Why Should A Small Business Be Outsourcing HR?

In the evolution of small business, there comes a time when the need to outsource HR becomes a necessity. This often is when the business leader will have to deal with one or more of the main aspects of HR. They will inevitably find that it can be difficult to manage them with limited resources, knowledge and time.

small business hr outsourcing

What is HR Outsourcing (HRO)?

Exactly what it says on the tin, outsourcing is hiring an external party to perform services (in the case of human resources). The practice of outsourcing HR comes often from lack of time, lack of internal resources, lack of knowledge and more. Naturally, and specifically for small businesses, outsourcing is advantageous, so all aspects of HR are taken care of. HR advice for small businesses is also extremely valuable from a compliance point of view

The Benefits of Small Business HR Outsourcing

Administration, including the legalities of employment

The person responsible for employing people needs to know what the legal obligations are that must be fulfilled. This needs to be considered even before offering a job. Once the job is offered, that person will need to know how to administer a payroll and deal with auto-enrolment of pensions. Payroll and HR outsourcing are commonplace due to the complexities of the task in hand.

Our HR Assure small business support package provides you with the knowledge you are compliant with employment law. This includes provision of documents, templates and forms, along with direct guidance from us!

The recruitment of new staff

Outsourced HR services include making sure that the staff hired are the most appropriate people for a specific role. They ensure people have the necessary skills, knowledge and behaviour for the business. This is a crucial element in running a successful business.

It should be noted that the more skills and qualifications required for a role, the more time consuming and expensive the process becomes. This type of HR advice for small businesses will come in extremely useful when going through the hiring process.


Employing staff requires a significant investment of time and money. Once they join the team, they need to grow and develop until they feel best equipped and qualified to perform their duties.

Training is often seen as the “soft option” in terms of budget, and external training is often used as the preferred method.  But it is expensive and doesn’t always meet the demands of an individual business.  Is there a better, more cost-effective way to train staff without prohibitive spend?

Staff retention

Once the investments are made, the return on investment is realised by getting the most from staff members. This means appropriate reward and development schemes to ensure that the workforce is motivated to stay. By outsourcing your HR and getting this HR advice for small businesses, you can rest assured knowing these schemes are well-considered.

Dealing with long term sickness

One nightmare for a small business is when staff member is lost for a significant period of time 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?

Outsourced HR Services and Small Business

How many of these aspects can a small business owner hope to understand enough to do well themselves? This is on top of running the business to ensure survival, growth and financial success?

A temptation is often to double up on jobs, giving HR responsibility to a senior role.  After all, it’s just people “stuff”, so the Finance Director can probably manage it alongside the numbers?

No, firstly this will reduce the productivity and usefulness of the Finance Director. It is also likely they don’t have the skills to understand the nuances involved with all aspects of human nature, nor the necessary knowledge.  This is the remit of HR.

Have an expert by your side to advise and guide on the right HR decisions and approach to win your employees’ hearts and minds with our Small Business HR Support Package

Small Business HR Outsourcing functions

Of course, you could employ an HR Professional at the start of a business. But this probably isn’t the best use of limited resources when there are better alternatives.  This is where outsourcing HR functions can be cost effective. It also can give the business owner the comfort of knowing that the business is acting lawfully and effectively.

Outsourced HR and Payroll Services, plus Pensions

At the most basic level, processes such as payroll and pensions can be easily outsourced. The recruitment of staff can benefit from the advice and participation of an expert who understands the market. They will quickly be getting to grips with the vision of the business and its culture, in order to attract the right kind of candidates.

Get HR Systems help here

Outsourcing HR and Hiring

It will always be the business that makes the final selection, but it can do so with the knowledge that the pool of candidates is catered to a specific role.

Following this up is the act of ensuring the employment process is legal. This includes the necessary documentation being sought and maintained properly. It also ensures the follow up induction and training plan is suitable for both the new employee and the business.

By ensuring that the new employee gets the best possible start, the risk of turnover can be significantly lowered. This is because the employee feels that they are being treated well and that the business has a continued interest in ensuring that they can do their job well.

Is In-House HR an Option?

The cost of hiring a HR administrator at the basic level of qualification averages around £20,000 p.a. and a HR Manager can go up to around £45,000 p.a. The on-costs also need to be accounted for such as tax and National Insurance. These are likely to raise the amount invested quite significantly.

In-House HR vs Outsourcing HR For Your Small Business

Small business HR outsourcing is a flexible option, which can be bought in on a fixed fee, monthly retainer or a daily rate.

For a highly experienced, capable and adequately-qualified HR professional, the day rate could be as high as £700 per day, but measured against the cost of a permanent employee, it’s still cost effective and is likely to give a good return on investment.

The key is to be clear on what you are outsourcing.

  • An ongoing requirement that you will need month on month?
  • A project with a clearly defined scope and timescale?
  • A flexible, potentially call-off arrangement whereby you’re prepared to pay a higher premium for the comfort and flexibility of having someone on hand when you need them?

The clearer you are on your requirements, the better position you will be in to find and contract with the most appropriate provider.

Remember, longer-term relationships give the outsourced provider more certainty which they will value; this should enable you to negotiate a better detail.

As the business grows the time may come when the number of staff and the addition of different departments makes it necessary to hire permanently into an inhouse HR role. In the meantime, outsourcing HR at all levels is the most cost effective and efficient route for small business.

What are the Advantages of HR Outsourcing?

It’s going to be a more cost-effective and flexible option for a small business.

  • For more advanced HR requirements, a HR consultant with specific expertise will give their input ensuring the business gets the highest standard of service.
  • It takes pressure off the business owner and senior managers. This allows them to direct their attention and resources to the matters of running the business, but always keeping in touch with the HR plan.
  • HR outsourcing companies are flexible and can tailor their offer to suit the business and budgetary needs. Get your bespoke HR solution with our HR Develop Small Business Support Package 
  • There is huge value in having HR management consisting of experts who are ahead of the trends. Especially those whose aim will always be to give the business the best possible service.  After all they want to retain the business as a client.

A small business must move fast, stay ahead of its market and innovate, all whilst managing a tight budget.  Outsourcing HR can ensure that the people aspect is in good hands and is being handled lawfully and appropriately. This will remove one less headache and hopefully allow the business owners to get a better night’s sleep!

Find out about our HR outsourcing services here

Learn more about HR Outsourcing (HRO) here with Personnel Today’s in-depth guide

If you would like some small business HR outsourcing advice, then please do drop us an email: info@petaurumhr.co.uk