Outsource or not to Outsource: Is outsourcing your HR support right for your business?

Is outsourcing your HR support the right thing for your business?

Selecting the right Human Resources (HR) support is a critical decision for businesses, both large and small. In a dynamic and ever-evolving business landscape, understanding your HR needs is paramount to making informed decisions which add value to your business.

When it comes to HR support, businesses have several options:

• Train an existing team member to look after HR alongside their usual duties

• Hire an internal HR manager

• Outsource to a large HR company (typically call centre style)

• Outsource to an independent HR Consultant

Each comes with its own set of advantages and disadvantages, tailored to specific needs and circumstances. Here's a quick rundown of HR support options with pros and cons for each:

Train an existing team member to look after HR alongside their usual duties

For smaller businesses, this might seem like the obvious option. You don’t have to hire someone new, they already know and fit into the business and you don’t have any recruiting or outsourcing costs.

For this approach to be successful, HR responsibilities shouldn’t be seen as just a bit of extra admin for someone, and you’ll need to ensure this person is properly trained to provide your business with the protection it requires. As you’ll be well aware, if HR is handled incorrectly, issues can escalate rapidly with potentially damaging results. You will need to factor in the time and cost of training to ensure your employee is at the level required to look after your business’s HR needs, so this needs to be factored into the decision. You may also find that you need additional systems.

Typically, the biggest risk to a company who opt for this option, is that the individual is new to the role and doesn’t have the knowledge, experience and often the time to deliver a meaningful HR service, and consequently it can end up negatively impacting their other responsibilities.

Hire an internal HR manager

The biggest advantage to this is that your business has a dedicated person to look after your HR needs, on a part-time or full-time basis. They will understand your business and can commit their time fully to your HR needs.

Taking on your first HR employee is an exciting step but can result in a significant and ongoing increase in operating costs and you therefore need to be sure that the new hire will be fully utilised. You’ll need to consider recruitment costs, equipment and office costs, additional systems costs, as well as the cost of their salary, benefits, PAYE and employers NI.

The typical HR-to-employee ratio in the UK is 1:100 for full-time in-house HR employees, although this ratio can vary significantly depending on the specific needs and size of the business. Smaller businesses, especially start-ups with ambitious growth plans, may find it beneficial to bring on an HR manager much earlier in their development.

Outsource to a large HR company, that typically provides “call-centre” style support

There are a number of large HR companies out there that provide very affordable HR packages. They keep costs low by having a centralised call centre so instead of working with just one consultant, or a team of small consultants, you dial in to the call centre to get the advice that you need.

For some businesses this works well, especially if you have some internal resources managing HR and only use this service for ad hoc advice and support. However, you need to know what to ask and how to interpret the advice provided. For businesses that wants or needs a more tailored and personal service, this wont work as well.

You will often have to sign up to a specific monthly ongoing cost which is payable whether you use the service or not.

Outsource to an independent HR consultancy

If your business wants the benefits of dedicated in-house resource, without the associated costs and responsibilities, then outsourcing to an independent HR consultancy is another option available to you.

An independent consultant is likely to cost more than a generic support package from a larger company and may not be as “available” as a call centre, but this is offset by many advantages.

• Personal Touch and Continuity - working with an individual consultant, or a small team, you’ll build a better working relationship. You won’t have to explain the nuances of your team or your business because they’ll already know, and will deliver a more personal level of support as a result. They’ll also be able to work with your business as a strategic partner, helping you turn HR into a tool to grow income and profits.

• Skills and knowledge – independent consultants eat, sleep and breathe HR. They’re experts and you’ll benefit from their skills, knowledge and experience. They also work collaboratively with a wider consultancy network, giving them a greater breadth of skills and solutions at their disposal.

• Efficiency and saving management time – if you do something every day, you’re going to be the most efficient person for the job. Independent HR consultants know how to get the job done quickly, effectively and most importantly, accurately. They understand what systems can help and what processes can be automated. This not only saves you costs if being charged by the hour, but also hours of your own management time having to deal with HR yourself.

• Reduced costs – compared to hiring an internal resource and the cost of HR not being done well, the price of working with an outsourced HR company provides fantastic value for money.

Choosing the right approach to HR support is dependant on so many factors, and I hope you’ve found this useful to highlights some of the questions you need to think about before choosing a new HR support partner.