HR outsourcing: Get your small business the best staff
Great people make great businesses. But it can be hard for small businesses to find them. That’s where HR outsourcing comes in
Some people think HR outsourcing for small businesses means posting a job on LinkedIn. But did you know that payroll is actually the most popular HR need for small businesses?
As you are probably aware, HR (Human Resources) is the part of an organisation that focuses on the staff. It covers everything from sourcing and hiring new members, to providing your current employees with the training and assistance they need to perform their job as well as possible.
|HR takes good care of your staff, so your staff take the best care of your business|
Larger companies often have entire departments devoted to this important function. But for smaller businesses and start-ups, it can be tough finding the time and know-how required to hire the best recruits – let alone keeping them motivated to stay long-term.
That’s where HR Outsourcing (HRO) comes in. HR outsourcing is a way of sub-contracting your HR tasks to a third-party expert. There are a host of agencies who specialise in HR, and below we tell you everything you need to know to find the best one for you.
In this article you will learn:
- Why do small businesses need HR Outsourcing?
- How do I know if HR Outsourcing is for me?
- How much does it cost?
- Who are the top providers?
Why does my small business need HR Support?
First, let’s look at the numbers. According to Deloitte’s study of HR trends today:
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- 80% of executives rated employee experience as important
- 57% of employees leave a role for better job satisfaction
- 89% of organizations currently use or are considering HR outsourcing
Often the most successful businesses – Google, Apple, LinkedIn – understand the importance of taking good care of their staff. After all, a happier workforce means a more productive workforce.
Putting people first can be especially tough for small businesses, but it’s no less important. Luckily, HR outsourcing offers an affordable option, and there are a number of HR agencies that offer HR expertise in affordable and flexible packages.
These are the main HR pain points that all businesses tend to face:
Most business owners want to take care of their staff, but no one enjoys the admin involved – organising payroll, managing staff documents, dealing with long-term sickness etc.
With employees also comes legal agreements, which require an in-depth and consistently up-to-date understanding of employment law.
It is a tall order for small business owners to stay on top of all this, but there are budget-friendly ways of leaving it to the experts.
Finding and hiring the right people for the job can be one of the hardest tasks for small businesses. There are so many stages: sourcing, shortlisting, interviewing, and selecting candidates – not to mention drawing up employment contracts.
Having recruitment pros working hard on your behalf can help you find the perfect candidate, and do your business a big favour.
3. Health and safety
It’s crucial – both legally and morally – to give your staff a safe working environment, as well as sufficient training to operate any relevant equipment.
Even the most basic elements of health and safety – such as CCTV, alarms and fire escape routes – require a great deal of attention and knowledge, and small businesses can do with a helping hand.
4. Staff retention
Your staff are your most important resource. So it’s worth working hard to keep them working for you.
Businesses with few employees tend to struggle here due to limited time and resources, but HR agencies can provide cost-effective solutions.
5. Staff rewards
Everyone performs well when suitably rewarded. But how do you know what performance metrics to go by? And what should the rewards look like?
Small businesses can benefit from outsourcing this vital task to people in the know.
6. Staff development
A big part of staff retention is the investment you make in your staff. This means providing the training – in-house, online, or via a third party – they need to perform their job optimally. But it also includes engagement initiatives like mentoring, community outreach, and philanthropy.
Staff development is one of the easiest ways of boosting morale and motivation amongst your employees – and happy workers mean better work for your business. As a small business, it can be tough staying on top of all your HR needs. But by outsourcing them, you may be surprised by how much time and money you save.
To get your hands on your very own quotes from the suppliers who best match your needs, don’t forget to fill in the form at the end of the page.
HR checklist – does my small business need HR?
Still not sure whether your small business needs HR support? Just ask yourself these five questions to find out:
- Do I have a high rate of staff turnover? – Often this can mean your employees’ needs are not being met. Are you invested in them, and giving them all they need to excel? You might like to consider HR support in their training and development.
- How is my filing system? – Are all of your employee files organised properly? Do they contain all of the relevant documents, and do you know what they are? Do you know how they should be stored? If not, outsourcing your HR admin could be a good idea.
