If you’re running an SME, as you expand, you might find that you need to start outsourcing a number of different activities so that you can focus on growing your business.
HR is a commonly outsourced element of small businesses and even larger companies because it’s essential (not just by law) to look after and protect your employees. This not only protects them, but it also protects you from a legal standpoint.
Research from CIPD reveals that HR outsourcing services are mainly used by SMEs who lack the resources or skillset in-house. Outsourcing your HR function can offer a range of benefits and free up your time, as well as save costs on hiring internally.
If you’re wondering whether to outsource your HR function or you need help, we’ll provide an explanation of what HR outsourcing is, how it works and why you might need to use it in this guide.
What is HR outsourcing? How does HR outsourcing work?
HR outsourcing involves hiring a third party to oversee all or some of your HR functions.
These HR tasks may include:
- Employment contracts and handbooks
- Change management
- Organisation design and development
- Employee wellbeing
- Absence and performance management
- Conflict resolution
- Health and safety
- Support with legal issues
You can expect to discuss how you’d like the HR company to work with you, including which elements they will handle or support you through. Then, when you require so, you can then lean on them for their professional services. They are there to manage and take responsibility for the HR functions you’ve delegated to them.
Why should you outsource your HR needs?
Outsourcing your HR function does more than only save you time and money. It helps reduce your workload and, most importantly, it reduces your compliance risk and increases security within your organisation.
Every business must comply with specific employment laws and regulations and, depending on the industry you’re in, you have to comply with more than other businesses. Failing to comply can lead to expensive consequences.
Although HR is an essential part of any organisation, it no longer has to be an in-house solution to the challenges you face in your business when it comes to managing your employees.
Outsourcing your HR function can provide a number of benefits:
- Ensures compliance
Any business policies and benefits that relate to employment must meet specific standards and regulations. When you’re not sure about the ins and outs of the laws and good practices you should be following, it can be easy to make costly mistakes that lead to heavy penalties or lawsuits.
Non-compliance could also cause irreparable brand damage so having an HR company in place that you can call on when required means you have access to expertise and people who know exactly what you should be doing.
- Improves efficiency
When you work with HR outsourcing companies, you can tap into the expertise of those with experience in the field. You would have to employ multiple people in-house to access this expertise if you wanted to take care of it yourself. This is often the case with internal finance teams, where you have a director, manager and those doing the day-to-day work.
HR professionals work at different levels with a variety of experience and skills required depending on the needs at the time. Plus, if you have a smaller business, there may not be enough work to justify a specific HR manager and HR department in-house.
- Access to expertise
When you work with an external HR company, you gain access to a group of people who are specifically trained in their field. There might be different people for each aspect of HR too, as it would be difficult to find this expertise by employing just one person in-house.
Outsourced HR professionals can also educate and guide you through complicated employment laws and regulations. This can contribute to improved employee wellbeing and happiness which, in turn, improves the efficiency of your workforce and reduces costs.
With HR, you can expect regular – often weekly – updates regarding how policies, procedures and contracts of employment should operate. Working in tandem with a HR company ensures your business is kept in line and up to date with new developments.
- Cost-effective
Outsourcing any business function helps you to keep costs low. It ultimately allows you to focus on the day-to-day running of your business and work on growing your business effectively. Hiring an in-house HR advisor can be costly when compared to hiring a specialist company. Plus, by working with experts, you’ll save money on penalties or court cases that occur as a result of non-compliance.
How much does HR outsourcing cost?
The cost of outsourcing your HR activities varies depending on your business, the company you choose to work with, and a number of other factors. You might be thinking ‘how does HR outsourcing reduce costs?’.
Here are just some of the factors that can affect the cost of outsourcing HR:
- Size of your team: the more staff you have, the greater your HR needs are. The number of employees you have will play a huge role in the cost of your outsourced HR service because a bigger team means you’ll require more time or resources from the company you work with.
- HR functions required: functions such as payroll or creating employee handbooks will carry a lower cost than bringing an HR specialist in to help you in a tribunal. The cost of outsourcing will depend heavily on the service you require.
- Business model: the business model your HR company follows will affect your costs. For example, you may choose to take advantage of a retainer so you can call the company when required or you may need to bring them in for a specific project.
- Your industry: some industry regulations can be much more complex than others so you may need specific expertise to help you which can carry higher costs.
Do you really need to outsource your HR function?
Every business, no matter how large or small, is required by law to ensure that they follow compliance and regulations when employing people. As a result, every business requires HR support in some way.
So, for most businesses, it makes sense to outsource HR. It allows you to save time and focus on running your business effectively instead of dealing with the often time-consuming elements of HR that can arise when looking after your employees.
Not looking after your employees properly or failing to comply with laws can be a costly mistake which is why it’s essential to ensure you’re doing it properly. Deciding whether or not to outsource your HR function or employ someone in-house will depend on your individual business and the functions that you require help with.
Professional HR Consulting by Trusted HR
If your business needs advice on an HR issue, problem, or project, our team of HR consultants can help. Our team members are fully qualified, up to CIPD level 7, with years of experience, so we can help you to manage your case to its successful conclusion.
Whether you need short, medium or long-term support, our HR consultancy service is the perfect solution. At Trusted HR, we provide valuable, professional consultancy to a range of organisations across the UK. Our team can assist with various projects, such as pay reviews, TUPE or redundancy, offering guidance, advice and recommendations to help your business grow. If you require ongoing assistance, we also offer three levels of retainer HR support.
We know that every company is unique; therefore, everything we do is tailored to our clients. Our HR consultants focus on your organisation’s values and goals to create bespoke HR documentation and personalised recommendations.
Request a consultation to learn more about how our consultancy service can help your organisation succeed. Trusted HR offers a free, 45-minute, no-obligation consultation on any HR issue to help you get started.
