Outsourced HR vs In-House HR: Which Is Right for Your Business?
As your business grows, managing employees becomes increasingly complex.
At some point, many employers ask the same question:
Should we employ an HR Manager or outsource our HR?
The answer depends on your business, your growth plans and the level of support you need.
This guide explains the advantages and considerations of both options to help you make an informed decision.
When Does a Business Need HR Support?
Many businesses manage HR themselves during the early years.
As your team grows, however, so does the complexity of managing people.
You may find yourself spending more time dealing with:
Recruitment
Employee relations
Employment contracts
Workplace policies
Absence management
Performance issues
Employment law changes
New Employees
Employees Leaving
HR Admin
At this stage, investing in professional HR support can save time, reduce risk and help your business grow with confidence.
What Is In-House HR?
Many businesses manage HR themselves during the early years.
An in-house HR professional is employed directly by your business.
They become part of your organisation and are responsible for supporting your employees, managers and leadership team.
An internal HR team can be an excellent option for businesses with larger workforces or organisations that require HR support every day.
Advantages
✔ Dedicated employee
✔ On-site support
✔ Deep understanding of your business
✔ Immediate availability
✔ Long-term strategic involvement
Considerations
Higher salary costs
Pension contributions
National Insurance
Holiday cover
Training and professional development
Recruitment costs
Limited to one person's experience
What Is Outsourced HR?
Outsourced HR means partnering with an external HR consultancy that provides professional HR support whenever you need it.
Instead of recruiting an HR Manager, you gain access to experienced HR professionals who become an extension of your business.
This is often an ideal solution for small and growing businesses that need expert support without the overheads of employing someone internally.
Advantages
✔ Lower overall cost
✔ Access to a wider range of HR expertise
✔ Flexible support
✔ Flexible contracts
✔ No recruitment costs
✔ No holiday or sickness cover concerns
✔ Scalable as your business grows
✔ Ongoing employment law updates
✔ Access to multiple HR professionals
Considerations
Not permanently based within your business
On-site visits arranged when required
Works best with regular communication and collaboration
Which Option Is Best for Small Businesses?
For many businesses with between 5 and 100 employees, outsourcing HR offers the best balance of expertise, flexibility and cost-effectiveness.
It provides access to experienced HR professionals without the financial commitment of employing a full-time HR Manager.
As your business grows, the level of support can grow with you.
However, larger organisations with more complex people requirements may benefit from having an internal HR function supported by external specialists where required.
How Evaluate HR Can Help
At Evaluate HR, we provide flexible outsourced HR services designed to meet the needs of growing businesses across Scotland.
Whether you need occasional HR advice, ongoing HR administration or a fully outsourced HR department, we'll tailor our support around your business.
Our services include:
HR Administration
HR Advisory
HR Team Services
Employment Contracts
Staff Handbooks
HR Policies
Recruitment Support
People Manager Training
Frequently Asked Questions
Is outsourcing HR cheaper than employing an HR Manager?
For many SMEs, outsourcing HR is often more cost-effective because you avoid salary costs, employer National Insurance contributions, pension contributions, recruitment costs and ongoing training expenses. The right choice, however, depends on the level of HR support your business requires.
Can outsourced HR replace an internal HR department?
Yes. Many small and medium-sized businesses use outsourced HR as their primary HR function. Larger organisations may choose to combine outsourced HR with an internal HR team.
Will outsourced HR understand our business?
A good HR partner takes time to understand your business, your culture and your objectives. At Evaluate HR, we work closely with our clients to become an extension of their team.
What size of business benefits most from outsourced HR?
Outsourced HR is particularly well suited to growing businesses that need expert support but don't yet require a full-time, in-house HR professional.
Many businesses begin looking for HR support when they recruit their first employees, experience people-related challenges or find that managing HR is taking too much time away from running the business.
At what point should I hire an HR professional?
Ready to Find the Right HR Solution?
Every business is different. Whether you're considering outsourced HR for the first time or reviewing your current HR arrangements, we're happy to discuss your options.
Book a free consultation to explore the level of support that's right for your business.