Sample Vendor Due Diligence Management

Sample_Documents

DISCLAIMER: This is a sample template provided for informational purposes only. It does not constitute legal, tax, or financial advice. Organizations should consult their own legal and tax advisors and tailor this document to reflect their specific business needs, geographies, and applicable laws.

Document Header

Field	Value
Title	Vendor Due Diligence & Management
Company	<Company Name>
Category	Compliance & Governance
Version	v<Version Number>
Effective Date	<Date>
Last Review Date	<Date>
Next Scheduled Review	<Date> (every <Number> months or annually)
Document Owner	<Head of Total Rewards> and <Head of Procurement>
Approving Authority	<Risk Committee> and <Executive Sponsor>
Geographic Applicability	<Country/Region List>
Related Policies	<Information Security Policy> • <Privacy Policy> • <Procurement Policy> • <Records Retention Policy>

Purpose and Objectives

Define a consistent, risk-based approach for selecting, contracting, onboarding, monitoring, and offboarding third-party vendors that support Total Rewards (benefits, compensation, recognition, well-being, mobility) at <Company Name>.
Safeguard employee data, ensure legal and regulatory compliance, and protect service continuity and value for money.
Establish clear accountability, performance measures, and escalation paths to manage vendor risk across the lifecycle.
Support strategic sourcing and continuous improvement of Total Rewards vendor outcomes, including cost, quality, compliance, equity, and employee experience.

Scope and Applicability

In Scope
- Vendors providing or enabling Total Rewards programs, including benefits carriers, third-party administrators (TPAs), brokers/consultants, HRIS and payroll integrations related to rewards, leave administration, wellness platforms, recognition providers, equity plan administrators, mobility/relocation providers, retirement plan recordkeepers, and any subcontractors processing employee data on behalf of <Company Name>.
- All contracting models: master services agreements, statements of work, order forms, business associate agreements, and data processing agreements.
- All geographies where <Company Name> operates or where vendor processing occurs.
Out of Scope
- Direct employment arrangements, independent contractors engaged as individuals (covered under separate contingent workforce policies).
- Non-Total-Rewards vendors (covered by <Procurement Policy>).
- Internal shared services (covered by internal SLAs).

Guiding Principles

Risk-based proportionality: diligence depth scales with vendor risk tier.
Privacy by design and security by default.
Value for money: total cost of ownership, transparent fees, measurable ROI.
Equity and accessibility: inclusive design, language access, and ADA/EN/FR/ES accessibility as applicable.
Employee-centric outcomes: prioritize accuracy, timeliness, and clarity.
Ethical sourcing: compliance with anti-bribery, anti-slavery, and fair labor standards.

Governance and Roles

Roles and Responsibilities

Total Rewards
- Define business requirements and employee experience standards.
- Own vendor performance outcomes, KPIs, and renewal recommendations.
- Lead benefits-specific compliance checks (e.g., ERISA, ACA, pension, local statutory benefits in <Country>).
Procurement
- Manage sourcing, RFP/RFI, commercial negotiations, and competitive processes.
- Ensure adherence to sourcing thresholds and conflict-of-interest disclosures.
Legal
- Review and negotiate contractual terms, data protection agreements, and compliant cross-border transfer mechanisms.
- Confirm regulatory applicability (e.g., HIPAA, GDPR, CCPA, PIPEDA) and required notices.
Privacy/Data Protection
- Validate data mapping, minimization, lawful basis, retention, and privacy impact assessments.
Information Security
- Assess technical and organizational controls, including SOC 2/ISO certifications, encryption, and BCP/DR.
HRIS/Payroll
- Own integrations, data quality, and testing for end-to-end accuracy.
Finance
- Review pricing models, budget impact, accounting treatment, and ongoing invoice controls.
Internal Audit/Compliance
- Periodically test adherence to policy and control effectiveness.
Business Owner (Executive Sponsor)
- Approve risk acceptance, sign off on key milestones, and chair quarterly business reviews for Tier 1 vendors.

