HR Solutions For Small Business: When to Go In-House and When to Outso

It’s like “wiring your home without help from an electrician.” That’s the risk you run when you don’t have HR expertise to help run your business according to a recent Forbes article. Getting the right HR support is crucial.

You need expert HR support. What are the best HR solutions for small business? Read on to learn when to go in-house and when to outsource your HR.

What Does HR Include?

Let’s begin by identifying what HR solutions we are talking about. HR can cover all the people needs of your business.

This includes payroll, benefits and reward administration. It can also include recruitment and onboarding as well as handling employee counseling, discipline, and legal problems. HR can also include employee training, engagement, and culture.

Size Matters

When deciding whether to outsource HR or have in-house HR, size is often the crucial factor.

A very small business with single figures of employees may find it un-economic to provide HR solutions internally. The overhead of maintaining the people, skills, and resources is not in proportion to the size of the business. In this case, it will generally be more cost effective to outsource all or most of the HR services.

As your business gets bigger, say up to 50 employees, it may be desirable to bring some services in-house. Areas like recruiting and training may be better handled internally. Payroll and legal advice can still be uneconomic to deliver in-house.

Above 50 employees may benefit from some in-house HR, especially to support change. This may be delivered by people with other responsibilities too. Specialist solutions such as payroll may still be better handled externally simply because the cost of maintaining payroll systems makes it expensive to have a stand-alone solution.

Needs

Making the decision about whether to go in-house or outsource begins with deciding your needs. Outsourced HR can be customized to provide only those services you need.

If you already have some capability in-house you may find it economical to have a hybrid solution. Some in-house and some outsourced.

If the business has a high employee turnover or is in growth, it may be helpful to have a recruitment capability in-house. At the same time, you may not need to have payroll in-house if your needs are for a generic payroll solution with little or no customization. Better to outsource the payroll in that case.

Costs

Outsourcing an HR solution costs money but then so does providing it in-house. It’s easy to understand the costs of outsourcing because you can ask the provider to quote a fee for the services. You may have to put some effort into working out the costs on an in-house solution.

Don’t forget to include all the costs of people who may provide occasional HR support while also trying to hold down their main job. Include the costs of software, HR training, and legal advice. You may be surprised at the real internal cost.

Competitive Advantage

If people are a source of competitive advantage in your business you may regard HR as a core activity. Controlling and leveraging a return in people investment may be better achieved in-house. Don’t be blinkered about this as you may still find some aspects of HR are better outsourced.