Is 2022 the year you finally consider outsourcing HR? Here’s what you should know – and why it makes sense.
For thousands of entrepreneurs, start-ups and growing businesses, the function of HR poses a dilemma.
Should the owner of people processes be an ‘in house’ undertaking, with a salaried member of staff solely focused on employee issues – of whatever level or complexity?
Or should the company adopt an outsourcing approach, tasking a trusted and focused consultant to deliver all of the necessary people-based support and strategy?
According to the UK Chartered institute of Personnel and Development (CIPD), some 39% of small and medium sized businesses choose to outsource at least some of their HR functions.
Highest on the list of such functions is payroll; while others may choose to also hand over responsibilities for the likes of training and development, employee challenges such as disciplinaries, grievances and absence management, restructure and redundancy, creating and updating contracts of employment and handbook policies, pay and benefits benchmarking, recruitment, onboarding and offboarding to name a few…
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While the outsourcing quandary has long been in existence for many firms, it’s clear that the last two years – in which Covid sparked unprecedented issues around staffing, absenteeism, financial contributions and more besides – created a very obvious motivator for some business owners to press the button and introduce a competent practitioner or consultancy for the first time.
And regardless of a pandemic at play, most managers and leaders are unlikely to have founded their company, or taken on the helm, with substantial knowledge of HR – a field of business which changes daily, and requires absolute accuracy and competence.
Presenting the business case for outsourcing HR will naturally require a detailed and honest look at what the challenges are for the current operation, and being clear about the perceived benefits which might come from a new approach.
Questions a leader or team might ask themselves in reaching that conclusion, might include:
- Where have been we being managing HR well to date?
- What types of day to day issues are arising, for which we feel additional help is needed?
- How might we manage issues around confidentiality and access to data, if we engage a consultant?
- What financial implication would outsourcing have on our bottom line?
- Would we have access to them when and where we need them?
- How would we introduce the new approach to staff, and what access to the outsourced practitioners would employees have?
- How can we supercharge what we are already doing to get an even greater return on your investment?
Most firms arrive at the HR outsourcing decision with a clear idea of what they hope to gain, and what burden the new instruction could reduce for the business on a daily basis.
Some of those likely benefits are more obvious than others.
- Bringing a senior level of specific expertise into the business which might not be affordable or practical in an ‘in house’ way
- Gaining an additional and objective confidante on people issues, particularly for a firm which believes itself likely to have to navigate tricky matters
- Cutting out the heavy salary cost of a PAYE professional, and providing a resource which does not also need to be further ‘managed’ by other team members
- Risk reduction – allowing a firm to scale up and down HR services at particular times of need
- Efficient use of specific resources and technology, which an HR professional will have existing access to, and which will therefore spare the business costs
- Time and cost saving (if it’s done once, it’s done properly)
There is of course another benefit which employees themselves might come to appreciate.
In SMEs in particular, it’s incredibly common for an owner manager to have an extremely direct-line relationship with staff, and often be regarded as the ‘one who pays the wages’, as well as being the central figure driving forward the entire operation.
This can make it particularly difficult for staff to feel able to air concerns freely without fear of awkward consequence.
To that end, your outsourced HR pro helps to alleviate that risk, and offers the ears and eyes which benefit both employer and employee in the long term.
Of course, fundamental to adopting the outsourcing strategy successfully, is also being open to the likely hurdles of a poor transition, and understanding what initial time management and knowledge support might be required to get things running smoothly.
A good consultancy will always take the time to present you with their suggested checklist for the implementation phase, and will be devoted to wanting to understand your business (almost) as well as you do.
Choosing a provider that is aligned to your values is key to ensuring a fruitful partnership, ensuring that your “people initiative” are created and implemented to support and enhance your culture, rather than work against it.
Inevitably, bringing in a ‘third party’ induces a cultural learning process for everyone, but the overwhelming benefits are usually seen very quickly – so long as constant communication and mutual trust are maintained.
Carole Burman, MAD-HR’s award winning founder, says of outsourcing: “For the vast majority of our clients, the single biggest reaction we hear after their first month or two of outsourcing, is that they simply wish they had made the decision earlier.
“Delegating a function can feel unnerving, and in particular if there are existing employed HR staff to have the consultancy work alongside, it can create a level of angst as everyone settles into the relationship.
“But, for most owner managers, the rewards and reassurance are quickly seen. Businesses that let specialists do their job, and invite those trusted practitioners to be part of their wider function, are naturally more able to focus on their core output – which means higher productivity and profitability for the long term.”
As we emerge from two years of challenging business conditions and shifting sands for so many leaders and employers, is this the year you finally outsource HR and reap the benefits?