RACI Matrix (Excerpt)

Activity	Total Rewards	Procurement	Legal	Privacy	InfoSec	HRIS/Payroll	Finance	Internal Audit
Define requirements	R	A	C	C	C	C	C	I
Vendor shortlisting	A	R	C	C	C	C	C	I
Due diligence (domain-specific)	A	R	C	R	R	R	C	I
Contract negotiation	C	R	A	C	C	C	C	I
Integration and UAT	A	C	C	C	C	R	C	I
Ongoing monitoring	A	C	C	C	C	C	C	R
Renewal/Termination	A	R	C	C	C	C	C	I

Vendor Risk Tiering

Tier 1 (High Risk)
- Processes sensitive employee data at scale (e.g., health data, SSNs, national IDs), is mission-critical, or holds payment flows ≥ <Amount> per year. Requires full due diligence, executive sponsor, quarterly reviews, annual onsite or virtual audits, and BCP testing.
Tier 2 (Moderate Risk)
- Processes personal data but not sensitive special categories, or has moderate financial/operational dependency. Requires standard due diligence, semiannual reviews, and certification validation.
Tier 3 (Low Risk)
- Minimal data processing, non-critical services, or purely advisory roles with no access to personal data. Requires basic screening and annual attestation.

Tier	Example Vendors	Minimum Assurance
Tier 1	Medical carrier, retirement recordkeeper, payroll-integrated TPA	SOC 2 Type II, ISO 27001 or equivalent, BAA/DPA, BCP/DR test results, penetration test summary (last 12 months)
Tier 2	Recognition platform, well-being app, HR survey provider	SOC 2 Type I/II or ISO 27001, DPA, vulnerability management summary, privacy policy review
Tier 3	Benefits communications agency (no PHI/PII), actuarial advisor	Background check, NDA, conflicts check, insurance certificates

Vendor Lifecycle

1. Planning and Sourcing

Define business outcomes, KPIs, data needs, in-scope geographies, employee segments, languages, and launch timeline.
Map current-state vendor landscape to avoid duplication and reduce complexity.
Determine budget, cost targets, and value levers (e.g., fee caps, guarantees, performance credits).
Select sourcing path: RFI, RFP, or direct award with single-source justification per <Procurement Policy>.
Require conflict-of-interest disclosures by all project team members.

2. Due Diligence

Financial and Operational Vetting

Audited financials for the last <Number> years; confirm going-concern status; review cash runway and debt covenants.
Client references in <Industry/Sector> and of similar size (≥ <Number> employees).
Insurance coverage: professional liability, cyber, E&O, fiduciary (if applicable) with minimum limits of <Amount> per claim and aggregate.
Operational capacity: staffing ratios, peak season planning, ticket backlog, mean time to resolve.
Performance history: accuracy ≥ 99.5%, SLA adherence ≥ 98%, first-call resolution ≥ 85% (or <Percentage>% targets defined by <Company Name>).

Legal and Regulatory Compliance

Confirm regulatory scope: ERISA, ACA, COBRA, HIPAA/HITECH, MHPAEA, Medicare secondary payer, pension/retirement laws in <Country>, data protection laws in <Country/Region> (GDPR, CCPA/CPRA, LGPD, PDPA).
Require attestations to anti-bribery/anti-corruption (e.g., FCPA, UK Bribery Act), modern slavery, sanctions screening, and export controls.
Confirm licensed status where required (e.g., insurance brokerage licenses, TPA certifications).
Ensure fiduciary status is declared where applicable and align with plan governance (e.g., 3(16), 3(21), 3(38) in the U.S.).

Privacy and Information Security

Data inventory: systems, data elements, special categories, retention, and cross-border flows.
Lawful basis for processing and data minimization approach; avoid unnecessary collection of SSNs/PHI where not required.
Security controls: encryption in transit and at rest (TLS 1.2+, AES-256), MFA, least privilege, segregation of duties, secure SDLC, vulnerability management, and patching within <Number> days for high severity.
Certifications and audits: SOC 2 Type II (within past 12 months), ISO 27001, ISO 27701, HIPAA security rule safeguards where applicable.
Subprocessors: list, locations, and obligations to flow down controls; prior notification of changes and right to object.
Incident response: notify <Company Name> within <Number> hours of discovery; provide incident reports, root cause, and corrective actions.
Cross-border transfers: standard contractual clauses, UK IDTA, or other mechanisms; conduct transfer impact assessments for data leaving <Country/Region>.
Privacy impact assessment and, where required, data protection impact assessment for high-risk processing.

