Outsourcing of HR to internal HR management

Why do small businesses need HR? HR develops the culture of an organization, manages payment, oversees recruitment and strategic employee

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Why do small businesses need HR?

HR develops the culture of an organization, manages payment, oversees recruitment and strategic employee development, as well as handling grievances and disciplinary procedures.

However, businesses with less than 50 people rarely have an internal HR department. Mostly they follow the outsourcing of HR route, which is why there are many HR consultants who specialize in small businesses.

Whether you decide to manage HR in-house or decide to outsource to an HR agency depends on the circumstances and priorities for your business.

> See also: A Guide to Outsourcing HR

Pros and cons of outsourcing HR

Benefits of outsourcing HR

Here are the benefits of outsourcing HR according to Rachel Mudd of Citrus HR:

  • Cost savings. “Outsourcing is significantly cheaper than hiring a qualified HR professional, even part-time, for almost all small companies. It also better suits the need — very few small businesses actually need an HR person for even one day a week, so hiring is often wasteful. ”
  • Access to specialist knowledge. “Outsourcing means you can keep abreast of the more specialist aspects of HR, for example employment relationship issues or handling a TUPE transfer. Internal professionals rarely have all that expertise themselves and need to be more general. ”
  • Legal compliance. “Good HR providers will ensure that you are aware of legal requirements for businesses, which is important as the law changes most months, often with enormous consequences for breaches.”
  • Cover for absences. “Any employee needs holiday time and can become ill from time to time. By using an outsourced HR service, you can ensure that you always have access to expert advice whenever you need it, which is not possible with an in-house HR professional at a small company. ”
  • Time efficiency. “By outsourcing these functions, employers can free up time to focus on making their business successful and profitable.”

> See also: 6 HR software tools you can use for small business

Disadvantages of outsourcing HR

  • Less control. Outsourcing is less personal and can lead to a loss of control. An employee may find it easier to approach a colleague with whom they work regularly
  • Culture disconnects. An organization’s culture stems from its HR strategy. If the HR team is external, it can create a disconnect between its strategy and the employees
  • Concerns about data protection. By outsourcing HR, you entrust your data to a third party

> See also: Top 10 HR tips

Pros and cons of an in-house HR team

Benefits of having an internal HR team

  • Easier to find the right talent. “In-house recruiters are there to ensure that the small business can find the right talent to keep up, helping SMEs to grow into the most organic [and cost efficient] way possible, ”says Anna Moore of Pollinate’s HR team. “Our own in-house recruiter has been with us from the beginning and has made a massive impact across the business, working closely with hiring managers, line managers and candidates to ensure we get the right fit, which is an annual staff turnover for 2021 at an impressive low of 12 percent. “
  • More personal. Employees can hold face-to-face meetings at any time to build trust and engagement between an organization and its staff.
  • Faster resolutions. Having a member on site should, in theory, allow discussions to escalate quickly and for any issues to be resolved effectively.

> See also: How to Decide on HR Policies for Your Small Business

Disadvantages of an internal HR team

  • It can be expensive. Depending on the size of your business, hiring employees can be more expensive than outsourcing. Of course, you can think of hiring someone internally to be your HR manager. According to HR outsourcing firm Peninsula, if you do decide to hire a full-time HR manager, the average national HR manager’s salary is £ 43,000. This equates to around £ 1,200- £ 3,600 per year for fully outsourced HR management, including health and safety, payroll, etc.
  • An employee can have a larger workload. By having a small HR team, each individual will have a wide range of responsibilities, from payroll management to recruitment. When outsourced, the third party will have experts in each area.
  • Access to HR systems. Chances are good that the software you have in-house does not match the capabilities of systems used by outsourcing HR agencies.

> See also: 7 of the best HR consulting companies in the UK

More about HR for small businesses

Small Business HR – Everything You Need To Know


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