Selecting an HR outsourcing company is an important decision that you want to get right first time. However, with such a lot of choice out there, it can be difficult to know what to look for when you first start to consider how to choose an HR outsourcing company. If you’ve never worked with outsourced HR before, how do you know what a ‘good’ HR outsourcing partner looks like? And, how do you gauge the appropriate level of support for your business?
To help you, we’ve developed a guide covering the 10 most important things you should think about, to inform and guide your choice.
We have also included a summary of what a new, small, medium and larger company might require.
1. Level of support required
You may already have given this some thought and the answer will be largely dependent on the following factors:
- your existing HR function (including experience level and capacity of HR staff);
- the number of employees you have;
- your upcoming plans for the business; and
- HR situations and challenges you are currently facing.
For example, your requirement for outsourced HR support is going to be more significant if you have lots of employees and your HR team is very busy, small, or inexperienced. Similarly, if you have little to no HR function in place, you’re likely to need more support from an HR outsourcing company initially, in order to establish some of your HR basics. Once you have the building blocks in place, keeping up with legislation can be onerous and you will need to be confident that you have this covered.
Questions to think about:
- Is your business in a position to always be up-to-date and compliant with current legislation?
2. Template vs bespoke documentation
It will be advantageous to find a reputable HR consultancy that can offer template HR documents. However, it is always worth choosing an HR partner that can also provide you with advice and guidance on creating and using these documents. In some cases, you may want an HR outsourcing company that can create bespoke documentation that really works for your organisation and your specific needs. This will save you time and ensure your documents are fit for purpose.
Questions to think about:
- Do you simply require access to a template document library or would you benefit from advice and hands on guidance on how to implement these?
- Do you require bespoke documentation that has been tailored to reflect the nuances and needs of your business?
3. Managing costs
Establishing a clear HR function is crucial to the success of your business because HR issues can be time-intensive to manage and costly to resolve when things are not handled correctly. Employment tribunal awards can be significant, and tribunals can increase the compensatory award by 25% if the ACAS code of practice is not followed. So, your investment in your HR function will pay off in the long run.
How much you can afford to invest in your HR will be governed by your budget and may depend on the size of your organisation and the scope of your HR requirements.
Importantly, you need to ensure that you get best-practice, and commercial HR support, knowledge and experience that is commensurate with your investment.
HR outsourcing provider costs will vary, so it is important that you scope out your needs and work with a partner who has both an appropriate level of expertise and a cost structure that suits you and offers you the best value.
For example, some companies provide ‘unlimited’ ongoing advice via email or a call centre, based on a long term contract, and charge separately for work outside the scope of this arrangement at higher rates.
Whereas, other companies will provide shorter contracts and you may be able to pay by the hour for the time that you need when required.
Questions to think about:
- Are you comfortable being tied into a long-term contract and annual fees or you would you prefer a monthly retainer with the flexibility to manage your costs and respond to any new requirements on an ad hoc basis and at preferential rates?
4. Employment Tribunal Insurance
When looking an how to choose an HR outsourcing company, it’s important to consider what’s included in the HR outsourcing services. There can be expensive consequences if HR situations are not handled correctly. An employee can bring a claim against your company, and even if their claim is not successful, you will still face the associated costs of your defence at tribunal. As a result, having employment tribunal insurance in place can be reassuring for employers.
Employees with two years’ service have employment rights which mean you need solid grounds to terminate their employment or you may be open to an unfair dismissal claim. Moreover, employees can raise claims regardless of their length of service in certain situations, for example, if they have been subject to discrimination, breach of contract and more.
You can find out more about ‘automatically unfair’ reasons for dismissals by reading our guide: Dismissing staff with short service
Questions to think about:
- Do you have employment tribunal insurance in place, and if not, is this something you require from your HR outsourcing company?
5. Growth plans
If you have plans for growth, it is worth choosing an HR outsourcing company that is experienced in specialist organisational development projects to help you build and maintain a sustainable structure. If you are looking to expand, you need to ensure your HR strategy, organisational design and reward and recognition plans are aligned with your goals.
Your HR consultancy should have the capacity to support you with multiple and simultaneous recruitment processes, as well as implementing employee engagement strategies and provide management training services to help retain employees for the long term.
Questions to think about:
- Do you want an HR partner who you can create a long-lasting relationship with, that can adapt to the level of support you need, as you grow?
6. Location and working hours
If you need on-site support from an HR outsourcing company, it makes sense to look for one that is based locally to your business and can support you in-person when needed. Over the last year, companies have adapted to working remotely without it impacting their service delivery, so this requirement may be more flexible than in the past.
In addition to this, you may want to be able to contact your HR consultancy for support at a time that works best for your business, for example, if some of your workforce operate on a night shift, or if you have a team in a different time zone.