Benefits-Specific Requirements

Enrollment and eligibility: EDI/834 or equivalent accuracy ≥ 99.8%, processing time ≤ <Number> hours, retro rules documented.
Claims administration: financial controls, separation of duties, fraud/waste/abuse monitoring, claim turnaround within <Number> days.
Payroll and HRIS integrations: file frequency, delta logic, error handling, cutover plan, and reconciliation procedures.
Member services: hours of operation across time zones, language coverage, accessibility (WCAG 2.1 AA), average speed of answer ≤ <Number> seconds, abandonment ≤ <Percentage>%.
Plan compliance: SPD/SMM support, notices, Medicare creditable coverage, Form 1095-C reporting (or local equivalents in <Country>).

ESG and DEI Considerations

Supplier diversity disclosures and spend reporting aligned to <Company Name> targets (e.g., <Percentage>% of addressable spend).
Environmental and social practices: sustainability commitments, accessibility, and inclusive product design.

3. Contracting Standards

Master terms plus service-specific SOWs; ensure clarity on deliverables, assumptions, and acceptance criteria.
Data Processing Agreement including roles, purpose, retention, deletion, subprocessors, and audit rights.
Business Associate Agreement if processing PHI.
Service levels and credits:
- Uptime ≥ 99.9%, measured monthly; service credit of <Percentage>% of fees for each 0.1% below target, capped at <Percentage>%.
- Accuracy ≥ 99.5%; credit of <Amount> per critical error impacting ≥ <Number> employees.
- Response time to P1 incidents ≤ <Number> minutes; resolution target ≤ <Number> hours.
Pricing and fee protections:
- Transparent fee schedules; caps on annual increases at ≤ <Percentage>%.
- Most favored customer or benchmarking clause every <Number> years with right to reprice or terminate for convenience.
- Performance-at-risk fees: withhold <Percentage>% of monthly fees subject to KPI attainment.
Audit and compliance:
- Right to audit annually with <Number> days’ notice.
- Mandatory reporting cadence: monthly operational metrics, quarterly executive reviews, annual SOC reports.
Security and continuity:
- Data backups, RPO ≤ <Number> hours, RTO ≤ <Number> hours; BCP/DR test annually with summary to <Company Name>.
- Data return/secure destruction within <Number> days of termination with certificate of deletion.
Term and termination:
- Term of <Number> years with auto-renewal only upon mutual written agreement.
- Termination for convenience with <Number> days’ notice; wind-down and transition assistance included.
Liability and insurance:
- Limitation of liability at ≥ <Amount> or <Multiple>x annual fees; carve-outs for data breach, IP infringement, confidentiality, and willful misconduct.

4. Onboarding

Kickoff: finalize project plan, milestones, RAID log, and communication protocols.
Data mapping, minimization, and access provisioning with role-based controls; least privilege enforced.
Integration build and test:
- System design documentation and sequence diagrams.
- Test cases for enrollments, life events, retroactivity, payroll deductions, refunds, and refunds reversals.
- UAT exit criteria: zero critical defects, ≤ <Number> minor defects with workarounds.
Change enablement:
- Training for HR, payroll, and vendor teams; job aids and SOPs.
- Employee-facing communications drafted, translated, and timed to key milestones.
Go-live readiness:
- Cutover checklist, rollback plan, hypercare period of <Number> weeks with daily huddles.

5. Ongoing Monitoring

Monthly operational reviews: SLAs, error logs, ticket volumes, root-cause trends, and improvement actions.
Quarterly business reviews: strategy alignment, roadmap, service innovations, benchmarking, and spend analysis.
Annual assurance: SOC 2/ISO renewal, security questionnaire refresh, PII/PHI review, and BCP test evidence.
Performance dashboard with KPIs and targets:

