When should a small business think about outsourcing HR?

Every small business needs to keep on top of HR but overstretched owners may not have the time and resources to do so. Outsourcing HR can be a flexible and cost-effective solution

Like any other business, a small business – whether it’s a microbusiness with less than 10 employees or a fast-growing scale up – needs to take care of HR.

What does HR involve?

  • Employee recruitment and retention
  • Onboarding new employees
  • Training
  • Performance evaluation
  • Dealing with long-term sickness
  • Employee relations issues including discrimination claims, redundancy, grievances and dismissals

However, all this can be difficult to manage for you, the typically overstretched business owner.

See also: The Small Business guide to HR

Businesses with fewer than 50 employees rarely have an HR team. Instead, a finance director who may have had some HR experience in the dim-and-distant past is seconded to the role. Not only does this leave your small business vulnerable to legal challenges when HR procedures are not rigidly followed, doubling up like this takes away time from his or her finance department day job.

And if you yourself are handling HR, it takes time away from running your business and eats into your own productivity – one of the biggest challenges facing any small business.

5 questions to ask if your small business needs to outsource HR

Generally speaking, the top three reasons cited for outsourcing HR are: access to up-to-date skills and knowledge, gaining better-quality support than the business is currently able to offer in-house, and saving money.

The five questions you need to ask yourself if you’re pondering outsourcing HR are:

  • Do I have a high staff turnover rate? At a time when staff retention is key for any growing business, why are my staff leaving?
  • Are my staff records up to date and are they being stored properly? Rules surrounding the content and storage of employee files and the way businesses handle them are strict
  • Do my employees have a staff handbook and do all employees have access to it? Any staff handbook needs to have up-to-date procedures and best practice
  • Am I recruiting new staff as quickly as I would like? Do I need help with staff recruitment and retention?
  • Is there a performance review process in place?

If you think any of the above areas need work and resources you do not currently provide, it may be time to start thinking about outsourcing your HR and handling things correctly.

See also: The pros and cons of outsourcing for small businesses

Good HR boosts the bottom line of your business

HR is not simply a “nice to have” but is integral to future turnover of any small business.

Dealing with HR is hugely time consuming and having a staff member “double up” handling HR while doing their usual job takes away from what they should be doing.

Meanwhile, handling HR yourself takes attention and resources away from what you should be doing in leading your business.

When the amount of time you spend on HR administration eats into time better spent actually running your business, it’s time to consider outsourcing.

What do outsourced experts bring to HR management?

HR agencies such as Peninsula are experts in what they do and take the onus off you and your staff should any HR process go awry. They stay ahead of any trends and changes in HR.

Benefits include access to skills and knowledge, HR software enabling you to manage holidays and absences, calculating sick pay and maternity leave, and onboarding new employees.

Do you need a face-to-face service or remote support?

This entirely depends on where you are in your business journey. If you are a start-up and need help establishing systems, in-person support would be best, which you can scale back to remote support once systems are in place.

Hiring a full-time HR manager vs. outsourcing

Of course, you might think about hiring someone in-house to be your HR manager. If you decide to hire a full-time HR manager, the average national HR manager salary is £43,000. This compares with around £1,200-£3,600 per year for fully outsourced HR management, including health and safety, payroll, etc.

Outsourcing HR is usually more cost effective than having a full-time salaried employee.

How much does outsourcing HR cost?

Outsourcing is a flexible option, which can be bought in on a fixed fee, monthly retainer or a daily rate.

4 things to factor into the cost of outsourcing HR

  • Size of your business (number of employees)
  • Type of support required and volume e.g. processing new joiners, leavers etc and generating employment contracts
  • Number of hours needed on-site per month
  • Number of calls/emails per month

There is huge value in having HR management from experts who are on top of trends and whose purpose will always be to give your business the best possible service. After all, they want to retain you as a customer.

Outsourcing HR ensures that your staff are in good hands and are being handled lawfully and appropriately.

Potential benefits of HR outsourcing

  • Reduced cost
  • Increased efficiency
  • Access to improved HR IT systems
  • Improved management information (metrics)
  • Access to HR expertise not available in-house
  • Increased flexibility and speed of response
  • Reduced risk

Why waste your time spending far too long doing something badly, when you could pay someone to do it right first time, getting on with what you’re good at?

Award-winning HR and health and safety support for small businesses. Arrange a free consultation with one of Peninsula’s local advisors today.

Further reading

Five outsourcing trends for small businesses

Related Topics

Small Business HR