When should a small business think about outsourcing HR?

Originally written by Partner Content on Small Business

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?

  • Staff recruitment and retention
  • Onboarding new employees
  • Training
  • Performance evaluation
  • Health and safety
  • Coping 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 overstretched business owner.

See also: Six HR mistakes start-ups make and how to avoid them

Businesses with fewer than 50 employees rarely have an HR team. Instead, a finance director who may have had some relevant experience in the dim-and-distant past is seconded to the role. Not only does this leave your small business wide open to legal challenges when HR procedures are not followed, doubling up like this reduces your FD’s productivity.

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

Let’s look at three of these responsibilities in more detail:

Recruiting and retaining staff

Finding and keeping talent is seen as the biggest headache for most small businesses, especially when larger companies can lure staff away with the promise of more benefits.

Long-term sickness

One of the worst nightmares for a small business is when a staff member is signed off for a significant period due to illness. What does the law say? Is the illness related to physical, mental or financial matters? What should the business do to guard its own interests but be fair to the employee, both legally and morally?

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 costs saved.

Building a community that feels organic and genuinely valuable should be a goal of small business owners

The five questions you need to ask yourself are:

  • Do I have a high staff turnover rate? At a time when staff retention is at a premium, do I know why staff are 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 getting things under control.

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 revenues 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 goes wrong. 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 contracts of employment
  • 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 ahead of the trends and whose aim will always be to give your business the best possible service. After all they want to retain you as a client.

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 internally
  • 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 in 2019

When should a small business think about outsourcing HR?

Source: SmallBizUK

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