The Pros of Outsourcing HR for Small Businesses

A CIPD survey found half of HR professional expect to furlough employees during the COVID19 pandemic; and a quarter expected job cuts permanently. Economic professors estimate a rise in unemployment from 3.9 to 21 per cent!

The challenge for small business owners or company directors with no or a small HR team; is – how do you ensure you follow a fair, reasonable, and compliant people process?

A lot will take ad hoc HR or employment law advice for the people problems they have at that point in time; but being reactive is not as effective as being proactive.

Commercially astute, effective and experienced human resources advice and support is essential to any company, but for small businesses it may be difficult to manage the HR processes in-house, and companies may find it more beneficial to outsource all or part of these to a HR consulting business.

Using an outsourced HR provider can have many advantages, such as:

  • Skills and knowledge – the good HR consultants will be experts in all aspects of people management, trained and competent and will have excellent knowledge and experience at all levels of HR. Even if you have in-house HR, they will in most small businesses likely not have the in-depth knowledge and experience required to grow your business through your people, add value to the bottom line and mitigate risk.
  • Increased legal compliance – the good HR consultants, will have more of an understanding of employment legislation, ensuring legal compliance. 
  • Efficiency – companies can focus on their core business rather than human resources when they outsource their HR.
  • Reduced costs – hiring in-house HR can be costly in comparison. The cost of poor people management can be substantial and if a company fails to comply with the law, they could be faced with a hefty claim at an employment tribunal and a large bill for the legal costs, a good HR consultant will have more of an understanding of the law in their field, and will know it inside out, which would mean the chance of a tribunal for a situation is less likely.
  • Saving management time – the expenditure of management time alone in dealing with, for example, troublesome employee, is wholly disproportionate in most cases.

Here are some top tips to securing the right small business outsourced HR firm –

  1. Research Linkedin;
    • What do people say about the owner/consultants?
    • Read the recommendations section
    • Do they have praise for meeting targets and adding value?
    • Do their fellow HR professionals praise them?
    • What level of seniority in HR have they worked at? The more senior the more experienced they will be and able to address any HR problem in a commercially savvy way
  2. Website recommendations: what do they say about the quality of work delivered?
  3. Are they a “fellow” of their professional body the CIPD? this is an excellent indicator of their operational and strategic HR and business knowledge and experience.
  4. Have they worked in HR? for example employment lawyers are great to mitigate legal risk but they are not seasoned HR professionals who have worked in and ran HR teams, (the good consultants will have a number of employment lawyers they work with so you can be assured legal risk is covered).
  5. Have they worked in large and small businesses? The good consultants have, and this gives them vast experience and the ability to resolve all types of HR matters. If you can work with a consultant that has large outsource firm experience even better!
  6. Are they well networked with other HR specialists? Payroll, pensions, HR advice services, recruiters etc this will give them a honeycomb of experts to draw down on to ensure they deliver the best service to you.