Questions to think about:
- Do I need to work with an HR company who I can meet in person and / or who can respond to any requirements outside of standard office hours?
7. Dedicated HR Consultant(s)
Some HR providers operate call centre style advice lines which provide guidance on legislation. You may speak to a different person each time, but they will know the letter of the law and how it applies to your requirements. However, this can stop short of the practical and commercial advice needed to help you resolve your specific situation and meet your business need.
Other HR companies may provide HR consultants that operate as one of your team, getting to know both your business and your people, offering a more personal and integrated service.
Questions to think about:
- Is an advice line sufficient to cover your needs or do you require an HR partner who understands your business, is able to work as an integral part of your HR team and with who you can build a long-term relationship?
8. Full HR Service
Some HR outsourcing companies provide access to HR generalist support, which is helpful for day-to-day HR management. However, in order to manage complex and specialist HR projects, you may require an experienced and knowledgeable HR consultancy with professional resource and expertise in a specific field.
Explore HR providers’ scope of expertise and review their case studies and references to ensure they are the right partner for any specialist areas that you may require assistance with.
HR consultancies can provide a range of add-ons to their service, to help you take care of your HR processes like payroll, and people management. With such an array of HR management systems available, it can be time consuming to research each HRIS, undertake the free trial and select the right one for your organisation. So, choose an HR partner who can support you in selecting the right HR systems for your business.
Some HR providers are also able to provide the full the spectrum of HR support throughout the employee lifecycle, from recruitment, to training, to dismissals.
Questions to think about:
- Do you need an HR provider who can handle your payroll and HR management software?
- Do you need an HR provider to provide specialist support to handle upcoming HR challenges and plans?
9. Commercial awareness
It is crucial that your HR outsourcing company supports you in following a best practice approach to find fair outcomes for your employees and protect your organisation. Moreover, you will want to work with a consultancy that really understands the nuances of your organisation and can help you work within legislation, assess the risk levels and find a solution that is right for your business.
Questions to think about:
- Do you want an HR partner who understands your business and takes the time to find commercial solutions that are right for you?
10. Trust and fit
Last, but by no means least, think about your company’s values and how it would feel to work with your chosen HR partner.
Questions to think about:
- Will you like working with your HR partner and will you be able to place your trust in them?
Typical HR requirements depending on the size of your business
To help you further, we’ve included below common HR requirements for companies at different stages of their growth. Every organisation is different, so these are simply suggestions to get you started. We recommend discussing your goals and HR challenges with your HR outsourcing company, and they will be best able to advise on the level of support you require.
If you’re a new business…
Choose an HR outsourcing partner who can help you establish the HR basics. A new company has an HR requirement to set up essential HR documentation to comply with legislation when recruiting employees or engaging workers.
For example, since April 2020, employers are required to issue a written statement of employment particulars to an employee by their start date, at the latest. Having a contract of employment defines the employment relationship, and a staff handbook and clear policies and procedures provide a clear set of guidelines and boundaries for your staff.
Your ideal HR consultancy will support you in creating bespoke documents that suit the needs of your company.
Recommendation
Build a relationship with an HR outsourcing company that can support you with getting the initial HR basics in place and can be contacted as much or as little as you need.
Add-ons to look for:
If you’re a small business
Once the HR basics are covered, the amount of day-to-day HR situations you will be managing, such as absence management and performance, is likely to be influenced by the number of employees you have. If you have an internal HR team, or line managers, they may be able to handle this requirement, depending on their experience in HR. It is important that processes are followed to ensure best practice. Your ideal HR outsourcing partner will provide advice and hands-on support in complex situations, and support you with HR documentation.
Recommendation
It’s likely you’ll need a number of hours support, which may increase as you grow; and benefit from access to a library of templates.
Add-ons to look for:
If you’re a medium to large organisation with an HR team
If your internal HR team has reached capacity, they may require additional HR support to help you manage complex HR processes that are time intensive and require several people to be involved.
Recommendation
You may benefit from a retained HR Partner who can offer a large number of hours of support per month, and access to templates and tools when needed.
Add-ons to look out for:
If you’re an organisation, big or small, looking to carry out a specialist HR project
If you have plans for growth, or have a specific project in mind that requires more specialist support, you would benefit from an HR consultancy that has the knowledge and experience of successfully supporting clients with similar projects.
Projects you may need specialist support for:
Recommendation
Choose an HR consultancy with the knowledge and experience to support you with your specific needs.
Overall, your ideal HR consultancy partner will have the knowledge and experience to help you manage your HR situations, find solutions that work for you, and support you in developing your company and workforce for the long term.
How to choose an HR outsourcing company: Further reading
We hope you found this guide useful. If you would like to speak to our team about your HR requirements, please contact us on 0330 223 5253 or office@fitzgeraldhr.co.uk .
