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HR outsourcing can make financial & operational sense…. but there are pitfalls for the unwary!

HR outsourcing can make great financial & operational sense…. but there are pitfalls for the unwary!

Times remain difficult, and employers are being encouraged by banks and advisors to outsource non-core activity, like payroll and HR. But it pays to look before you leap. Some national HR companies are creating a poor reputation for HR with low value, high cost services. Sure, £200 a month is cheaper than employing an HR Manager, but if all they really provide is a phone number to discuss the odd disciplinary issue, is it good value for money and should you be signing that 5 year contract?

The big HR companies have more marketing clout and presence, but try not to be won over by the packaging – what counts at the end of the day is the people you will actually work with, and ironically many of the bigger companies don’t factor personal contact into their service plans at all.

A good quality HR outsourcing business should take time to get to know your Company, should help you identify your HR priorities, and have the capability to work with you to deliver genuine improvements to your people practices.

We’ve been providing outsourced HR support for 12 years now, and over that time we’ve learnt a lot about our customers, competitors and ourselves. While we started providing service in the licensed retail sector, we now support shops, consultancies, charities, care homes, doctors, IT companies…and even a Space company! Here are our tips for some of the things you might like to consider when choosing an HR provider.

Beware the one man/woman band. There are a lot of redundant HR people knocking around at the moment, not all of whom will have the depth or breadth of skills necessary to advise you properly on the range of issues you might have to deal with. And what happens when they get a ‘proper job’ again? Or they go on holiday? Will they have the capability to deal with an employment tribunal application? Check: how many people they have, do they have offices, do they have other clients, and can you speak to them? What experience do they have of managing complex HR issues e.g. collective redundancies and TUPE transfers? Can they evidence this? And one final tip – beware the public sector HR person…public and private sectors are very different cultures and one rarely translates well to the other.

Look to experience, not qualifications. HR qualifications are no substitute for experience….. when we recruit HR staff at myhrdept, ‘CIPD qualified’ is not the first thing we look for, someone who has led an HR team in a fast moving commercially oriented environment is more likely to know their onions.

Beware the call centre. Most national HR companies are in fact call centres and don’t provide experienced HR Advisors. Our clients tell us about these services (these are real, but obviously we can’t say who they’re about):

“Different call agent every time we ring, which means we have to re-explain the case every time – most annoying & a waste of time.”
“They gave me wrong advice and it cost me £3K. To make up for it they gave me 6 months free….”
“The employee was drunk, and they still wouldn’t let me sack him.”
“They said they’d cover me, but then refused – because I’d changed TWO words in a letter.”
“Every time we have a case they want us to copy the whole employee file – in turns me into a full time photo copyist!”

Think personal. HR is a people business. We believe that the best employer/HR relationships are personal ones and so we normally like to factor in face to face time with our clients, even if it’s only once a year.

Check the contract. Why a five year deal? If they’re any good you’ll choose to stay with them, but if they’re not you’re tied in whether you like it or not for the full term, and they have plenty of resources to pursue those who try to escape! Our 3 year deal reflects the high workload we have to undertake in a customer’s first year with us, but we will quote for individual projects or one year contracts if it makes sense for the customer and us.

Check the infrastructure. Does the provider have the capability to introduce systems designed to make your life easier, to remind you of key employment milestones and provide you with the necessary paperwork? Our unique HR system provides you with the technology to produce documents seamlessly and store employee details. These have been designed and built by us, and are only used by us and by our customers.

Check the services. Some questions to ask:

  • Will I have my own personal HR Advisor who I can speak to when I need to?
  • Will you review my business HR needs with me and create bespoke contracts of employment & other key documents (not stock templates)?
  • Will you work with me to identify my HR priorities and improve my organisations performance e.g. recruitment practices, performance management/reduce absenteeism etc.?
  • Will your IT systems make my life easier or create more administration?
  • If I have a major HR event will you (and have you the capability to) support me through it, e.g. redundancy consultations, or a TUPE acquisition or disposal?
  • When dealing with HR issues, will you draft the letters and other paperwork etc. on my behalf?

NB: don’t take the salesman’s word for it….ask to talk to other clients to see what their experience has been – see taking references below.

How much should you expect to pay/could you save? This really depends on what you expect. £200 a month to have a helpline to discuss disciplinaries is not good value. Be clear with your HR provider what it is you’re looking for help with – if it’s just to have and maintain good quality HR paperwork for a small company and have the odd bit of advice, the bill shouldn’t top £100 – £300 per month depending on the size of the Company. Larger companies should aim to save 20 – 50% against the costs of employing HR staff & external advisors (e.g. employment lawyers), with some limits and guarantees possibly required from both sides.


Don’t be fooled by the insurance policy“Up to £1m cover against tribunal awards against you” may sound enticing, but the reality is that resolving HR ‘issues’ often involves a degree of risk. We’ve seen too many examples of HR companies refusing to help employers resolve issues because the insurance would not cover the resolution. A good quality HR provider will be able to help you evaluate the options including those that have some degree of risk. Sometimes you might decide that purposeful action is worth some managed risk. A comprehensive insurance policy that prevents you from properly managing an employment issue is worse than a waste of money – it could make matters worse!

Finally….take a reference. Ask for examples of other companies who have used their services and ask for permission to speak with one or two directly.

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