Everything you need to know about outsourcing HR for small business.
Posted on 5th March 2021 at 17:09
As your business grows and you employ more people, more of your time will start to be taken up with hiring and managing those employees which could prove a big distraction from really working on growing your business and delighting your customers.
For many small businesses, spending time, money, and energy on human resources feels unproductive. Menial tasks like payroll and hours tracking eat into time that could be spent on company growth. Meanwhile, the tricker sides of HR such as dealing with employee relations, hiring the right people, and managing performance – sometimes need more expert support. This guide to help you understand what type of support is on offer:
The Basics – HR Documents
In other words, the paperwork. Even for small businesses most of this is a legal obligation, but others are good practice to protect your business interests. Typically, your business will need employment contracts, to employee records, some policies. You are also likely to need a process for holiday requests, statutory leave, expenses, and payroll, as well as a basic framework for probation and termination. In this space, small businesses have lots of options:
Standard contracts, policies and procedures are available (sometimes for free) online or via some of the small business membership organisations. Free documents will be generic templates, so it is good practice to check they are fit for your purpose. When it comes to contracts, it is true that the devil is in the detail – so it is worth investing in these to get them right at the beginning. Another common pitfall includes contracts are not regularly updated and reviewed, as employment legislation in the UK is updated twice a year (April and September) so whichever route you choose, make sure you audit these regularly, ideally one a year minimum.
HR Admin can be done in-house, which will take up a trusted employees’ time but can work for many, often this type of HR support sits with finance or an accountant until specialist advice is needed. Don’t forget technology –good HR Platforms can cut HR admin time in half, meaning that simple tasks can be automated, and employees’ can update their own records, whilst meeting data protection requirements.
Growing Businesses - Employee Relations Advice
What we mean here is the employee relationship. Anything involving employee issues, manging people’s performance, behaviour or conduct. This does not have to fall to HR, of course – a skilled manager will be able to (and should) have a close relationship with their team and be able to deal with initial concerns upfront.
However, often managers need backup or support with tricker issues, things they have not come across before or complex problems. In this space, it is important that advice comes from someone with both the experience and technical knowledge of employment law.
The main HR Qualification to look our for is CIPD – someone with CIPD Level 5 (known as an associate) or ideally CIPD Level 7 (they usually have MCIPD after their name once they are fully qualified). Someone with 5+ years of dealing with employee relations is a good bet, as they will have seen similar issues before and have the experience of what steps to take.
Common issues dealt include employee grievances/complaints, staff being absent and performance issues. Employee Relations work is a specialist area, as it takes a considerable amount of diplomacy but also commercial acumen to work towards outcomes that protect your business as well as keeping employees happy.
Scale-Up, Evolving and Changing Business - People Strategy
This is the bigger picture strategy for small businesses. Employees are expensive so it makes sense for most businesses (usually at 20 employees plus) to start thinking more strategically about managing the workforce. Typically, this level of support is needed during a period of business change – which could mean growth, restructure, planning for exit, sale, or merger.
Projects could include revamping performance management that has slipped, undergoing restructure and redundancy consultation, a hiring strategy, supporting managers and Directors with management or leadership, succession planning for future leaders, reward and retention or creating a company culture in line with business values.
This is where a relationship with a trusted HR business partner – usually someone who has 10+ years’ experience and is MCIPD qualified as well as working at the most senior levels – can really add value. It takes time to find and develop this trusted relationship and you will ideally need someone in striking distance of your operation, who can meet with you on site, in your premises, to really understand what your business is looking to achieve and how best they can help you.
One of the obvious advantages to outsourcing this level of HR support is the cost savings: this is senior level, flexible resource which you should be flexible, something you can dip into when business requires it. But there are other advantages too – a external HR Consultant comes from an objective position. They should be able to challenge and give you honest and impartial feedback – what comes from a well-rounded point of view. HR Consultants usually work with several businesses – meaning they have probably seen the challenges you are experiencing many times before – and they must keep up to date with people trends and employment legislation.
As with any industry the HR sector has different models and providers. Here is how to identify what you might need:
UK-wide call centre-based option, who will provide remote telephone support and perhaps roll up this with basic H&S cover as well. Things to look out for here include the length of the contract “tie-in” as 12 months+ is common and we have come across 5 years or more, which can be difficult to get out of if your requirements change. These companies often offer ‘Tribunal Costs’ as part of their service which can work if you follow their advice exactly. Good for HR Administration, and basic employee relations support in the first few years.
Franchise models – UK-wide, but with local independent consultants working underneath and umbrella brand. These companies will have templates and operate at scale but within a strict postcode boundary. Things to look out for again are experience, commercial language, and length of contract. Quality of advice will vary depending on the consultant holding the franchise for your area, but they can offer good value over and above purely remote support.
Independent HR consultants – these vary hugely in both expertise and experience. If you are only looking for basic documentation and audit support, look out for a someone that has attention to detail, is efficient, and who takes the time to understand your business so they can amend contracts to your specific need. For employee relations support, look for someone that has worked with other businesses of a similar size/sector to the one you operate in. It is often a huge benefit if the consultant has worked in boarder business roles than purely HR as this can give added perspective and speaks your language. Contracts vary, from ad-hoc hourly rates to monthly and annual retainers but in any case, review every quarter to check you are getting value for money.
HR Consultancies - Usually, a group of HR professionals working together, who can offer a blend of the franchise and independent models: you get access to more than one expert and different perspectives and can tap into different areas as you need them. As with independent consultants, look for qualifications, experience, commercial acumen, and someone that speaks your language. Sector experience, recommendations via word of mouth and a proven track record are also important. Again, contracts vary, from Ad-Hoc flexible support to retained projects, particularly for HR Strategy. Some HR Consultancies can offer support at all 3 levels – HR Basics, Employee Relations and People Strategy – meaning you can develop a trusted relationship with one firm as your business grows and develops.
So now you know. Hopefully this guide has given you a insider’s view of how HR support works for small business. Once you have decided which option is for you, we have written another guide to how much HR Support costs here.
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