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The Advantages of Outsourcing HR for SMEs

The Advantages of Outsourcing HR for SMEs

Over the past decade, we have witnessed the exponential growth of organisations steering toward HR outsourcing – an option historically reserved for the ‘big end of town’ only. 

Small and medium sized organisations have also been taking advantage of the commercial benefits associated with outsourcing their HR function, with the market’s appetite only growing during COVID.

Here, we explore some of the key drivers for SMEs outsourcing HR and how a post COVID world will only further the desire to manage human resources in this way.

Access to Experts

A typical SME will have access to either a stand-alone HR Manager or very small team of HR professionals. Whilst the HR Manager or small team may be capable and willing, HR is a very broad area, which includes discrete specialist areas, such as, remuneration and benefits, industrial relations, recruitment, learning and development, and performance management. With the best will in the world, it is unreasonable to think that one or two individuals can be experts in all these areas; however, an outsourced HR function is able to draw on its internal expertise and deploy knowledge as required by the client to ensure that genuine subject matter experts are supporting them. 

Cost Effective

Organisational leaders often underestimate the true cost of employing internal HR staff. Simply considering an employee’s base salary and superannuation as a total cost does not take into consideration, leave, payroll tax, insurance etc. In fact, a safe bet is to calculate an additional 29% cost on top of a staff member’s base salary to reach a ‘true cost’. 

An effective outsourced HR solution should provide its clients with the ability to scale up and down its level of support so that it is not stuck with a substantial, ongoing fixed cost. The ability to flex up and down is a key advantage of an outsourced model, so be vigilant of suppliers not offering this key differentiator.   

Keeping Across Changes

The HR landscape is dynamic and forever changing. If it’s not legislative amendments to the Fairwork Act, it’s new approaches to engagement and benefits or retention trends. Irrespective of the changes, it is critical for organisations to keep abreast of changes that can affect them. An outsourced HR provider should not only be across these developments but actively communicating the relevant changes to their clients. This becomes a lot harder for a stand-alone HR Manager or small team to handle, especially if they are not actively investing in research data.

Access to Technology and IP

Some HR outsourcing providers may own proprietary technology or have partnerships with technology suppliers. This often comes with preferential rates that can be passed on to the client and a deep understanding of how the technology can be applied effectively.

Furthermore, providers will have access to HR content/IP that would not readily be available to small internal HR teams. This means that work can often be delivered quicker and more cost effectively.

HR Outsourcing – Post COVID

There is no doubt that COVID has impacted the practical nature of work, but also our perception of work. The former mentality of needing to be present in the office 5 days per week has largely dissipated and flexible work models are not just a ‘nice to have’ but a requirement if organisations wish to attract and retain staff. With this shift, we have also witnessed a willingness for organisations to view HR more fluidly and, as a consequence, more open to outsourcing than prior to the pandemic.  

For more information on the above, please contact us on 1300 887 458 and speak with one  of our HR Consultants. If you are interested in learning more about our HR services, including HR OutsourcingHR ConsultingHR Advisory Services, contact us at