Deciding when (or if) to outsource your Human Resources function can sometimes feel like choosing the perfect moment to plant a tree: before a heavy downpour during the rain or once the ground is already saturated. Get it wrong and you might find yourself paying over the odds or scrambling for urgent help when you are already feeling the strain. Get it right and you will lay a solid foundation that supports your workforce for years to come.
It is not always obvious. One day, managing your HR documentation, policies, employee contracts and recruitment tasks can feel manageable. Then the business grows – perhaps you open a new site or take on more staff – and suddenly you are wading through compliance updates, rewriting employee handbooks and revising employee contracts. It is often at this point that the question changes from “Should we outsource?” to “Why did we not do this sooner?”
This blog explores the tell tale signs that indicate it might be time to bring in external HR support. We will look at why timing is important, the key signals to watch for and how to establish a successful outsourced relationship from day one.
Why Timing Matters in HR Outsourcing
It is tempting to think of outsourcing purely as a personal preference: if you like dealing with staff handbooks, contracts of employment, employee policies and HR administration, you keep HR in house; if not, you outsource. But HR outsourcing has a strategic dimension and the timing of your decision can greatly impact how successful it is.
Picture two companies, each with around 50 employees. Company A decides to outsource HR just as it plans to expand to 100 employees and open a second branch. Meanwhile, Company B’s HR manager is overwhelmed, missing policy updates and legislative deadlines and inadvertently creating friction and employee relations issues among staff.
Fast forward six months and Company A has a well structured employee handbook, a consistent set of HR policies and efficient compliance processes. Meanwhile, Company B continues to struggle with outdated documents, delayed updates and mounting staff dissatisfaction.
The main difference? Timing. Company A outsourced before their HR challenges intensified, ensuring they were organised from the start. Company B waited then struggled. The moral is clear: do not leave your HR support until you are in crisis. While it is possible to outsource under pressure, it is far simpler and more cost effective to make the move before your internal systems hit breaking point.
Key Indicators You Are Ready for HR Outsourcing
How do I know it is time? The signs can be subtle or they can be as glaring as an overflowing inbox. Below are some common triggers that indicate you may be ready to explore an external solution.
Rapid Growth or Expansion
Growth is exciting as it often means more clients, increased revenue and fresh ideas from new team members. However, scaling up also creates a heavier HR load. Are you prepared to handle the extra documentation, updated employee handbooks and the compliance checks that come with doubling or tripling your workforce?
An outsourced HR partner can deal with the day to day grind of creating and revising HR policies, ensuring each new starter gets the right documentation and is fully onboarded. This frees you to maintain momentum in other areas without risking mistakes or burnout in your existing team.
Rising Administrative Burdens
Perhaps your in-house HR lead is spending all their time on essential paperwork – updating staff handbooks, drafting & updating policy documents, reviewing risk assessments – and cannot focus on broader initiatives like workforce planning or leadership development. If HR administration is swallowing up the strategic side of HR, it is a tell tale sign that help is needed.
For instance, a small technology firm may have an HR manager who could be adding enormous value by designing performance frameworks or staff engagement programmes. But if that manager is bogged down rewriting procedures and sorting out compliance records, the company misses out on potential benefits. Outsourcing those administrative tasks can unlock your internal team’s true value.
Frequent Compliance Challenges
Employment law can be a moving target, especially if you are managing staff in multiple regions or sectors. One year you might be updating policies around flexible working; the next you could be preparing for different regulations concerning family leave.
In the UK, for example, the introduction of new legislation such as the upcoming Employment Rights Bill and the Neo Natal Care Act can add extra layers of complexity for employers. The Employment Rights Bill is set to bring changes in areas like flexible working while the Neo Natal Care Act will provide specific rights for parents whose babies need specialist care after birth. Staying ahead of these developments can be tough and getting it wrong can lead to expensive errors or legal challenges.
If you find yourself frequently wrestling with compliance, paying for last minute legal advice or rushing to update your policies after the fact, it might be time to consider an external HR partner. Specialist HR providers stay up to date with the latest legislation, giving you peace of mind that your documents and processes comply with current law.
Shifting Strategic Focus
Sometimes the nudge to outsource is driven by ambition. Maybe you are planning to pivot to a new market, expand geographically or launch a major new product. Such strategic moves require concentrated leadership attention and it can be frustrating to get pulled into updating yet another round of HR guidelines or employee communications.
By outsourcing, you ensure your HR documentation and compliance tasks continue ticking over smoothly while you give your full attention to higher level objectives like growth, innovation or strategic partnerships.
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Internal vs External HR
Before you dive into outsourcing, take stock of your current resources. Some SMEs have well structured HR teams that just need a bit of backup while others rely on a single coordinator who is stretched to the limit. Conduct a quick skills audit to see whether your people have the capacity and expertise to meet both current and future challenges.
Ask yourself
Do we have a knowledgeable HR professional who can lead policy creation and documentation?
Is our budget for HR systems (like HR information systems, document management, compliance tracking software or e‑Learning platforms) adequate?
Are we frequently dealing with complicated employee relations or falling behind on legal updates?
If the answer to any of these is No, or you sense your team is at breaking point, outsourcing can provide the support you need. A hybrid approach can also work – keep an internal lead focused on strategic culture building while outsourcing routine but essential tasks such as maintaining handbooks and revising policies.
Common Misconceptions About HR Outsourcing Timing
It is normal to have doubts about outsourcing, especially about the right time. Below are a couple of widely held myths.
