HR outsourcing – the key considerations for small businesses

With human resources playing a pivotal role in the success of any business, it's crucial to handle it with the utmost care. After all, the better you look after your people, the better they will look after your business.

HR outsourcing - the key considerations for small businesses

As a business owner, you may have realised that nurturing and developing your human capital is the key to sustainable growth. If you’re considering outsourcing your HR function but are unsure about how to approach it, you’re in the right place. 

In this article, we’ll delve into the various considerations around HR outsourcing, empowering you to make informed decisions that benefit your business.

Why should you consider outsourcing your HR Function?

Managing staff is undeniably time-consuming and complex. It requires technical expertise to navigate ever-changing legislation, as well as strong people skills to excel in this critical function. Small businesses, in particular, may find this field daunting and see the benefits of engaging external HR experts, especially if they lack the knowledge and resources required within their business. 

Outsourcing your HR function can provide you with access to professionals who possess the necessary knowledge and experience, allowing you to streamline your operations and enhance your HR practices.

Which HR elements can you outsource?

There are numerous HR elements that lend themselves well to outsourcing, including:

  • Payroll
  • Recruitment
  • Disciplinary processes
  • Grievances processes
  • Redundancy processes
  • Staff policies and procedures

Each of these elements carries different risk considerations, which we’ll explore further.

What risks are involved in HR outsourcing?

HR outsourcing involves managing various risks, depending on the nature of the outsourced element.

One key risk is ensuring that the outsourced function is carried out legally and diligently. A subpar service may strain employee relations or even lead to legal claims against your business. To mitigate this risk, selecting the right provider from the outset is critical.

Another potential risk is loss of control. When you entrust a function to an external provider, you naturally relinquish some degree of control. To address this, effective communication and information exchange between your organisation and the provider is essential. 

Additionally, data control and management must be handled with care. Implementing suitable Data Sharing Agreements and robust data security measures is vital to protect sensitive information.

How to choose an HR outsourcing services provider?

When selecting an HR outsourcing services provider, consider their credentials and experience. Recommendations from businesses in your industry with similar profiles can be valuable. 

Ask pertinent questions to understand their operations and evaluate their suitability for your business. Consulting multiple providers allows you to make an informed decision based on the best fit and previous track record.

Employment law compliance

Outsourcing HR doesn’t absolve your business from compliance with employment laws. You remain responsible for ensuring that your HR practices align with legal requirements.

Collaborate closely with your HR outsourcing provider to stay updated on any changes in employment legislation and to ensure that your policies and procedures reflect these changes. Regularly review your outsourcing agreement to confirm that the provider is fulfilling their legal obligations.

Transferring your HR function to an external provider must not compromise your employees’ rights or fair treatment. Communicate the outsourcing process transparently with your employees and address any concerns they may have. Ensure that the provider understands and respects employee rights, maintaining a culture of fairness and inclusivity within your business.

Key takeaway

Remember that while you can outsource the function, you can’t outsource all the risk. The ultimate responsibility still lies with your business. Therefore, choose your provider wisely, establish robust contractual arrangements, maintain regular contact, and closely monitor the progress. Effective outsourcing can save you time, stress, and money while ineffective outsourcing can have the opposite effect.

If you’re uncertain about the contractual aspects of HR outsourcing or need advice and support in this area, seeking legal guidance is advisable. LawBite is your trusted partner in handling commercial, corporate and employment legal matters. Our experienced lawyers are friendly and ready to assist you. We strive to provide tailored solutions that protect your business and foster its growth.

Clive Rich
Clive Rich

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