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Whatever the size of your business, the people who work for you are the engine for your organisation. Whether you have five or 50 employees, the success of your brand depends on the quality of the people behind it. But a positive, talented workforce requires superlative HR, to ensure the best candidates are appointed, an appropriate programme of professional development is implemented, and employment issues are managed fairly.

For small business owners, human resources can be a difficult minefield to negotiate: lacking the necessary expertise, legal knowledge, and time, managers – or financial directors whose portfolio of experience may include a vague awareness of HR issues – can become submerged by their responsibilities, with the risk that HR procedures won’t be followed properly. Without a dedicated team, who possess the qualifications, knowledge, and skills to effectively discharge their duties, small businesses find it difficult to attract and retain the most talented employees. Staff loyalty will be lower, while legal challenges, if procedures are not followed correctly, are more likely.

Instead of attempting to juggle many responsibilities, outsourcing could offer an alternative approach to delivering the high-quality HR that your workforce deserves.

Is outsourcing the solution for your small business HR?

Like most key business decisions, outsourcing your organisation’s HR must add value to your operations. Typically, small business owners route seek specialist expertise in HR matters that, in the long-term, saves their organisation money. Outsourcing must be cost-effective; there’s little point employing external specialists if the service becomes a costly white elephant. Best value is vital.

If you’re wondering whether your business would benefit from outsourced HR, consider these key questions:

  • Am I able to recruit the highest calibre candidates to my business, at the right time to fill vacancies, or do I have to appoint less talented employees to avoid key positions being left vacant?
  • Is the staff turnover rate in my business high? If so, why are my employees willing to leave established roles?
  • Are my business’ staff records up-to-date and stored in line with my legal obligations, such as under the Data Protection Act?
  • Does my business’ staff handbook contain relevant and up-to-date policies and procedures to which my employees have access?
  • Does our performance management cycle enable employees to develop professionally through the provision of high-quality training?

If any of these aspects give you cause for concern – you may, for example, recognise that you’re not able to deliver an optimum quality of human resourcing due to a lack of knowledge of HR practice – outsourcing your small business’ HR could be a logical and cost-effective solution.

What are the benefits of outsourcing HR?

Outsourcing your business’ HR to specialists who possess up-to-date training and legal knowledge can be hugely advantageous. A specialist provider will always work hard for your organisation, with your business goals and objectives in mind.

The benefits many, but commonly include:

  • A stable workforce, with increased retention and greater loyalty towards your brand.
  • Access to the highest calibre of candidates to fill vacancies in your organisation.
  • Reduced costs, as HR can be scaled up or down to match the changing needs of your business, with lower overheads.
  • Easier risk management and compliance, as human resources specialists are fully informed about the latest legal and regulatory requirements and can, therefore, ensure your business fulfils its obligations.
  • A professional developed workforce, achieved through incisive annual appraisals, clearly defined development plans, and a programme of professional development to increase your employees’ skillset.
  • Increased efficiency, as streamlined HR services alleviate the pressure and time demands on existing administration staff, enabling them to work more productively on other key business operations.
  • Increased flexibility, as specialists can respond in a timelier manner to organisational changes within your business.
  • Access to the latest HR management IT systems, without the need to purchase expensive software or site licences.

Why is outsourcing HR a cost-effective solution?

When you outsource your business’ HR to a specialist, they won’t be working for your organisation every minute of the day. Outsourcing is incredibly flexible: you can opt to buy in services for a daily or monthly rate, or for a fixed fee. The size, structure, and needs of your business will dictate which option is most suitable.

By contrast, employing an in-house, salaried human resources advisor is a much more costly solution. With salaries ranging from £31,835 to £47,141, a full-time employee will eat into your business’ budget; fully outsourced HR that includes payroll services, however, will typically cost between £1,200 and £3,600 a year.

The exact cost of outsourcing will depend on several factors:

  • The number of employees in your business.
  • The type of support required (for example, recruitment, contracts, payroll etc).
  • The number of hours required to carry out services on your behalf.
  • The frequency of on-site visits.

Can outsourced HR be provided remotely?

Remote working is becoming a common feature of business models around the world, made possible by the rapid growth in Cloud-based technology, and necessitated by global phenomenon such as pandemics.

Many services can be provided remotely, reducing the number and cost of on-site visits, and freeing up your time to focus on other operational tasks. If your business’ HR systems are already well-established, remote support is more possible, whereas new businesses, or those needing an overhaul of their human resources systems, may require face-to-face support to begin with.

Remote support also means you can work with HR specialists who are based outside your local area, so you can invest in a company that offers the right level of experience, rather than being defined by their distance.

Occasionally, on-site support may be more suitable, for example to manage a sensitive situation, such as a disciplinary hearing, that would be challenging if held remotely.

How to choose an outsourced provider

HR providers offer an extensive range of services, so it’s important to identify which your business requires support with. A ‘one size fits all’ solution is rarely cost-effective, as you may end up paying for services that you don’t need, or partnering with a provider who doesn’t have an understanding of your business or its objectives.

The Service Level Agreement (SLA) between your business and your chosen HR provider should identify both parties’ expectations and responsibilities, to avoid misunderstanding. Commonly, an SLA will include:

  • The names of the parties.
  • The commencement date of the contract and its term.
  • The specific functions the provider will deliver.
  • An outline of how your business’ goals and objectives will be achieved by HR outsourcing.
  • Review mechanisms, such as performance updates, to evaluate the success of the partnership.
  • Cost and payment details.

Remember to request an element of flexibility in the contract, to enable you to add or remove services if required, particularly if this is the first time you have outsourced your business’ HR operations.

Outsourced HR: a road to greater profitability

In any business of any size, HR is the lifeblood of its success. Your people are your primary asset and, as all business owners know, there’s a gulf between high-calibre, loyal employees and inexperienced, uncommitted workers. HR helps to secure and retain the best candidates for your business.

However, HR tasks can be time-consuming and require a specialist level of understanding. Attempting to manage HR yourself, or delegating it to an inexperienced colleague, is unlikely to secure the high-quality people management your employees need.

Outsourcing, therefore, makes perfect business sense, handing this critical element of business operations to experts who can utilise their experience, knowledge, and understanding of legal frameworks to deliver outstanding service for your organisation, allowing you and your colleagues to focus on increasing profitability.