It's Only for Big Businesses
Many believe outsourcing is solely for large corporations. In reality, smaller businesses often benefit most, precisely because they cannot justify hiring multiple full time HR experts. If your workforce jumps from five staff to 30, that can be a massive shift in the complexity of your HR processes. Outsourcing lets you access a pool of specialists as and when you need them without the overheads of growing your own in-house team.
As you expand further, outsourcing providers can scale too, offering anything from streamlined documentation support to specialist compliance guidance. It is far more flexible than hiring multiple full time roles whenever a new requirement crops up.
You Lose Control Over HR
Some worry that outsourcing means giving up control of critical decisions about staff or workplace culture. But reputable HR providers know they are there to support, not replace, your existing values. Think of them as consultants who manage the details of documentation, compliance and policies while you continue making the big decisions about your people and your culture.
It is also common for outsourced partners to offer service level agreements spelling out exactly which tasks they will manage. You might pass on the creation of HR policies and compliance updates but keep your day to day team management in house. It is your call on how responsibilities are divided.
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Step by Step Guide to HR Outsourcing
If you recognise the signs that it is time to outsource, proceed carefully to ensure a smooth transition. Diving in without a plan can be just as risky as not outsourcing at all.
Identify Your Pain Points
Pin down the tasks that consistently drain your energy or cause confusion. Are you bogged down with policy updates or are you struggling with complicated compliance requirements? This clarity will help you choose a provider with the right focus.
Research Potential Providers
Every HR outsourcing firm has its strengths – some excel at documentation and compliance while others might shine in recruitment or staff wellbeing. Look at case studies, read client reviews and ask how they have tackled issues like yours.
Align on Expectations
Before signing any contract, clarify your goals with the provider. Do you want to free up internal talent for strategic planning? Do you have multiple sites with different documentation requirements? A transparent discussion sets a solid foundation.
Communicate the Change Internally
Mention outsourcing and some employees may worry about job security or losing a personal touch. Be clear that the goal is to relieve the administrative overload, not diminish existing roles. Keep staff informed and encourage feedback to maintain trust and clarity.
Track, Measure and Adjust
Once the partnership starts, keep an eye on key indicators such as how quickly you can update policies, how easily staff can access HR documents and whether compliance tasks are done on time. If the numbers improve, great. If not, talk openly with your provider about tweaks or improvements. Outsourcing is a continuous relationship that should adapt to your changing needs.
Conclusion
Determining when to outsource HR is not an exact science and there is no universal timeline that fits every SME. For one business, the crunch point may arrive when it doubles its staff in a short space of time. For another, it might come when compliance changes like those introduced by the upcoming Employment Rights Bill and the Neo Natal Care Act demand a comprehensive review of policies and procedures.
That said, a few patterns tend to emerge – rapid expansion, increased administrative burdens, looming compliance challenges and the need to devote more attention to wider strategic goals. Moreover, when things go wrong and could have been prevented – for example, if an employee grievance escalates to a tribunal claim, or if an employee is dismissed wrongfully or unlawfully resulting in litigation and expensive solicitor and legal fees – these are tell-tale signs that you should have sought external HR support long before. Outsourcing HR offers a preventative and more cost-effective way of dealing with people and HR issues.
Ultimately, the question of timing becomes clearer once you assess your current setup and future ambitions. By selecting a well matched outsourcing partner, one that aligns with your culture and business aims, you gain more than just administrative relief. You elevate your HR into a strategic asset, safe in the knowledge that the day to day detail of managing policies, documentation and compliance is in capable hands.
Yes, it takes work to set up and maintain an outsourced partnership. But as with any business decision, acting early to prevent future problems pays dividends down the line. By recognising early signs, doing your research and engaging a reliable partner, you will be better prepared for whatever challenges arise and be able to focus on guiding your organisation towards its bigger objectives.
After all, growth can arrive unexpectedly and the pressures on your HR function can shift overnight. By choosing the right moment to seek help before you are overwhelmed, you will ensure a smoother, stronger and more resilient approach to looking after your most valuable resource – your people.
Keep your HR on Track – Protect Your Business and Drive Growth
We’re Breen & Associates - Results Through People. We empower small businesses & SMEs with personal HR Solutions and transformational People Development. Just like car insurance protects you from the unexpected, our multi-award winning services in HR, Recruitment, People Development and Coaching ensure legal compliance with employment law while turning talent into high-performing teams and driving growth.
Our mission is to give small and medium-sized businesses access to extraordinary HR & People solutions typically reserved for larger budgets. Unlike larger firms we treat you as partners, genuinely caring about your success and supporting you to achieve exceptional results through your people.
We won’t tie you in lengthy HR contracts that don’t work for you. Unlike Peninsula or Croner who only provide high-level HR advice, we offer dedicated personal 121 support without the price tag! Our Outsourced HR Services Pricing is transparent, flexible and fair – with no lengthy contracts and no cancellation fees.
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Written by Joanna Breen
Joanna Breen, co-founder of Breen & Associates - Results Through People, is a highly accomplished HR and business leader with over 25 years of experience. As a Fellow Chartered Member of the CIPD (FCIPD), she has excelled in HR strategy, operation and transformational change across diverse industries. Joanna is also a seasoned Corporate and Executive Coach, with over 20 years of experience helping leaders achieve their full potential. With a proven track record advising at board level, she blends strategic expertise with a passion for developing people and driving business success.
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