Small-to-medium-sized business owners know the frustration of spending more time than they want on non revenue-generating activities. From payroll and human resource management to benefits and compensation, managers and directors can spend a significant proportion of their day engaged in these necessary but time-consuming tasks. The answer to this would be to outsource part or all of HR functions to third party providers so business owners can focus on their core business.
Generally speaking, there are two top reasons why SMEs should outsource HR, including gaining better quality support than the business is able to offer in-house as well as getting hiring costs saved. This saving comes from the company either not requiring an HR person in-house, or enabling the person who had taken on the HR function to focus on revenue generating work.
While outsourcing human resources role is a great solution, when does it make sense for you to outsource? In assessing whether you should or not, Nicola Goodridge, HR consultant and owner of Good HR, suggested the following questions to consider before you make a decision.
Businesses with fewer than 50 employees rarely have an HR team. Instead they might have a manager or finance director who dabbles in HR roles because they have some relevant experience in their dim and distant past which seemingly qualifies them to deal with all the people issues that arise. As a rule of thumb, organisations with more than 50 employees will often find it easier to have an in-house HR department and therefore, though they might still require outsourced HR support. However, the nature of that service might differ greatly from that utilised by the smaller business.
The nature of the work undertaken by an outsourced HR consultant varies hugely dependent on the nature of the business and the talents within an organisation. If possible, business owners should find a professional who could manage not only staffing but also understand legal practices and issues, such as discrimination claims, redundancy, grievances, and dismissals.
It is important to establish up-front the way in which the outsourced service is billed. By and large, the cost of service varies depending on the level of outsourcing human resources role that is required. For example, A might be asked to assist on a specific well-defined project in which case A will estimate the cost involved, or at least offer a range of costs within which it will fall. Alternatively, B might work alongside the business dealing with day-to-day issues on a retained basis, or, B might be called in to sort an “emergency” for which B could charge an hourly rate.
Do you want a “face” who gets to know your business, staff and culture, who can be flexible in the service you offer and who, by virtue of being a phone call away, can operate as if you have your very own HR department? You could sign up to a HR support line – a less personal service but one that might suit the nature of your business and complement the expertise you already have within your organisation.
As a business leader who prioritises employee engagement, you can ensure you are not burdened by high employee turnover, low morale or ineffective teamwork. Instead, you will have employees who are productive, enthusiastic and effective, enabling you to maintain an edge in a highly competitive environment. The attraction and retention of talent is now such a business critical operation that for many businesses, outsourcing their HR function is the best way to ensure that what is arguably their most valuable asset is well managed, freeing them up to concentrate on their core business.