Today, we’re diving into a topic that’s crucial for small business owners – HR Outsourcing: Revealing the Pros & Cons to help make this decision more straightforward and to give you an honest assessment of the different elements to consider.
The reality is if employees see that you have HR support, whether internal or external, it will demonstrate to them that you take your employment responsibilities seriously and that you are getting the right advice when you need it. Having the advice of an experienced HR professional is really powerful for a business owner in any employee meetings and discussions, but whether you need to in-source this or not can be a conundrum.
The Cons: The Challenges of Outsourcing HR
1. Less Personal Touch:
An external HR team may not have the same understanding and closeness with your business and employees as an in-house team would especially if they are on a call-centre-type basis. This can sometimes make handling personal issues or disputes less effective. It may also mean that employees do not feel that they have someone that they can go to for support and help if they need it. Conversely, it can also mean that they are not embroiled in internal politics and so can help support more effective decision-making. If you do outsource your HR make sure you do so to a company that will come out and meet your managers and get to know you and your team.
2. Confidentiality Concerns:
Sharing sensitive information with an external company can be risky. It’s crucial to ensure that the HR company you choose is trustworthy and has strong data protection measures. Ultimately as a business owner in GDPR terms – you are the data controller of your employee’s data and any third party will be the data processor so you need to ensure that if anyone is controlling your data too they have the right protections in place, as ultimately any liability will sit with the business owner.
3. Limited Customisation:
Outsourced HR services are sometimes more generic and may not be as flexible in catering to the specific needs and culture of your business. You may not need what they are offering and so end up paying for a service that you don’t use. Make sure that you work with a supplier that offers different packages to meet your needs at different stages of your business. Quite often when you start out and up to about 10 employees (if there are no problem staff members 😊) you just need contracts and an employee handbook, to protect your business and outline the rules of your business to an employee. Basic HR software can really help to streamline the admin burden that comes with employing staff. As you grow your organisation structure should evolve, it is essential that your organisation design drives accountability. A key part of this is making sure you have the right people in the right seat.
Conversely, a really common scenario we see in fast-growth small businesses is that they need resourcing help – getting the right people in. Whilst this can be a challenge you may need to in-house this element of HR you may find that you wish to out-course the Employment law and HR element. So work out what your business needs and aim to get this support.
Relying on an external company makes you dependent on their availability and responsiveness. In times of urgent needs or crises, this could be challenging. You may also need occasional out-of-hours support at weekends or evenings as quite often you want to go into the next business day knowing what you should and shouldn’t do. So check this when you are looking at an outsourcing provision.
You may get advice from different people if they operate on a call centre type basis. This can be confusing for managers as they do not know what advice to listen to.
The Pros: The Bright Side of Outsourcing HR
Outsourcing HR can free up a lot of your and your manager’s time. Instead of juggling recruitment, employee admin, and employee relations, you can focus more on growing your business and doing what you do best. Getting the best software can assist with this too. Modern HR Software for SMEs Built by UK HR Experts (sense.hr)
2. Expertise on Your Side:
HR companies specialise in what they do. They bring expertise, experience, and knowledge to the table, ensuring that your HR processes are handled professionally and efficiently.
Maintaining an in-house HR team can be costly. By outsourcing, you can save money on salaries, benefits, and HR software, and only pay for the services you need. You also need to work out at what level you recruit HR resources (similar to IT and Finance etc) as a small business you will need a small element of strategic HR, HR legal compliance, and a lot of HR admin – you do not want to recruit an experienced person and the over pay them to do admin tasks and likewise you don’t want to recruit an inexperienced admin person who then misadvises you and you end up in an employment tribunal.
4. Staying Compliant:
Laws and regulations related to employment are ever-changing. HR companies keep up with these changes, helping you stay compliant and avoid legal issues.
Conclusion: Making the Right Choice for Your Business
Outsourcing HR comes with its own set of benefits and challenges. It could be a game-changer, saving you time and money, but it also requires careful consideration of potential downsides such as confidentiality and customisation. Assess the specific needs of your business, do thorough research on potential HR partners, and make a decision that aligns with your business.