HR: outsourcing versus in-house

Outsourcing an HR function is increasingly popular, and can complement in-house teams, explains Nicola Mason, HR consultant at Napthens solicitors.

Many businesses outsource functions, and there is no doubt this trend is set to continue as companies look to work efficiently and cost-effectively while still having access to expert advice.

HR is one of the most popular areas of a business to be outsourced, and the CIPD (Chartered Institute of Personnel Development) found through its winter 2014-15 survey that a third of SMEs reported outsourcing complex advice. There are many reasons why businesses turn to outside help for HR functions. The most common we come across at Napthens include:

• Size: Some businesses are simply not big enough to have a dedicated team internally, and need to consult with a third party provider leaving the management to get on with the day-to-day running of the company and focussing on business development. It is also very common for HR consultants to work on a project-by-project basis for a business, working at a fairly strategic level, developing an HR strategy and ensuring it matches up with the company’s business plan.

• Specialist advice: Some are larger organisations but need help or support on a complex area of HR that they are not equipped or have the capacity to deal with, such as a TUPE transfer. Given the constant changes in HR and employment legislation, it is unsurprising many businesses simply struggle to keep up and would rather call in experts. This is also an important way to reduce risks associated with HR and compliance.

• Sensitivity: In some cases, teams may be called in to handle sensitive issues such as a disciplinary issue against a business’ HR team itself. Management is not always trained or skilled enough to deal with these types of situations. Having an independent HR advisor can give additional credibility to the process.

• Cost: Outsourcing can be far more cost-effective for a small or growing business than hiring dedicated staff, and can give access to advice and resources that simply wouldn’t be affordable otherwise.

Whatever the reason for outsourcing, it’s important to remember that where there is an existing HR team in place within a business, they should not feel threatened. As Marcus Buckingham, renowned business consultant once said, “Do what you do best and outsource the rest.” HR experts will work alongside an existing team to guide them through a process, and perhaps work with them to transfer knowledge so that in the future they will have the capability to handle such a project themselves. Outsourcing can offer many benefits, particularly to a growing business, and should always be a serious consideration when assessing HR requirements.