Why Outsource the HR Function?
Typically small businesses, and even some medium sized ones, don't have a HR department or even a HR Officer. And it's hardly surprising when Glassdoor is currently reporting the average HR Manager salary in the UK as £43,574 per annum - that's a massive cost for most SMEs and that doesn't take into account the employers cost, cost of office space, IT equipment and possibly HR software etc.
It is common practice in small and medium sized businesses for responsibility for HR to be taken by the business owner or given to a trustworthy employee to do on top of their "normal" job.
In many organisations that works. Or at least it works until something goes wrong.
So is there an alternative? Something that will give the business owner peace of mind that their HR practices are legal and effective but that won't take £60K plus each year from the bottom line.
Yes there is! The alternative is HR Outsourcing!
What is HR Outsourcing and How Does it Work?
Essentially, whilst overall responsibility for HR practices remains with the business owner, an external HR Consultant provides the expert support needed to efficiently run the HR function within the business. This is usually done remotely but many Consultants will offer site visits for meetings etc. The HR Consultant is a qualified and experienced HR professional who understands employment law and how it can impact the employment relationship without the high cost associated with employing an HR Manager directly.
HR Consultants may charge by the hour or some offer retainer packages where the client pays a fixed fee each month for as much support as is required. Many HR Consultants offer a Telephone Helpline service that operates outside of normal office hours, so is accessible to non-9-5 industries, for employment law and HR advice.
Cost is clearly a significant benefit of outsourcing HR but there are others:-
Increased efficiency - The business owner and/or employees can concentrate on their core work and not have to spend precious time researching and interpreting HR rules and procedures when an issue arises.
Access to HR IT systems without capital outlay as many HR Consultants offer this as part of their service to facilitate the process link between themselves and the business owner.
Legal compliance as the Consultant is a HR specialist who remains up to date with ever changing employment legislation and will ensure any changes necessary are implemented into your policies and procedures before they take effect.
Improved People MI including HR metrics and KPIs which should quickly illustrate how the Consultant's expertise is also saving money for the organisation.
Less risky than employing someone as it is much easier to scale up or down should the need arise in a changing business.
The HR Consultant will bring a level of skill that may not have existed previously within the organisation and, therefore, the opportunity for HR to work more strategically and ultimately create greater efficiencies.
How Do I Select a HR Consultancy Provider
As with any supplier service, there are a number of considerations you should make before selecting your provider:-
Understand the HR provision in place currently - cost, responsibilities and level of service to enable easy comparison to that offered by the external providers.
Does the provider offer telephone and/or email support and what hours is this service available.
Understand the organisation's future plans - if rapid growth is anticipated can the provider scale up quickly without interrupting their service to you.
Communicate within your networking circle to find out if they have any recommendations (or not!)
Consider the culture and values of the provider and how they will fit into the culture of your own business.
Decide how long you would like to enter into an initial contract for, or whether you would prefer PAYG if available.
Find out whether you build in an element of flexibility in the event of a significant change in circumstances that meant you no longer needed their services.
Get to know the actual person who will manage the relationship - are you comfortable dealing with them and willing to take their advice
Identification of metrics to be included in the SLA and their acceptable and unacceptable ranges for measurement.
Make sure you have a clear Contract that clearly sets out what the responsibilities of the Consultant, as well as the other points agreed and don't sign it until you are happy with your choice and the solution they offer.
A good HR Consultant will add value and increase efficiencies across your business and should work as a true business partner to you. If you are currently trying to juggle people management with growing and running the business then outsourcing HR could well bring huge advantages to you and the business.