Outsourcing is simply “the process of paying to have part of a company’s work done by another company”. This is how it’s defined in the Cambridge Dictionary.

Companies can choose to engage with a third-party to have a range of services, tasks or operations performed. There are many areas of a business that can be outsourced. When it comes to business support functions, the functions most frequently outsourced tend to be IT, elements of finance (book-keeping as an example), and, of course, HR.

The concepts of outsourcing each function are similar. However, we are focusing on the topic of businesses outsourcing their HR function to consultancies like ours.

There are some key advantages when you outsource HR. Firstly, there’s the flexibility that you get. HR issues can be routine requiring a relatively inexperienced HR resource. Equally, they can be complex or you can need more strategic advice. When you outsource your HR, you get access to the different skill sets you need in the quantities that you need them.

Additionally, there’s the objectivity.  When you have an in-house HR resource they can find it difficult to do what’s right for the business. This is particularly the case when it’s going to have a negative impact on their friends and colleagues.  By using an outsourced HR provider you’ll get objective guidance. 

The main disadvantage of outsourcing your HR is that you may not have someone physically on-site who is able to keep an eye on all that is happening.  This is less of an issue now that many organisations have adopted hybrid working but it’s still something to consider.  At LighterHR we offer on-site support which will overcome this particular issue. However, that’s not something that’s offered by all providers. 

These are just a few of the advantages and disadvantages of outsourcing your HR.

The starting point if you’re considering outsourcing your HR is to think about how things are working at the moment.  You need to consider which elements of HR you want to keep in-house and which you want to outsource.

As an example, maybe you want to continue to plan and manage your induction programme in-house. However, you’d like to outsource all of the administration that goes with hiring an employee.  Perhaps you want to continue having your managers complete exit interviews for employees. However, you want to outsource the process of acceptance of resignation letters.

If you’re not sure then a good starting point is to look at our LighterHR Framework. This sets out typical HR activities and you can then consider your options.

There are then some other key questions that you need to ask yourself.  You should consider how much on-site presence you would like.  You should consider whether employees will be able to use the service or whether you want to limit it to just managers.  You should consider how open you are to having some of your current HR processes changed.

Really this question is more around why do companies start thinking about changing how they get HR support?  There are some key reasons that lead companies to start to look at how they get HR support.

Often times the case is that a company does not actually have any formal in-house HR capability.  The HR ‘hat’ has been worn by the business owner, the Operations Director, the Finance Director until this point but this is no longer working.  It could be that the issues are becoming increasingly complicated. This can lead to a concern that there is a risk of the company breaching employment law.  It can also be that the individual no longer has time to HR alongside their main role. This can be a trigger for a business to start looking at getting their HR support in a different way.

Another issue that we find is that a company does have in-house HR, but they aren’t getting the support they need.  This can be because the business does not have access to the variety of skills that the it needs. Or, it could be that the in-house HR is finding it difficult to execute changes that the business needs.

This is the question that drives at “Why outsource HR rather than use one of the other options to get HR support?”.

Clearly, there’s more than one way for a business to get HR support.  So why would a business chose to outsource?  Clearly, this is covered by considering the advantages of outsourcing.

Outsourcing makes sense for businesses that:

• Need access to a variety of HR skills and expertise at different times.
• Are looking for flexibility.
• Are looking to have access to HR best practice insights from businesses that are similar to theirs.
• Want to ensure objective HR support.
• Are looking for a cost-effective way to get the HR support they need.
• Want to ensure that sickness/holiday does not leave them without HR support.

We’ve touched on some of the challenges with having in-house as opposed to outsourced HR already.  We’ve talked a little about objectivity and how it can be challenging for an in-house team to do what is best for the business when it will have a negative impact on their friends and colleagues.

Another key consideration is cover.  If you have in-house HR then they will inevitably have to take time off. There’s holiday, sickness and other life challenges that could see them need to take time away.

When you outsource your HR you’ll always have cover.  Of course, your key contact will also end up away at some times but you’ll have back-up from other members of the outsource provider that you’ve selected.

Picking the right provider is something that is essential. It will ultimately determine whether you get the positive result that you’re looking for when outsourcing HR.

The key things that you should consider are:

• Do you want to work with the provider?  HR issues can be extremely challenging and stressful to manage.  You want to pick an HR provider who feel you’d be happy to be open and honest with. You want to be confident that will take drama away from situations rather than add to it.
• Can you meet the actual team you’ll be working with?  Similar to the above, it’s important that you meet the actual people who you’ll be working with. This will all you to assess whether they will be a good fit with your organisation.
• How much flexibility is offered?  We strongly recommend that you don’t sign up to a multi-year agreement until you know that you’ve definitely selected the provider that’s right for you business.  Additionally, consider how easy it is for you to get additional support or to decrease the amount of support you get should the needs of your business change.

On this point, it’s worth looking at any case studies that your chosen provider has. You can also see if they would be happy for you to speak to one or two of their clients.  Outsourcing should be very flexible, allowing you to keep control of what happens with your HR, without having the stress of actually handling it.

We’re experts when it comes to outsourcing HR and we’d love to chat with you about your requirements.  You can reach us on our contact page.