KPI	Target	Measurement Method	Escalation Threshold
Eligibility file accuracy	≥ 99.8%	Random sample and automated rejects	≤ 99.5%
Claim payment accuracy	≥ 99.5%	Audit sampling and financial reconciliation	≤ 99.0%
Member call ASA	≤ <Number> seconds	Telephony reports	≥ <Number> seconds for 2 months
First contact resolution	≥ 85%	QA scoring	≤ 80%
Uptime	≥ 99.9%	Monitoring tools	≤ 99.7%
P1 response time	≤ <Number> minutes	Incident tickets	Breach of SLA
Ticket backlog age	≤ <Number> days	Ticketing system	≥ <Number> days for 2 cycles
Employee satisfaction	≥ <Percentage>% favorable	Pulse surveys	Drop of ≥ <Percentage>% points

Financial monitoring: compare invoiced fees to contracted rates, usage volumes, and credits; require credit memos within <Number> days of validation.
Risk monitoring: track data incidents, complaints, regulatory notices, and audit findings; maintain risk register.

6. Change Management

Change categories: standard, normal, emergency; require documented impact analysis.
Prioritization and approval path based on risk tier and impact to employees or payroll.
Communication plan for any change affecting employees; effective dates synchronized with payroll cycles.
Regression testing for all changes affecting interfaces or calculations.

7. Incident and Issue Management

Issue definitions: P1 (service outage/data breach), P2 (material processing delay), P3 (minor defect).
Response and communication:
- P1: notify <Company Name> within <Number> minutes; provide hourly updates; executive bridge if incident exceeds <Number> hours.
- P2: notify within <Number> hours; daily updates.
- P3: include in weekly status.
Root cause analysis within <Number> business days; corrective and preventive action plan with owners and due dates.
Regulatory and legal notifications coordinated by <Company Name> Legal and Privacy.
Post-incident review and service credit application within <Number> days.

8. Offboarding and Transition

Trigger events: non-renewal, termination for cause/convenience, M&A, or regulatory requirements.
Transition plan:
- Parallel run for <Number> pay or claims cycles; reconciliations to zero variance.
- Data return and deletion per DPA, including archives and backups as feasible.
- Secure transfer of documentation, configurations, and knowledge; up to <Number> hours of transition assistance at no additional cost.
Final audit: confirm fee credits, overpayment recovery, and certificate of destruction.

Implementation Guidelines

Step-by-Step Implementation Roadmap

Confirm business case, budget, and executive sponsor; align with <Annual Planning Cycle>.
Draft requirements, KPIs, and data minimization approach; validate with HRIS, Privacy, and InfoSec.
Determine risk tier and sourcing path; launch RFI/RFP with standardized questionnaires.
Evaluate proposals with weighted scorecard (e.g., price <Percentage>%, capability <Percentage>%, security <Percentage>%, experience <Percentage>%).
Conduct due diligence deep dive; request evidence and validate with domain SMEs.
Negotiate commercial and legal terms; secure DPA/BAA and finalize SLAs and credits.
Build integrations; complete SIT and UAT; remediate defects.
Train internal teams; prepare employee communications and support scripts.
Execute cutover and hypercare; monitor KPIs daily for the first <Number> weeks.
Transition to steady state; schedule QBRs and annual assurance activities.

Tools and Artifacts (Templates)

RFP questionnaire and scoring model.
Due diligence checklist (financial, legal, privacy/security, benefits operations).
Data mapping inventory and transfer register.
SLA/KPI catalog and dashboard.
Implementation plan and RAID log.
Incident management playbook and RCA template.
Vendor performance review form.
Offboarding checklist.

Review and Approval Process

Thresholds and Approvals
- New Tier 1 vendor: requires <Executive Sponsor> approval and <Risk Committee> review.
- Contract value ≥ <Amount> per year: requires <CFO/Finance> approval.
- Cross-border data transfers: requires <Privacy> assessment and <Legal> sign-off.
Gating Milestones
- Business case approved.
- Due diligence completed with no open high risks or an approved risk acceptance.
- Contract executed with required schedules (SOW, DPA/BAA, SLA schedule).
- UAT exit criteria met.
- Go-live readiness review signed by Total Rewards, HRIS, Privacy, and InfoSec.
Review Cadence
- Tier 1: monthly operations, quarterly executive reviews, annual onsite/virtual audit.
- Tier 2: monthly or bimonthly operations, semiannual reviews, annual assurance.
- Tier 3: quarterly or semiannual reviews as needed, annual attestation.

