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HR service – should you outsource your HR or recruit in-house?

As your business grows, a time will come when you need to build your HR department. The question is, how do you know which avenue to take? How do you know when it’s time to outsource your Human Resources? Would it be better to hire an in-house HR professional?

For many, it can be difficult to decide what’s best. As with any decision, you’ll need to look at your specific needs, and the pros and cons for each solution. To help you, we’re going to take a closer look at outsourcing versus recruiting in-house.

How size affects your decision to outsource HR or hire in-house

When it comes to HR, each business and its needs are unique. When you begin thinking about your HR provision, a good starting point is to look at the size of your business. In the very early stages, you may be able to rely on current in-house experience. However, as you expand and take on more members of staff, your HR workload will grow, and you’ll need additional support.

For small companies under 10 employees, outsourcing your Human Resources could be an ideal way to delegate certain HR tasks such as payroll and compliance. Whilst you’ll still need an in-house face of HR to interact with employees, outsourcing can be a great way to beef up your HR service offering without breaking the bank. However, as your workforce passes into double figures, having in-house HR resource will become essential.  

Whilst some tasks can be automated or outsourced, many need an HR professional on the inside. Initially you’ll need a head of HR; someone that can strategically create and implement HR policy, build an engaging culture, and manage the recruitment and retention of staff. As time goes on, your head of HR will need support too, and at that point you’ll need to start building a HR department. Throughout this process, assess which tasks can be automated or outsourced and which need to be in-house. You may be able to support your in-house staff by automating or outsourcing routine or monotonous HR tasks. 

How much each option costs 

When deciding whether to keep your HR service in-house or outsource, one factor to consider is cost. For example, a business in the UK looking to outsource its HR services to a consultant can expect to pay from £480 per day for a retained Consultant. On the other hand, if you’re looking to keep your HR service in-house, then the average salary for a full-time HR director stands at £91,408 a year, with HR managers and HR officers earning an average of £47,047 and £30,508 respectively. 

Pros of outsourcing your HR Service
  • Outsourcing HR tasks could help to minimise risk – if you don’t have the experience in-house, outsourcing could help you to avoid common HR pitfalls
  • Outsourcing can be a cost-effective HR service solution
  • Outsourcing can help streamline or automate HR functions such as payroll and compliance management
Cons of outsourcing your HR Service
  • An outsourced HR professional will have limited buy-in to your company and its mission
  • Knowledge and skills are ultimately kept outside of your company
  • An outsourced professional won’t have the same familiarity with the needs of your business as an in-house HR professional
  • Pros of hiring in house HR
  •  An in-house employee will have a greater buy-in to your company and its mission
  • Any knowledge and lessons learnt will be kept in-house, helping your business to grow in the future
  • An in-house employee will have greater knowledge of your business and its needs
  • An in-house HR team is better placed to create and implement strategic solutions
  • Having an in-house HR department is essential for any tasks that need face-to-face interaction

Cons of hiring in-house HR  

  • Hiring an in-house HR professional can seem costly, especially in the early stages of a business
  • It takes time to find the right HR professional for your business

Struggling to warrant a full-time HR professional or team? 

We often hear from companies that are struggling to find the wages to pay for either a full-time Head of HR, or for a second or third HR team member. Fortunately, there is another way. If you can’t find the budget, rather than outsourcing, you could look to a part-time or flexible HR professional to bridge the gap. For a fraction of the cost of a full-time employee, a part-time or flexible HR professional could allow you all the benefits of an in-house HR professional, without the downsides of resorting to outsourcing your HR service function.

Capability Jane Recruitment specialise in sourcing part-time professionals for SMEs. If you’re looking to expand your team, call us on 0845 604 1916, email us at or visit our contact page to find out how we could support your business.  

Author: Jennifer Brooks – Regional Client Account Manager at Capability Jane