In-House HR vs. Outsourcing

Which is Right for Your Growing Business?

As your business expands, managing HR becomes more complex. One of the biggest decisions you’ll face is whether to hire an in-house HR professional or outsource HR functions. This choice has significant implications for your budget, flexibility, and long-term strategy.

What are the key considerations to help you make the best decision for your business?

Key Differences Between In-House HR and Outsourcing

Your decision should align with your company’s size, growth plans and budget

1. Cost Considerations: In-House HR vs. Outsourcing

Understanding the financial impact of each option is essential.

In-House HR Costs

Hiring in-house comes with expenses beyond salary, including:

• Base Salary: Vary based on experience.
• Employer National Insurance Contributions, Pension Contributions, Recruitment Fees  PLUS Training and Development: Ensuring your HR professional stays updated on compliance and best practices.

For example, an HR Manager earning £50,000 per year could cost your business at least £70,000 annually when factoring in additional expenses.

Outsourced HR Costs

Outsourcing provides a cost-effective alternative by eliminating recruitment fees, National Insurance, and pension contributions.

Instead, you pay a monthly fee tailored to your needs.

From ad-hoc support to full-service HR management and strategy, it allows you to scale your HR systems and resources to match your business growth.

• With year-round HR support without hiring an internal team.

Depending on the number of employees (e.g. 5 employees to 90 employees – it can cost from  £160 to £2500 per month or £2,000 – £30,000 per year), providing a full HR team’s expertise at a fraction of the cost of hiring in-house.

2. Expertise: Single HR Professional vs. Team Support

The level of HR expertise your business requires depends on its goals and challenges.

What are the pros and cons of both options?

In-House HR Expertise

An in-house HR professional brings deep knowledge in specific areas, such as:

• Recruitment Specialists: Great for hiring but may lack compliance knowledge.
• HR Generalists: Versatile but may struggle with strategic planning and benefits administration.

As your business scales, you may need to hire additional specialists, increasing costs and complexity.

Outsourced HR Expertise

Outsourced HR gives you access to a diverse team of professionals specialising in:

• Performance management and workplace culture.
• Employment law and compliance.
• Strategic HR planning.
• Recruitment and onboarding.
• Outsourcing your HR needs, allows you to evolve without the overhead of hiring multiple specialists.

3. Flexibility and Scalability

Your HR support should grow with your business.

In-House HR Flexibility

• A fixed cost and resource—expanding HR capabilities requires additional hires.
• Downsizing HR staff can be challenging due to redundancy laws and obligations.

Outsourced HR Flexibility

• Scale services up or down based on your needs.
• Adjust support levels as your business grows.
• Start with essential HR functions and expand as needed.

4. Seamless HR Coverage

HR continuity is crucial for compliance and employee satisfaction.

In-House HR Continuity

An in-house HR professional will need time off for:

• Holidays
• Sick leave
• Personal leave

During absences, HR tasks may be delayed or passed to untrained employees.

Outsourced HR Continuity

Outsourcing ensures 52-week coverage, meaning no gaps during absences. Providers offer:

• Consistent HR service, even if an individual consultant is unavailable.
• Access to a team of professionals ensuring ongoing support.

5. Cultural Knowledge: Internal vs. External HR

How well your HR support understands your company culture can impact business success.

In-House HR

• Deep understanding of company values and team dynamics.
• Quick access to employee concerns and morale shifts.
• May develop biases that impact objectivity.

Outsourced HR

• Provides an objective perspective on workplace culture.
• Brings insights from multiple industries.
• Requires time to learn company values but remains neutral in decision-making.

Making the Right Choice for Your Business

To decide between in-house HR and outsourcing, consider:

• Budget: Can you afford an in-house hire, or is outsourcing more cost-effective?
• Expertise Needs: Do you need broad HR skills or a specialised focus?
• Flexibility: Do you require scalable HR support?
• Management Style: Do you want to manage an employee, or would you prefer a service contract?

If you want to talk through the services we can provide, just book free consultation through our website.