Risk Management and Controls

Control objectives: data confidentiality, integrity, and availability; financial accuracy; regulatory compliance; business continuity.
Key controls:
- Vendor onboarding checklist completed and approved.
- Evidence of SOC 2/ISO and insurance certificates on file and current.
- Access controls reviewed quarterly; least privilege enforced.
- Interface reconciliations for eligibility and payroll deductions completed each cycle; variances resolved within <Number> days.
- Invoice three-way match: contract, usage, and invoice; credits applied.
- Incident logs maintained; RCAs completed within set timelines.
- Records retained per <Records Retention Policy> for at least <Number> years.

Cost and Value Management

Total cost of ownership analysis: fees, pass-through costs, internal support time, and transition costs.
Benchmarks against market rates using <Benchmark Source> every <Number> years.
Value levers:
- Volume-based discounts and rate cards by tier.
- Outcome-based fees tied to measurable improvements (e.g., call ASA, error rates).
- Continuous improvement plan with quantified benefits and timelines.

Documentation and Recordkeeping

Store all vendor artifacts in <System of Record> with access controls and versioning.
Maintain vendor profile including risk tier, contacts, services, data types, locations, and subprocessors.
Record all approvals, exceptions, and risk acceptances with justification and expiry dates.
Archive implementation and test evidence, performance dashboards, and audit results.

Compliance Considerations and Legal Disclaimers

This policy aligns with industry best practices but must be localized to reflect laws in <Country/Region>.
HIPAA/PHI processing requires a compliant BAA and safeguards defined by the HIPAA Security Rule.
GDPR and similar regulations require a DPA, lawful basis for processing, transparency notices, and valid transfer mechanisms for cross-border data flows.
Local statutory benefits may impose unique obligations (e.g., pension auto-enrollment in <Country>, works council consultations in <Country>). Consult local counsel before implementation.
Nothing in this document alters fiduciary duties or creates fiduciary status beyond what is expressly agreed in contracts.

Sample Due Diligence Questionnaire (Excerpt)

Company Profile and Financials

Provide audited financial statements for the past <Number> years.
Describe capital structure, ownership, and any material pending litigation.
Detail your top 5 clients by industry and average client tenure.

Information Security and Privacy

Provide current SOC 2 Type II report and management response to exceptions.
List all subprocessors, locations, and services; include data flow diagrams.
Confirm encryption standards, key management, and secrets handling.
Describe your incident response program, breach notification timelines, and evidence of annual testing.
Provide results of the last external penetration test and remediation status.

Operations and Service Delivery

Provide staffing model, peak season coverage, and escalation tiers.
Share quality assurance methods, accuracy rates, and sample reports.
Describe your BCP/DR plan, last test date, RPO/RTO, and test outcomes.

Compliance and Legal

List applicable licenses and certifications for all operating jurisdictions.
Provide anti-bribery, sanctions, and modern slavery policy attestations.
Confirm ability to comply with <Company Name>’s data retention and deletion requirements.

Benefits-Specific Controls

Eligibility and enrollment processing standards, error handling, and turnaround times.
Claim adjudication controls, overpayment recovery, and audit approach.
Member support metrics: ASA, abandonment, CSAT, FCR.

Metrics, SLAs, and Credits Catalog (Reference)

Area	Metric	Target	Measurement Window	Credit
Data interfaces	File delivery timeliness	100% on-time	Monthly	<Percentage>% of monthly fee for each late file beyond <Number> hours
Calculations	Payroll deduction accuracy	≥ 99.9%	Per pay cycle	<Amount> per error impacting ≥ <Number> employees
Contact center	CSAT	≥ <Percentage>%	Monthly	<Percentage>% fee at risk if below target for 2 consecutive months
Platform	Critical defect fix time	≤ <Number> hours	Per incident	<Amount> per missed SLA
Compliance	Notice delivery timeliness	100%	Monthly	Credit of <Percentage>% of monthly fee if any statutory notice missed

Training and Change Enablement

Annual training for Total Rewards, Procurement, and HRIS on this policy and updates.
Role-based enablement for vendor managers, including KPI interpretation and root cause analysis techniques.
Playbooks and SOPs kept current and accessible in <System of Record>.

