6 Reasons SMEs Are Choosing Outsourced HR
There is no end to the number of services a small business can access to streamline its operations, from time trackers to sandwich delivery. One of the most critical business functions that many small and even medium-sized businesses overlook, however, is human resources (HR). Either they have a single HR manager who handles the many functions that come under the HR umbrella, or these roles are taken on by leadership on an ad hoc, reactive basis. This is the traditional approach.
However, a sea change is happening in SMEs, with many businesses prioritising attracting and retaining top talent and making sure employees are engaged and well looked after. When small businesses outsource HR, they get the support of qualified professionals and shift to a strategic approach, without the financial burden of employing a full team.
New research shows that 85% of businesses that outsource their HR requirements grow faster than similar organisations that do not. The additional growth is put down to improved efficiency, higher employee satisfaction rates, and time to focus on key goals.
1. Maintain Compliance
SMEs can make sure they are being good employers and acting in line with the legal rights of employees. This helps small employers avoid costly fines, tribunals and court cases, which could take time and revenue away from business margins.
Employment law is regularly updated to balance business and employees’ interests. It can be difficult for SME leaders to keep up with what’s required. A recent report from Lighthouse Research & Advisory showed that just 49% of UK businesses take steps to stay up to date on HR compliance. The rest fall behind, only looking up the requirements when an issue arises.
HR organisations have the time and resources to interpret new legislation and update documentation and practices to maintain consistent compliance. Outsourcing to an HR organisation means SMEs can be confident that their working practices are in line with their obligations.
2. Impartial Mitigation & Workplace Disputes
Avoiding workplace disputes effectively, or dealing with them appropriately when they arise, requires a combination of training, responsibility and experience. For small businesses, the leaders who hold these skills may be overstretched or, in some cases, too close to the issue to respond appropriately or mediate effectively.
Outside HR professionals are impartial, which is essential for quality mediation and dispute resolution. They are trained in conflict resolution and can assist business leaders with tricky issues such as disciplinaries, dismissals or workplace accidents. Your impartial HR contact can also advise on the best resolution for all parties, while keeping to regulatory compliance.
A solid HR team can prevent disputes, too. They can take the time to assess your inclusion policies and procedures for dealing with discrimination, workplace bullying or harassment against best practices and advise on where updates may be required.
3. Save Time to Focus on Other Business Areas
Where medium enterprises have in-house HR leaders, their time is often spent on administrative tasks, such as recruitment tracking, managing payroll and annual leave requests. As a result, leadership may mistake the HR function as an administrative role, and in small businesses, these vital tasks may be taken on by leaders, often without proper training.
Really, the scope of human resources involves many strategic activities. You might need leadership development, coaching, workforce planning and employee engagement strategies. By outsourcing HR, many SMEs find that their leaders and internal HR managers have more time for more impactful activity.
4. Cost-Effective Solutions
Businesses can outsource as much or as little of their HR functions as needed. There’s no need to pay for more than you need. If a small business wants to reduce administrative hours, they can outsource payroll and benefits and keep the strategic HR roles in-house.
Alternatively, if you’ve got the basics covered but need some expertise for recruitment, onboarding or training and development, outside support can come on board for the duration, in a short-term contract.
These flexible solutions meet the broad range of needs found among SMEs, which is why they are so popular. Outside HR support means employers save on overheads like salaries, hiring and training costs, as well as finding the most affordable rate for the services they need.
5. Scalable Support
Outsourced HR can scale with the business because it is tailored to their growth needs. When a workforce grows, the HR requirement grows: more administration for payroll, pensions, payroll tax and onboarding, more training to be completed, more disputes to mitigate and mediate.
For those businesses that face seasonal fluctuations, there is a regular change in HR needs. Outsourcing means companies benefit from flexibility to increase or decrease their service level depending on what they need, without adjusting internal staffing.
When an SME grows rapidly, looking for an agile HR organisation that can adjust their service level easily will help manage the additional pressures that come with business scaling.
6. Access to a Wide Range of Expertise
In house HR specialists will have experience in a particular industry but can be limited in the range of expertise they have. When a new issue arises that they haven’t faced before, support from a pool of experts in all areas can be extremely helpful.
Accessing HR for small business needs can improve the quality of your HR processes across a broad variety of subjects, from appraisals to succession planning.
What is the Process of Outsourcing HR?
Outsourcing HR for small businesses should be flexible and responsive. Small businesses go through many changes within a short time frame, so project-based support can be cost-effective, providing expertise on a particular initiative without long-term expenditure. Alternatively, retained support means leaders can access professional advice at any time, and focus on other business areas in the confidence that payroll, recruitment and compliance are handled.
When SMEs reach out to hire an HR company, they will have an initial discovery call in which they can share all about the business, its challenges and the specifics of what support is required. The HR organisation can use this conversation to tailor their support and offer a detailed quote to discuss and refine as needed. This will show what services are included and the level of support the business can expect.
When the quote is approved, leaders are introduced to a dedicated HR partner, who will work closely with them to put services in place and provide consultancy-level guidance. They will be a point of contact for all HR needs, so businesses get a consistent approach at all times. Find out how Clover HR can help your business with HR Solutions in Yorkshire.
