Financial Data
Updated 22 Feb 2020


Outsource HR?

Should you be outsourcing or bringing on board?


Entrepreneur, 12 November 2012  Share  0 comments  Print


All the answers to your unique business lifestage questions

The operational burden of running a start-up or small business is something that weighs heavily on the minds of many entrepreneurs.

Most small business owners know the frustration of having to spend time on non-revenue-generating activities, but they are necessary ones that keep your business running.

When it comes to managing payroll, benefits, leave forms, filing, performance reviews, and general administration, these tasks can occupy as much as 40% of a precious work day. That’s almost 3,5 hours of sales-generating time spirited away every day.

So what questions should you be asking to best assess whether outsourcing some, if not all, of your HR is the way to go?

1. How big is your company?

While expert opinion varies on head count, the general rule of thumb is when administrative processes start slowing down the productivity of the business.

Since every company and proficiency at performing duties is different, this can range from ten to 25 employees. Small businesses that lack the time, manpower or systems to keep track of leave forms, for example, can lose money by signing off one too many times.

Conversely, if your company is nearing 100 employees, it’s time to consider hiring an HR director who can oversee and streamline your employee processes and structure.

By putting one person in charge and having them on site, you can ensure your workforce is being treated fairly. HR managers also have the advantage of being able to set up programmes and perks that you or your outsourced company may not have known about.

2. How much does outsourcing cost?

Like all professional services this depends on the size of the company and the services required.

For example, PeoplePlus offers free payroll software followed by a premium for additional services. Pastel Payroll on the other hand, requires payment but takes on board the responsibility of processing your payroll, with no software installment and operation training required.

3. How much control do you want over your HR functions?

A business owner can’t be all things to all people. But if the one-size-fits-all approach doesn’t fit with your business culture or you’re not open to recommendations by an outsourced HR firm, then it’s probably not the best fit.

While businesses can lose some flexibility in the coverage they offer when outsourcing HR, the money saved, reduced legal risk and time made available for money making activities can mitigate the loss of flexibility.

4. Legal implications

Keeping abreast of labour laws and running a legally compliant operation is complex and time consuming.

Outsourcing HR functions like payroll, benefits, and legal matters puts these tasks into the hands of the pros which not only frees up time, but can save you a lot of money by avoiding costly legal mistakes.

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