Do I Need an HR Manager or Outsourced HR?
As businesses grow, there tends to come a point where managing people becomes a job in itself.
Perhaps you’ve recruited quickly, managers are asking more questions or employee issues are becoming more complicated. Contracts and policies need updating and somebody is spending an increasing amount of time dealing with things that somehow seem to have become “HR”.
That’s often when the question comes up: do we need our own HR person?
The answer might be yes.
But it might not be.
When Does a Business Need HR?
There isn’t a magic number of employees where a business suddenly needs HR.
We’ve worked with relatively small businesses with quite complicated people needs and larger organisations with experienced managers who need surprisingly little day-to-day HR support.
A better question is how much HR support does your business need and what kind?
If managers are spending significant amounts of time dealing with employee issues, decisions are being made inconsistently or the business is growing without really thinking about its future people needs, it’s probably time to consider more structured HR support.
That doesn’t automatically mean recruiting an HR Manager.
What Does an In-House HR Manager Give You?
There are plenty of circumstances where employing someone internally is absolutely the right decision.
An HR Manager is immersed in the business every day. They understand the culture, know the people and can build strong relationships across the organisation.
They can also take ownership of ongoing areas such as recruitment, onboarding, employee engagement, training, HR systems and day-to-day employee relations.
If a business has enough HR activity to justify a dedicated role, having an experienced HR professional internally can be incredibly valuable.
This is important because we’re an outsourced HR consultancy saying it: outsourced HR isn’t automatically better than in-house HR.
It depends entirely on what your business actually needs.
So Why Do Businesses Outsource HR?
For many growing SMEs, there is an awkward stage where they need experienced HR support but don’t necessarily have enough work to justify employing an experienced HR Manager or HR Director full-time.
That’s where outsourced or fractional HR can work particularly well.
Rather than employing somebody for five days a week, the business has access to HR experience when it needs it. That might be support with contracts and policies, helping managers through employee relations issues, looking at organisational structure or thinking about future skills and recruitment.
Quite often it’s simply having someone available when a business owner wants to say, “Can I just run something past you?”
Those conversations can be more valuable than they sound.
What Does Fractional HR Mean?
Fractional HR is another term you’ll increasingly hear and it sounds much more complicated than it really is.
Essentially, a business gets access to experienced HR capability for a fraction of the time and cost associated with employing that level of expertise full-time.
But good fractional HR shouldn’t feel transactional.
When the same HR consultant works with a business over time, they begin to understand the organisation, its managers, its culture and the way it likes to operate.
That context matters because you’re not starting from scratch and explaining your entire business every time you need advice.
What About Cost?
Cost is understandably part of the decision.
Employing an experienced HR professional involves more than salary. There is National Insurance, pension, holiday, sickness, equipment and all the other costs associated with employing somebody.
If a business genuinely needs somebody internally for most of the week, those costs may be entirely justified.
But if what you really need is access to experienced HR advice, support and strategic thinking for a relatively small proportion of the month, outsourcing can be a much more proportionate option.
Rather than simply asking which option is cheaper, we’d look at what level of HR expertise the business actually needs and how often it needs it.
Can You Have Both?
Absolutely, and this is something that sometimes gets forgotten in the in-house versus outsourced HR debate.
It doesn’t have to be one or the other.
We work with internal HR professionals too. An HR Manager might be perfectly capable of running the day-to-day people function but want additional support with a particularly complex employee relations case. A standalone HR professional might want somebody experienced to sense-check an approach or an HR team might temporarily need additional capacity.
Sometimes a growing HR function simply benefits from having access to more senior strategic input without recruiting another permanent role.
In those circumstances, internal and external HR can work extremely well together.
How Do You Know What’s Right for Your Business?
We’d start by looking at what is actually happening in the business.
How much management time is being spent on people issues? How frequently are those issues arising? Who is currently making people decisions and do they have the experience and confidence to do so? Is the business recruiting regularly? Are you thinking about what skills you’ll need in the future or simply reacting to whatever happens next?
It’s also worth being realistic about whether there would genuinely be enough work for an HR professional throughout the week.
Once you understand what you actually need, it becomes much easier to decide whether the answer is an HR Manager, outsourced HR or perhaps a combination of both.
And as the business grows, that answer may change.
Good HR Should Grow With Your Business
The HR support a five-person business needs is unlikely to be the HR support a fifty-person business needs.
That’s completely normal.
What matters is recognising when the way you’ve always managed people is starting to creak under the pressure of growth.
You don’t necessarily need a large HR department, but you do need access to the right experience at the right time.