Outsourcing cost Vs benefits for SMEs
Business conditions are about as challenging as I can remember and many CEOs will be considering the cost/benefit of outsourcing non-core activities.
Functions like finance, payroll and HR, despite the TV advert’s claims, cannot be satisfactorily replaced with software apps, and I’m often asked whether AI has the capability to do so. One day, maybe it will, but we’re still a long way from using Chat GPT to prepare annual accounts or assess staff potential.
Of all the support functions, payroll tends to be the obvious and initial choice for outsourcing and to some extent the choice of payroll provider will influence future decisions to influence other functions – a smooth transition to a careful and knowledgeable boutique bureau like JC payroll may well open up future amenability to further outsourcing.
Several years ago though (before I knew Nick Butler and his payroll team in Newbury) we outsourced finance and payroll to a stand-alone individual recommended by our network, and it was a disaster. We didn’t have a single correct payroll, HMRC payments were missed, companies house requirements neglected, always with an excuse of course – someone else’s fault.
Having outsourced, we re-insourced, and stayed that way for many years. I wonder how many missed opportunities owe their routes to ‘one bad decision’, because there are great quality outsourcers out there…it’s just a question of finding them – of course I include JCHR’s combined payroll and HR outsourcing services as a quality and time-tested option.
Should HR be outsourced?
But what about HR? Can you outsource HR well? Do you even need HR? I’m going to make a sweeping statement or two here. If you run a small organisation, you do not need to have an internal HR person, and most that do are wasting their money.
What is ‘small’? 1.4 million businesses employ less than 49 people, and virtually none of them need to have internal HR. The threshold between having an internal HR function and not normally kicks in at between 100 – 250 people, depending on the sector.
For the vast majority of SMEs then, outsourcing HR is a far more cost-effective option to deliver ‘good HR’.
The trouble is, most business owners and leaders don’t know what ‘good HR’ is. So what is it?
HR Compliance.
Boring, but important – organisations need good quality employment contracts and robust processes for hiring and managing staff exits. Good employment contracts can genuinely protect an organisation’s interests, but the ‘one size fits all’ templates from the call-centre ‘HR’ businesses won’t cut it (and neither will Chat GPT.) It takes skill and experience (and an exceptional knowledge of employment law) to write a decent contract.
And some HR processes are essential from a compliance point of view. Onboarding and offboarding processes help keep a business and its employees legal, help avoid expensive fines and can help root out potential bad hires before they start, potentially saving a huge amount of money for the time invested in doing the process well.
Organisation effectiveness.
Some SMEs develop quickly, some slowly – both extremes are prone to the errors of evolution. The old adage ‘right skills, right job, right time’ is important, and HR is the key to helping make this happen, equipping organisations to assess staff performance and potential, to develop essential skills, and to remove low performers.
It can be done, but a great deal of HR and employment law technical knowledge goes into all of these areas, and in my experience (of 23 years of outsourcing) the call-centre ‘HR’ companies are worse than useless here, and most stand alone HR internal staff don’t have the technical knowledge either – if tasked with a senior performance exit for example, they’ll run to the lawyers.
Outsourcing to good quality HR providers is the obvious solution
Good quality HR outsourcing is usually the key for SMEs, even at the larger end, and organisations like JCHR exist to bridge the gap between a full-blown multi-functional payroll and HR team and having just payroll, or nothing at all.
Our outsourcing services cover HR (administration, case management, learning and development, coaching and strategic consultancy); employee benefits; health and safety and comprehensive legal services (under separate instruction).
Good quality HR is available to SMEs in the UK, but sadly there are too many poor quality providers to avoid, and I would always include the call-centre solutions and their multi-year contracts in this category.
With approaching 25 years of payroll and HR outsourcing experience we are able to support SMEs of all sizes and sectors, and have decades of satisfied clients who are testimony to this.
