Should You Outsource HR? Lately, Smart Clients Are Asking a Different Question.

When I started HR Allies, most business owners who called me didn’t have an HR department. They weren’t trying to outsource HR—they were simply trying to keep up with hiring, employee issues, and compliance while running their businesses.

Lately, though, I’ve noticed something new.

In just the past two weeks, I’ve had two separate prospective clients tell me they’re considering eliminating their internal HR position and outsourcing many of those responsibilities instead.

In other words, they’re asking whether to outsource HR.

That’s a conversation I wasn’t having very often a few years ago.

Before you assume I’m cheering them on, let me be clear: I’m not convinced every business should outsource HR. In fact, some absolutely should not.

But I do think every business owner should periodically ask whether they’re buying HR in the way that best serves the business today—not the way it served the business five years ago.

Why Business Owners Are Reconsidering Their HR Model

For many small and mid-sized companies, the HR workload isn’t consistent.

One month you’re hiring aggressively. The next month you’re updating a handbook. Then nothing major happens for six weeks until a difficult employee issue lands on your desk.

Yet a full-time HR salary continues every week regardless of how much specialized HR work actually exists.

That’s causing many owners to ask a reasonable business question:

Do I need a full-time HR employee—or do I need access to senior HR expertise when it matters most?

Those aren’t the same thing.

When It Makes Sense to Outsource HR

For businesses with approximately up to 199 employees, the decision to outsource HR can be an excellent solution when:

• Your HR needs are important but not full-time.

• Your internal HR person spends most of the day on administrative work rather than strategic guidance.

• You only encounter complex employee situations a handful of times each year.

• You want executive-level HR expertise without adding another six-figure salary.

Instead of paying for 40 hours of HR every week, you’re paying for the hours that truly protect your business.

When You Should Keep HR In-House … or Off-Shore

Outsourcing isn’t the answer for everyone.

If your organization is growing rapidly, has multiple HR specialists, experiences constant employee relations issues, operates in highly complex labor environments, or needs someone physically present every day, an internal HR team may absolutely be the right investment.

Good HR consultants should tell you that.

The goal isn’t to outsource HR at all costs. The goal is to choose the structure that best supports your business.

Consider a Hybrid Approach

This is the model I recommend most often.

Keep the day-to-day administrative work—payroll, onboarding, benefits administration, scheduling, recruiting coordination, or other internal tasks—with your existing staff or office manager.

Then outsource the higher-risk work:

• Employee investigations

• Performance coaching for managers

• Discipline and terminations

• Wage and hour questions

• Leave and accommodation issues

• Handbook and policy updates

• HR compliance guidance

• Executive advice before making difficult employee decisions

That’s where mistakes become expensive, and where experienced guidance delivers the greatest return.

It’s Not About Replacing HR. It’s About Buying Expertise.

Many owners assume their only choices are hiring a full-time HR manager or handling everything themselves.

There’s a third option:  Buy experienced HR judgment only when you need it.

For many growing businesses, that’s enough to dramatically reduce legal risk, improve decision-making, and give owners confidence without carrying the cost of a full-time HR department.

The two clients who raised this topic with me recently arrived at the same conclusion independently. They weren’t trying to eliminate HR. They were trying to make sure they were investing in HR in the smartest way for the stage of business they’re in.

If you’re wondering whether your current HR model still fits your business, it’s probably worth asking the question. Sometimes the answer is to keep everything exactly as it is. Sometimes it isn’t.

Either way, it’s a conversation every growing business owner should have before their next big employee issue forces the decision for them.

Smart operators don’t eliminate HR. They make sure they’re investing in the right HR expertise at the right time.

Author: Danielle Verderosa is the Founder and President of HR Allies, where she serves as a trusted Executive HR Advisor to owners of growing privately-held businesses across the United States. http://www.hrallies.com/