From employee recruitment and retention to compliance and payroll – it’s essential that all businesses get their HR processes right. This article looks at why, when and where to outsource your business HR functions.
Human Resources
The business functions under the HR “umbrella” are as varied as they are vital to the optimal functioning of a business. Practical disciplines such as payroll and absence management sit alongside highly involved, personal practises such as recruitment and employee well-being.
Even for a small business with few employees, HR management can quickly eat up time, focus and resources. It’s no wonder then, that just under 25% of UK businesses already outsource the majority of their HR projects.
We look at the advantages and disadvantages of outsourcing to an HR company near you, when to outsource HR, and how to choose the right HR solution for your business.
HR Outsourcing Advantages & Disadvantages
Pros
Reduce Costs
Even premium HR consultant services compare favourably to hiring in-house HR staff. While it’s possible for staff from other departments to hold HR responsibilities, this approach is difficult to scale as your business grows.
Save Time & Resource
Outsourcing can streamline your HR processes or remove responsibility for them altogether – leaving your business with additional time and resources to allocate elsewhere.
Compliance
Good human resource companies will already be up-to-date with all the latest procedures, legislation and guidance when it comes to HR matters.
Expertise When It Matters Most
Hiring new staff is vital for every business to get right. The average UK employer spends £3000 and takes 27.5 days to hire a new employee. Input to, or management of, the hiring process from an HR expert brings expert guidance to this vital, expensive activity (as well as others!).
Cons
Separation Of Management And Workforce
Many small business owners like to “keep their finger on the pulse” and have oversight of all areas of their business. This includes having knowledge about individual employees and an understanding of the well-being and productivity of their workforce. For these business owners, relinquishing employee-related responsibilities to a third party can feel uncomfortable.
An Impersonal Service
While a good HR company will adapt to your company culture to some extent, the reality is that you will be getting an impersonal service like every other business on their books. A third party may not deal with HR matters in the same way that you would, and employees may find it harder to discuss personal matters with somebody outside the business.
When To Outsource Your HR
No business is too small for an HR department or representative, but it’s likely that the need for dedicated HR resources increases as your business grows.
So when should a business owner start thinking about outsourcing HR? This will differ from one business to the next, but if you recognise any of the following traits in your business, it could be time to consider outsourcing HR:
High Staff Turnover
A business with high staff turnover may not be doing enough to meet the needs of their employees – or may not be hiring the right workers in the first place.
Lack Of Clear HR Processes
Ideally, your business will have clear processes and documents in place for things like managing employee data, hiring new employees, disciplinary incidents and employee progression.
Disproportionate Time & Resource Spent On HR
Perhaps you are managing HR yourself, or have assigned responsibility to another employee as a secondary role. In both instances, HR management can quickly consume time and energy which could be spent on more profitable activities.
Three Types Of HR Outsourcing
All businesses are different – and small businesses are especially likely to have different requirements when outsourcing HR. Thankfully, there are a wide variety of HR services (and HR consultants) to choose from, each offering differing levels of HR management:
1. Online HR Software / Cloud-Based HR Software
Online or cloud-based HR software allows you to keep HR management in-house, but significantly streamline HR processes. Entry-level software will provide features such as basic employee management, business document generation and storage, and attendance tracking & leave management.
However many HR software providers offer additional tools and features such as:
- Staff intranet or employee self-service portals
- Training platforms and employee training programs
- Tools to manage hiring and onboarding new employees
Advantages: At significantly less cost than an HR company or consultant, HR software can streamline in-house management to free up time and resources to be used elsewhere.
Disadvantages: Fundamentally, time-consuming HR projects are still managed by company employees. While HR software should come with basic support, providers will not give you advice on HR matters.
2. Fully Managed Outsourced HR
It’s possible to outsource every aspect of HR to a specialist HR outsourcing company. These fully managed services are much like having your own in-house HR department, albeit supplied by a third-party provider.
Everything from basic documentation to disciplinary matters and long-term HR projects will be handled for you – absolving a business owner of nearly all HR-related work and responsibilities.
Most HR outsourcing companies offer tailored packages, allowing a business owner to keep certain functions (e.g. performance management) in-house. You can use our free service to receive quotes from local HR consultancies near you.
Advantages: Outsourcing HR entirely as part of a fully managed package unlocks the most time and resources to be used elsewhere in the business. It also means that all HR matters will be handled by qualified HR experts.
