Outsourcing HR: Leveraging HR outsourcing to boost your business goals
At Moore Kingston Smith People Advisory, we recognise the financial challenges that you, as an employer, are facing – being asked to deliver more for less. The squeeze on your financial budgets and internal resources means that you need to come up with creative ways to balance business needs while mitigating the ongoing impact of the financial crisis. Many have turned their focus to their HR departments, which is an area where savings can be made while allowing for more expert input.
In this latest post, we’ll help you understand how and why many businesses outsource their HR processes, while we’ll look at the pros and cons of HR outsourcing services.
Understanding HR outsourcing
HR outsourcing is a business practice where a business instructs an external service provider to handle some or all of its HR functions. These HR activities can include tasks such as performance management, benefits administration, recruitment, training and development, risk management, performance management, and compliance with employment laws and regulations.
Many professional firms opt for HR outsourcing for specific reasons, including cost savings, accessing specialised expertise, streamlining HR processes, and access to specialist HR software that isn’t freely available. By using HR outsourcing services, businesses can often reduce overhead costs associated with maintaining an in-house HR department, as they are only paying for the services they need from the external provider.
Analysing the costs
A cost-efficient option is to outsource your entire HR function to us. You not only save all the associated costs and liabilities of running an in-house HR team, but you also gain access to our team of HR, employee relations, and employment law experts. Hiring just one of these people for your in-house team could be very costly, but companies like Moore and Kinston Smith can provide them to your business at a fraction of the cost, without the ongoing employer-related costs.
Outsourcing your HR to us at Moore Kingston Smith People Advisory could typically save you up to 48% on your annual employment costs by removing the operational aspects of HR. This can provide you with the freedom to focus on the people strategy with support from one of our virtual HR directors and access to our HR specialists to help with your day-to-day HR issues. The training and development that our team can offer is often worth its weight in gold and can represent significant cost savings.
How much does HR outsourcing cost?
If you are wondering how much HR outsourcing costs, the truth is that this will vary from business to business. Some businesses, especially those on the smaller end of the scale, will have relatively small HR demands and therefore not require as much outsourced involvement, while bigger companies would typically have multiple people within their HR team, leaving a big void to fill.
Some HR software can cost as little as £3 per person, but these tools often require a lot of human input, while a fully managed third-party solution can cost upwards of thousands per month, depending on your business needs. It often boils down to whether these HR activities are necessary and how important these services are for your business. This is often much less than having an in-house person or team, but there are drawbacks that we’ll look at further down.
How does HR outsourcing reduce costs?
To understand how HR reduces costs, we need to look at some of the key components. By outsourcing HR departments, companies can avoid the expenses associated with handling HR internally, including salaries and benefits for HR staff, office space, technology infrastructure, and other overhead costs. This can make outsourced HR services for small and growing businesses a very appealing proposition.
Almost all HR outsourcing providers work with multiple clients, which allows them to achieve economies of scale. This means that they can spread their fixed costs across multiple clients, resulting in lower costs for each. This is especially true when considering the downtime that internal teams may have, which can be significant when compared to the fact that HR outsourcing services are often paid for by the hour and agreed upon beforehand, so you know what you’re getting for your money.
Exploring the benefits of HR outsourcing
HR outsourcing companies can help businesses in many ways, such as providing access to external expertise, improving efficiency, and eliminating the overhead associated with maintaining an in-house HR department. We’ll now look at some of these points in greater detail, which may help you decide one way or another!
Strategic focus and access to expertise
One of the main benefits of HR outsourcing is that it allows organisations to access top-tier expertise that may be costly to develop in-house. HR outsourcing services often have direct access to professionals with a deep knowledge of HR activities including payroll processing, benefits administration, compliance and employment law.
Scalability and flexibility
Many HR outsourcing providers offer flexible pricing models, allowing you to pay only for the services you need, when they need them. This can result in cost savings compared to maintaining a full-time HR staff, especially during periods of fluctuating demand or seasonal variations in HR workload. This can also be scaled, so as your business grows, your retainer for outsourced HR activities can evolve.
Outsourced HR for small businesses
HR outsourcing can streamline administrative processes, reducing the time and effort required to manage HR activities internally. This can free up internal resources to focus on core business activities, which is especially beneficial for small businesses. Choosing outsourced HR for small businesses is often a simple decision that many don’t regret moving forward, owing to the flexibility that small businesses need to succeed.
Disadvantages of outsourcing HR
Outsourcing HR functions may result in a loss of control over critical processes and information, which could impact decision-making, however, a good HR partner will always be open to feedback and will value your input. Some also worry that their business may become overly reliant on their outsourcing vendor, leading to vulnerabilities if the vendor experiences disruptions, but having access to strong external partners is what allows many businesses to thrive, without the burden of costly fixed overheads.
How Moore Kingston Smith can help
Contact us for a no-obligation discussion about how we can reduce your HR costs. Our team is ready and waiting to give you the support you need to get on the right track and unleash the benefits of HR outsourcing.