Legal

The pros and cons of outsourcing HR

25 Sep 2018 By David Lewis

David Lewis explores the benefits and possible drawbacks of using an external HR provider 

An effective human resources adviser is essential to any company, although sometimes it may be difficult to manage the HR processes in-house, and companies may find it more beneficial using an HR company outside of the business.

As there are so many different branches in HR, some companies may find it a lot easier to reach out to specialist companies, rather than employing somebody in-house.

Using an external provider can have many advantages, such as:

  • Skills and knowledge – hiring someone from a specialist company will ensure they have been fully trained in that one specific field and will have excellent knowledge. Someone in-house may not know something as in depth as a specialist.
  • Increased legislative compliance – specialist companies, such as payroll or pensions, will have more of an understanding of the legislation that surrounds that subject, ensuring legal compliance. 
  • Efficiency – companies can focus on their core business process rather than human resources when they outsource their HR.
  • Reduced costs – hiring an HR adviser can often result in a high cost, in comparison to hiring specialist companies. The cost of poor people management can be substantial and if a company fails to comply with the law, they could be faced with a hefty claim at an employment tribunal and a large bill for the legal costs. As previously mentioned, a specialist will have more of an understanding of the law in their field, and will know it inside out, which would mean the chance of a tribunal for a situation is less likely.
  • Saving management time
 – the expenditure of management time alone in dealing with, for example, a troublesome employee, is wholly disproportionate in most cases.

While the above does sound great, there are also many disadvantages to outsourcing specialist companies too. Some of these include:

  • Giving up control – small business owners who are used to managing everything that goes on in their company may find it difficult to let go and not take complete control of their staff. If they had an in-house HR adviser, they would be able to keep track and communicate with them on a daily basis, to find out exactly how everything is going. A specialist will have many clients, and won’t be able to make time to talk to each one, every day. 
  • Impersonal – an HR adviser from outside of the office may not be able to offer the same level of personal attention to issues that may have been handled a little more sensitively in-house. Employees may feel more comfortable talking to someone they know, rather than a stranger from outside the business. 
  • Distance
 – using an offsite company to deal with everything HR-related may make it more difficult for employees to communicate with them. They might not answer emails and if the issue is sensitive, it may not be something they wish to discuss on the phone. They may not be easily accessible off-site, whereas someone in-house, will always be there for them in person.

David Lewis is an employment law solicitor at Howells Solicitors

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