Disadvantages: As you might expect, fully outsourced HR comes at a higher cost. As noted earlier, it can also feel impersonal to have an HR department completely detached from the rest of the business.
3. Blended Approach / HR Consultancy Services
A third HR outsourcing option is using a blended approach; outsourcing some HR functions to a third party, while retaining certain other functions in-house.
One of the most common examples of this is outsourcing recruitment to a third party. This time-consuming process is an obvious candidate for outsourcing to a specialist HR recruitment agency. However, thanks to the tailored packages offered by many HR outsourcing companies, it’s possible to outsource as many or as few of your HR processes as you feel is appropriate.
Another common blended approach is to hire a HR Consultant or HR Consultancy company. Many businesses engage with HR consultants to help them navigate the more complex HR processes – such as employee dismissals or restructuring departments. It’s possible to hire HR consultants on a retainer or a one-off basis, depending on how frequently a business owner envisages needing support.
Advantages: A blended approach really can be “the best of both worlds”. By outsourcing those HR processes that require significant oversight, a business owner can save a substantial amount of time and resources. All for less outlay than a fully managed approach.
Disadvantages: The suitability of a blended approach will vary from business to business. It’s important to carefully select a HR partner, and which processes are outsourced, to ensure value for money.
How much does it cost to outsource HR?
The cost of outsourcing HR varies significantly depending on the number of employees a business has, as well as the desired service level.
Entry-level HR software is available from as little as £4 per month per employee. However, it can easily exceed £500 per business, per month for premium software catering for larger businesses.
Established, suitably qualified HR consultants charge from as little as £60 per hour or £150 to £500 per month when on a retainer. Freelance consultants are usually more expensive. For both routes, you should expect to pay more for certain services.
Fully outsourcing HR to UK HR outsourcing companies can cost as little as £200 per month, but costs can increase significantly depending on your requirements and number of employees.
In conclusion – while HR software represents the cheapest HR outsourcing option, the most significant cost factor is the size of your business and the desired level of service.
What should I look for in an HR provider?
The following key considerations may be helpful to keep in mind when comparing HR outsourcing:
Services
Does a provider offer the exact services that you require? With so many options and providers available, it’s reasonable to seek one that meets your needs exactly.
Cost & Package Structure
Make sure that outsourcing HR is genuinely providing value for money for your business. It’s important to compare package pricing between services, as even entry level providers can quickly become expensive for businesses with more employees.
Qualifications & Experience
You’re looking for an HR expert, so it’s reasonable to seek an individual or business with relevant qualifications and experience. In the UK, this could be that they are a Chartered Member of the Institute of Personnel Development.
Cultural Fit
Depending on the level of service you require, the HR provider you choose may be regularly collaborating with you and your employees. In these instances, it may be beneficial to consider how well a provider is likely to fit your company culture.
Best HR Outsourcing Services For Small Business
This guide to HR outsourcing should have demonstrated that the “best” HR service is heavily dependent on the size of an organization as well as the level of service required.
Choosing the right service level and provider for your business will – as always! – involve a cost/benefit analysis. How much time and resource do you want to divert from HR management? How much time and resource can your business afford to divert? Which HR tasks specifically do you want to outsource to a third party?
To help you begin comparing HR services for your own business, we’ve selected three providers below to use as a benchmark. Each provider is reviewed highly by customers – and each represents a different level of HR outsourcing at contrasting costs.
Zoho People – Affordable HR software with transparent pricing
Zoho is a reputable business software provider with a number of business process outsourcing solutions. The Zoho People software helps streamline everything from rota management to talent acquisition. There are five available pricing plans depending on your requirements, making it a useful benchmark from which to compare other HR software.
Bob – Feature-packed HR software with a personal touch
As well as streamlining your core HR processes, HR software from Bob is designed to help nurture company culture. The user-friendly UI is more akin to a social media network than management software, with the aim of bringing employees together. Pricing is tailored to each business and is likely to be higher than entry-level software such as the plans from Zoho.
citrusHR – HR support tailored to small businesses
While citrusHR does not offer fully outsourced HR, the “HR Support” service package is likely to meet the needs of many small businesses. The package combines HR basics (including bespoke HR software) and a HR advisory service via telephone. Transparent pricing and monthly rolling contracts add to the small business appeal – this should make it easy for you to compare citrusHR with other providers.
Finally
Many businesses and staff have been through difficult times with one thing or another – if you are looking to energise your workforce, perhaps it’s time to call in some external help.
It costs nothing to start a conversation with an HR expert.