Audit and Continuous Improvement

Internal Audit will test a sample of Tier 1 and Tier 2 vendors annually against this policy.
Findings will be tracked to closure with target remediation within <Number> days.
Continuous improvement backlog prioritized quarterly with cross-functional input.

Renewal Strategy

Begin renewal assessment <Number> months prior to contract end; review performance, benchmarks, and strategic fit.
Decision gates: renew as-is, renew with changes and improvement targets, or exit and rebid.
Apply price-protection clauses and benchmarking outcomes to negotiate improved terms.

Exceptions and Risk Acceptance

Exceptions to this policy require documented rationale, compensating controls, and time-bound expiration.
Approvals required from <Risk Owner> and <Executive Sponsor> based on risk tier and impact.

Glossary

BAA - Business Associate Agreement for PHI processing.
BCP/DR - Business Continuity Plan/Disaster Recovery.
CSAT - Customer Satisfaction Score.
DPA - Data Processing Agreement.
FCR - First Contact Resolution.
HIPAA/HITECH - U.S. health information privacy and security laws.
KPI - Key Performance Indicator.
PHI/PII - Protected Health Information/Personally Identifiable Information.
RACI - Responsible, Accountable, Consulted, Informed.
RCA - Root Cause Analysis.
RFP/RFI - Request for Proposal/Information.
RPO/RTO - Recovery Point Objective/Recovery Time Objective.
SLA - Service Level Agreement.
SOC 2 - Service Organization Control report for security, availability, confidentiality, processing integrity, privacy.
Tiering - Risk-based classification of vendors impacting diligence depth and oversight.

Communication to Employees and Managers

The purpose of this message is to help you understand how <Company Name> works with our benefits and rewards partners, and what you can expect when we introduce a new vendor or improve current services.

Our goal is simple: deliver reliable, secure, and helpful benefits that support you and your family. To do that, we carefully review each vendor’s capabilities, data protections, and service quality before we make a change. This review includes how the vendor safeguards personal information, how quickly they resolve questions, and how well their tools work with our HR systems. We select partners who commit to strong performance standards, such as high accuracy in enrollments and claims, quick response times, and clear, timely communications.

When we launch a new benefit or update an existing service, we will let you know what is changing, why it matters, and what steps you may need to take. For example, if a new provider offers a better mobile app or extended service hours, we will share instructions on how to register and where to get help. If there are deadlines for enrollments or actions, we will provide reminders before anything changes. We will also give managers easy-to-share summaries so you can support your teams.

Your privacy and the security of your information are top priorities. We work only with vendors that agree to strict privacy and security commitments, and we limit the data shared to what is necessary for the service. If an issue occurs, we have clear processes to fix it quickly and keep you informed as needed. In most situations, you do not need to do anything different if there is a behind-the-scenes vendor change; your coverage and access will remain uninterrupted. If we do need you to take action, we will explain exactly what to do.

Here is what you can expect with any vendor change:

Advance notice that explains the change and the reasons.
Clear instructions and links to any new portals or registration steps.
Information about service hours, language options, and accessibility.
Support contacts, including vendor customer service and our internal HR help resources.
A short survey or check-in to make sure the new service is working well for you.

If you have questions, please contact <HR Shared Services Contact> at <Email/Phone> or visit <Intranet Link>. We appreciate your feedback, and we use your input to make our benefits easier to use and more responsive to your needs. Thank you for helping us keep our programs secure, compliant, and focused on what matters most: your experience.

Document Information:

Document Type: Vendor Due Diligence & Management
Category: Compliance & Governance
Generated: August 28, 2025
Status: Sample Template
Next Review: <Insert Review Date>

Usage Instructions:

Replace all text in angle brackets < > with your company-specific information
Review all sections for applicability to your organization
Customize content to reflect your company's policies and local regulations
Have legal and HR leadership review before implementation
Update document header with your company's version control information
At bottom of the document you find a short example on how the content could be communicated to end-users, for instance employees.

This sample document is provided for reference only and should be customized to meet your organization's specific needs and local legal requirements.