Why Businesses are Turning to HR Outsourcing has become a significant focus in 2024, with 39% of SMEs planning to outsource HR this year, according to our 2024 SME Business Report. We expect this trend to grow as we face further developments in employment law later in 2024 and into 2025.
With a newly elected Government and continued financial challenges, SMEs are looking to how best balance the needs of the business whilst administering new employment rights in order to remain legally compliant.
The rise in HR outsourcing highlights the numerous benefits that businesses can gain from expert outsourced HR support. Below are the top five reasons why businesses are turning to HR outsourcing:
1. Cost Efficiency
One of the primary reasons businesses are turning to HR outsourcing is cost efficiency. Outsourcing your HR function, or even parts of it, can significantly reduce overhead costs associated with maintaining an in-house HR team. Businesses save on salaries, benefits, office space, and HR technology investments. By opting for HR outsourcing, companies can convert fixed costs into variable ones, paying only for the services they need whilst always having access to the latest legally compliant advice and HR best practice.
2. Access to Expertise
Another critical factor in why businesses are turning to HR outsourcing is access to specialised expertise. Outsourcing HR also provides your business with specialised and legal knowledge and extensive practical experience in handling various HR tasks. This expertise ensures that your business stays compliant with employment laws, manage employee relations effectively, and implement best practices in HR management. This level of proficiency is often difficult and costly to maintain internally.
3. Enhanced Compliance
Staying up to date with ever-changing employment laws and regulations is a challenge for many businesses. HR outsourcing businesses are well-versed in employment law, ensuring that company policies and practices as well as the employee documentation is compliant and incorporate the latest HR best practice and trends. At HR Solutions we do this by having our own dedicated Knowledge Team that ensures our employment documentation – contracts of employment, policies, handbooks and template letters are always up to date. Plus, the team ensure that our team of HR Consultants are continuously developing as the law develops. This reduces the risk of legal issues and financial penalties, which ultimately, safeguards your business.
4. Focus on Core Activities
It is evident to us, that those who outsource their HR functions are better able to focus on their core business activities that directly contribute to revenue generation and growth. This in turn, allows leaders and employees to dedicate more time and resources to strategic initiatives, improving overall productivity and business growth.
5. Scalability and Flexibility
HR outsourcing provides businesses with the flexibility to scale services up or down based on their needs. Whether it’s during a period of rapid growth or economic downturn, outsourced HR services can be adjusted accordingly, ensuring that HR support aligns with the company’s current requirements without the burden of long-term commitments.
Another significant challenge identified in our 2024 SME survey was that 52% of business owners and leaders said that the cost of living was the major hurdle in their business operations and when it came to managing and controlling costs, 56% viewed this to be their primary concern.
HR outsourcing can help your business to manage and control your costs because through outsourcing, it will give you the flexibility that you need to scale your services up or down based on your business needs. Whether it’s during a period of rapid growth or economic downturn. Your provider should tailor their services to your needs, ensuring that HR support aligns with your company’s current requirements without the burden of long-term commitments.
Conclusion
Why businesses are turning to HR outsourcing is clear: it offers numerous advantages, from cost savings and access to expertise to enhanced compliance and operational flexibility. As 39% of SMEs look to outsource HR this year, it’s clear that this approach is becoming a vital strategy for businesses aiming to optimise their HR functions and focus on growth.
We’re here to help
For more information on how HR Solutions can support your business with HR outsourcing, contact us on 0844 324 5840 or get in touch with us here.
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