- Do I have an employee handbook, and do all employees have access to it? – It is crucial to document your main policies and procedures, and ensure your employees are made aware of them. If you would need to create these from scratch, you could do with some legal HR assistance.
- Am I recruiting new staff as quickly as I would like to? – You probably know how essential your staff are to the growth of your company. Getting the best candidates on your radar, and bringing them onboard is your first step. By outsourcing this important job, you can stand a better chance of finding the best staff.
- Is a performance review process for employees in place? – Regular and structured feedback helps get the best out of your employees and keeps them motivated to perform. HR agencies can help if you are new to employee development.
If you feel that any of these areas require time, money and expertise you may not be able to offer, remember that HR outsourcing is on hand to get these things under control.
Business size – is my company big enough for HR?
In short – yes, your business is always big enough for HR, regardless of size. This is because all companies have at least one human on the inside, and therefore have human resource needs.
Depending on the size of your business, you may prefer to have an internal HR staff member or to outsource your requirements to HR agencies. Industry experts recommend a ratio of 2.7 HR employees for every 100 staff members.
Just use this chart to work out your own HR needs:
|No. of staff||No. of HR staff needed||Outsource or hire?|
|5||Fewer than 1 HR personnel||Outsource|
|5-10||Fewer than 1 HR personnel||Outsource|
|11-20||Fewer than 1 HR personnel||Outsource|
|21-50||1 HR personnel||Outsource|
|21-100||2-3 HR personnel||Outsource or hire|
|100+||5-6 HR personnel||Outsource or hire|
As we explain below, hiring a new HR recruit will often cost vastly more than seeking assistance from HR agencies. HR outsourcing is even a popular option for businesses with over 200 employees since it tends to cut costs and ensure HR expertise.
An internal HR Staff or HR Outsourcing – Which is for me?
One option is hiring an internal member of HR staff, either by promoting from within or through a normal recruitment process. The alternative is outsourcing your HR needs to an HR agency.
For most businesses with fewer than 50 employees, it does not make financial sense to hire internal HR staff.
By comparing the pros and cons of HR outsourcing, you can see why it takes the lead:
✅ Considerably cheaper
✅ HR agencies are HR experts
✅ You are not liable for any errors
✅ Your staff can focus on their jobs
✅ HR outsourcing is tailored
❌ Promotions can motivate staff
❌ You know what you’re getting
❌ Internal staff can get results faster
Generally speaking, internal HR staff can offer more control over your HR tasks, since collaboration is easier with people in-house. In addition, opening up new roles can help motivate existing employees hankering for a new opportunity with you.
But this all comes at a huge cost that often simply fails to make commercial sense. HR outsourcing not only saves your business time and money but you also tend to get better HR services due to the agency’s expertise, and there is always an incentive for them keeping their clients happy.
HR is not rocket science, but it is a field with legal implications – and serious consequences if done wrong. Outsourcing your HR needs takes this burden off you, so you can get back to what you know best.
What are the HR Outsourcing costs for small businesses?
Of course, HR outsourcing is not free. But did you know that its main benefit is actually to save small businesses money?
The services provided are necessary for companies of all sizes. But for smaller business, it often makes more financial sense to opt for HR outsourcing.
What do internal HR staff costs look like?
Taking on a HR manager or executive will not just cost your business their salary, but also the fees involved in their recruitment, training, and potential pension contributions – not to mention the time and money required to implement their own HR initiatives.
According to reed.co.uk, the average HR manager’s salary in 2018 is £47,000 – that’s already £3,000 higher than in 2017. In addition to this wage, remember you will also pay for their training, which incorporates the salaries of those that train the new HR manager, as well as any costs of new materials and equipment they may need.
The latest estimates reckon that these requirements cost a business on average an additional 50% of the employee’s salary.
So, you are really looking at an estimate of around: £70,500
And that’s just in the first year.
What about HR Outsourcing costs?
If you think your business only needs occasional support with your payroll, admin or more general advice, it may be excessive to pay for an internal HR manager. This is why HR outsourcing can be a lifesaver for small businesses.
There are two options for outsourcing your HR needs: HR agencies and HR consultants. For more details on costs, visit our dedicated HR outsourcing costs page.
HR agency costs
Of course, the fees will vary depending on the level of service required, but this is how they might compare to a new recruit: