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With human resources such a critical function of any business, great care must be taken with regards to its delivery. The better you look after your people, the better they will look after your business. 

As a small business owner, you might have experienced that the key to growth rests in the careful development of human capital in your SME.

If you are looking to outsource your HR function and wish to know how to approach it, then we cover some of the key considerations in this article. 

What is HR outsourcing?

HR outsourcing is when you elect to hire an external provider to carry out all or part of your business’s human resources management function.  

Why might you outsource your HR function?

The management of staff is one of the most time-consuming aspects of business administration. It is also one of the most complex, both in terms of technical aspects, such as keeping abreast of continually changing legislation, and in terms of the non-technical, people-skills that are required to excel in this function.  

For the above reasons, smaller businesses may see this whole field as somewhat daunting and see the potential benefits in engaging external experts to assist.

Which HR elements could I look to outsource in particular?

There are a range of human resources elements that businesses may seek to outsource, but the following are some of the most popular:-

  • payroll
  • recruitment 
  • disciplinary processes and meetings
  • grievances processes and meetings
  • dismissals
  • redundancies
  • policies and procedures

You will see that some of these elements are desktop-based or process-driven whereas others are people-driven. Each element involves different risk considerations, which we explore below.

What are some of the risks involved in HR outsourcing?

There are many risks involved and they all must be managed appropriately.  The type and scale of the risk will largely depend on the nature of the element being outsourced.  For example, the management of a large-scale redundancy exercise is likely to involve a greater degree of risk than basic monthly payroll processing. 

One of the key risks involved is ensuring that the relevant function is carried out legally and diligently, in other words to a good standard and meeting all relevant legal obligations involved with that function. A sub-standard or poorly managed service may lead to, at best, deterioration in your employee relations, and at worst legal tribunal claims being brought against your business. For this reason, it is critical that you select the right provider at the outset, and we cover this in more detail below.

Next, another potential risk is loss of control. This is a commonly experienced issue amongst businesses that elect to outsource. It is inevitable that once you hand over control of a function to an external provider, naturally you will lose a degree of control in respect of that business function. To address this, it is important that communication flows between your organisation and the external provider are regular and consistent, and that exchange of information is full and frank.  

Data control and management must also be treated with care.  It is important that a suitable form of data sharing agreement is in place as part of the contractual arrangements and that appropriate data security measures are adhered to.

How to choose a HR outsourcing services provider?

You should look closely at credentials and experience levels.  It helps if you have had a particular provider recommended by a business with similar industry and profile to your business. You should ask pertinent questions of them to explore how they conduct their operations. It may be helpful to speak with a few different providers before making a final decision to see which provider impresses you the most and which is the best overall fit for your business.

Key takeaway point

Remember that you can outsource the function, but you cannot outsource all the risk.  The buck still stops with your business!  Therefore, choose your provider carefully, have robust contractual arrangements, stay in regular contact, and always keep a close eye on matters.  When growing your business, effective outsourcing can save you time, stress and money but ineffective outsourcing can bring about the reverse.

Get legal assistance from LawBite

If you are unsure about the contractual side of HR outsourcing or are looking for general advice or support in this area, you should seek legal advice. 

LawBite has experienced lawyers, we are friendly and can help you with all commercial, corporate and employment legal matters. We have successfully handled tens of thousands of enquiries from SMEs and are proud of our 98% positive feedback rating.

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In closing

Nothing in this article constitutes legal advice on which you should rely. The article is provided for general information purposes only. Professional legal advice should always be sought before taking any action relating to or relying on the content of this article. Our Platform Terms of Use apply to this article.

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