Should You Hire, Delegate, or Outsource HR?

Small HR teams are rarely capable of handling the full spectrum of HR functions. The lack of time, expertise, and resources lead to errors, compliance issues, employee lawsuits, and revenue loss.

Companies that struggle with HR have several options. They include hiring new team members, delegating HR functions, or outsourcing HR tasks.

All these solutions are viable but come with certain disadvantages. Their combination could be the most comprehensive way for small companies to handle HR without complications. Let’s take a closer look at top options for HR task management. 

Basic Solutions  

These basic solutions can be highly beneficial for small companies but come with several downsides. While applicable, they may not always positively impact HR’s bottom line. 

1. Only Delegate

Delegating HR functions involves handing tasks over to other employees. These staff members may not have experience with HR, but they could fulfill specific administrative tasks.

Pros:

• Higher bandwidth – if your small HR team can delegate some manual and repetitive tasks to other employees, it gains time to focus on core functions. While someone else is handling payroll, HR experts can work on recruitment, risk management, employee relations, and more. 
• Fulfilled tasks – if you are a startup without an HR team, delegating these tasks to the existing staff can help your business survive.  

Cons:

• Hindered productivity – employees who have to take on the HR team’s responsibilities become less productive at their core business priorities. If your accountant needs to monitor payroll and HR compliance issues, they could lose track of profit maximization or budget reviewing tasks. Eventually, another aspect of your business operation will suffer. 
• Lack of training – employees you delegate HR tasks to rarely have proper HR training. This doesn’t just keep them from fulfilling delegated functions quickly. It could result in costly errors. For example, failing to withhold appropriate taxes could lead to criminal and civil sanctions.

Overall, delegation is a quick fix but not a permanent solution that can keep your company functioning at its top capacity. 

2. Only Hire

A straightforward solution to the lack of employees is to hire new ones. In-house team members can handle many HR functions without delegating them to other employees.

Pros:

• In-house expert – if you don’t have an HR team yet, you should hire at least one HR generalist who can handle your company’s basic needs and ensure compliance with current laws and regulations.
• Recruitment decisions – while you can delegate and outsource many tasks, recruitment and hiring decisions are up to you. In-house experts know exactly what your business needs and can make educated decisions about new team members. 

Cons:

• High costs – it can be expensive to hire a full-time HR manager. The average base salary of an HR expert is over $34,000. You also need to factor in recruitment, onboarding, and training expenses. Hiring new team members is also risky, with high turnover rates in mind.
• Temporary solution – as your company grows, you need more HR experts to handle its growing needs. Hiring new team members every time your needs change can be time-consuming and costly.
• Insufficient expertise – HR generalists may have some expertise in specific fields. One new team member can help handle many tasks, but some ground may still be left uncovered. 

Overall, hiring new HR specialists is an effective but costly and temporary solution. 

3. Only Outsource

Outsourcing your HR department to another company means handing over functions to a team of experts without incurring hiring costs.

Pros:

• Low cost – outsourcing your HR tasks is not as expensive as hiring new HR team members. You don’t have to worry about onboarding, training, or required employee benefits.
• Scalability – as your company grows, you can ask the outsourcing partner to take care of the extra functions. The same works if you need to scale down, so you don’t have to worry about salary cuts or layoffs.
• Better benefits – if you take advantage of a comprehensive HR outsourcing solution, you could gain access to affordable employee benefits and savings on workers’ comp insurance. 

Cons:

• Delegation problems – some tasks like reporting hours would still need to be done by an internal team member. If there is no HR representative in the company, another department would have to handle it. This, in turn, would lead to the same disadvantages as delegating. 
• Off-site assistance – while an outsourcing partner can explain and teach the best practices for handling employee relations, they aren’t always on-site to implement them. 

Overall, outsourcing is a highly viable solution, but it lacks full efficiency unless you have an on-site HR representative. 

The Hybrid Solution  

The best way for a small business to handle all of its HR functions is to combine a small in-house team with a comprehensive HR outsourcing solution.

The outsourcing partner can handle the administrative burden to stop your HR experts from stretching themselves thin. Meanwhile, an in-house team will gain time to focus on core priorities and employee relations issues.

By combining a small in-house HR department with a large team of experts from an HR outsourcing solution, you can create an effective HR environment and improve your company’s productivity.