Why should SME’s consider outsourced HR?

Occasionally when I am talking to owners and managers of small to medium sized businesses They ask the following question: “We don’t employ that many people, why do we need an outsourced HR partner?”

I am a Chartered Fellow of Chartered Institute of Personnel and Development. I’ve taught HR at University at undergraduate and post graduate level. I’ve spent most of my career in HR; and I  run a company that offers HR advice, guidance and support to small and medium sized businesses. I know this makes me bias when answering the question. However,the fact is, when a business employs people, it has to deal with a range of administrative and compliance requirements that cannot be ignored.  Employing people creates legal obligations and operational issues which have to be managed.

Managing Risk

Employees in the UK have certain rights in law, to mention just a few:

  • To a written statement of particulars that must contain certain information and be issued within a set time.
  • To apply for flexible working.
  • To maternity, paternity, adoption and shared parental leave and pay.
  • To time of in family emergencies.
  • To a set amount of leave.
  • Not to be discriminated against as a result of certain of protected characteristics.
  • To be paid a minimum or living wage.

In addition to their statutory rights, employees have rights created by the contract. Whatever the employer has agreed to, either verbally, in writing or just by the way they have done things, creates a contract of employment. The Contract of Employment gives employees rights, and places reciprocal obligations on the employer. The employer’s obligations exist whether or not the employer is aware of them. Employees with more than two years’ service have additional legal rights which must be met.

Most SME’s lack the expertise or resources to deal with these issues. They will need HR specialists to draft the required policies and procedures and advise how they should be implemented to ensure they don’t end up having to deal with protracted litigation or embroiled in Employment Tribunal

Managing Employee Records and Information

When a business employs people it has to maintain files and records. As well as ensuring its record keeping practices and procedures comply with the Information Commissioner’s ‘Employment practices code’; it has to ensure its record keeping systems delivers the needs of the business. Some records are pretty routine employee address, emergency contacts, etc. Others records may be needed if a dispute occurs, e.g. job history, pay history, training records, driving licence checks, discipline and grievance records. Whilst other records are needed to ensure everything runs smoothly. E.G. Holiday records and administration, attendance and sickness absence records. Running an integrated and comprehensive records system can be time consuming (keeping employee records in set of lists, folders, spreadsheets and calendar documents) or expensive (purchasing licences for HR record keeping software); or both!

In answer to the question “We don’t employ that many people, why do we need an outsourced HR partner?” I would say: “For most SME’s HR is too specialised and complex for their own management team, and the cost of an HR functions with specialised staff and a full HR infra structure is prohibitive. In those circumstances, finding a good quality affordable outsourced HR partner makes commercial sense.”

About the author:

Sean McCann is a Chartered Fellow of the Chartered Institute of Personnel and Development, and the Managing Director of People Based Solutions an HR consultancy specialising in delivering outsourced HR solutions and support to small and medium sized businesses.   If you would like to know more about the work his company does in helping businesses manage transactional, operational and strategic HR systems, policies and procedures contact the company at: enquiries@peoplebasedsolutions.co.uk



HR Management, Employee issues, Human Resources Advice, HR Consultancy, Disciplinary Advice, Contracts of Employment , Employee Services, Absence Management, HR Advice, Managing Sickness Absence, Dealing with employee Grievance, Employment Law, Policies and procedures, Small businesses, Staff Handbook,  HR Outsourcing, HR and employment advice, HR Services, HR Systems, HR Software, HR Record Keeping, Legal compliance, Absence Management, Right to Request Flexible working, Employment Tribunal, Long term sickness absence, Short term sickness Absence, Race Discrimination, Sex Discrimination, Disability Discrimination, Age Discrimination, Absence Management, Annualised Hours, Maternity Leave, Paternity Leave, Shared parental Leave, Time Off for Careers, Family Friendly Working
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