their class or work location.  If these types of elements aren’t included in the API, it would mean changes to their class or work location would need to be manually managed in both platforms. This could render the API more trouble than it is worth.  

4. Are there timing considerations or limitations with the API?

Another critical consideration is whether the API has limitations regarding transaction timing.  For example, will an employee enrolling in the benefits platform a month prior to their effective date cause an issue for the payroll system? If so, consider how this might impact the enrollment window you allow for your employees.

5. How are errors reported?

Understanding the timing and mechanics of how errors are reported is also important.  Is there a dashboard or notification system that proactively notifies you?  Or are you alerted to errors only after an employee notices an update to their payroll deduction hasn’t taken place, for example?  

There is little doubt that API will revolutionize HR professionals’ employee benefits administration experience in the same way it has transformed shopping, booking travel and peer-to-peer banking.  Weekly EDI file feeds to payroll companies and carriers will inevitably be replaced with the near real time transactions that API offers.  This will result in the drastic reduction of downstream challenges such as access to care issues due to delayed ID cards, coverage/claims discrepancies and payroll/ carrier billing reconciliation.  However, API is relatively new in this space, and should therefore be carefully discussed before adopting to ensure it can result in the efficiencies you desire.