As a business grows, there comes a point where HR can no longer sit with the owner, the finance lead or the office manager. Contracts, policies, absence, performance issues and employment law changes all need proper attention. The question is how to get it.
The two main routes are hiring an in-house HR manager or using outsourced HR. Both can work well. The right choice depends on your size, budget, the complexity of your people issues and how much day-to-day HR presence you need.
This guide compares outsourced HR vs in-house HR side by side, so you can decide which fits your business now and as it grows.
Key takeaways
- An in-house HR manager gives you a dedicated person, but brings the full cost and risk of employing them.
- Outsourced HR gives you access to a team of qualified HR professionals, usually for a predictable fee.
- Outsourcing is flexible: you can scale support up or down as the business changes.
- A hybrid route exists: an outsourced HR professional working on-site or part-time in your business.
- Many small businesses start with outsourced HR and add in-house roles as they grow.
What is the difference between outsourced HR and an in-house HR manager?
An in-house HR manager is your own employee, working only for your business. Outsourced HR means an external HR provider handles some or all of your HR work, either remotely, on-site, or both. The key differences are cost structure, breadth of expertise, flexibility and who carries the risk if the person leaves.
What does an in-house HR manager cost?
The cost goes well beyond salary. When you employ an HR manager, you also pay employer National Insurance, workplace pension contributions, recruitment costs, training and professional membership, equipment and holiday and sickness cover. If they leave, you face the cost and delay of recruiting again, with no HR support in the gap.
GOV.UK lists the costs every employer must plan for, including National Insurance, sick pay, pension contributions and family leave pay.
What does outsourced HR cost?
Outsourced HR is usually charged as a fixed or agreed fee, depending on the level of support you need. At Prime HR Partners, our small business HR services run on an easy-to-manage fixed monthly fee. You pay for the support you use, without the employment overheads of a full-time hire.
Outsourced HR vs in-house HR: side-by-side comparison
| Factor | In-house HR manager | Outsourced HR |
|---|---|---|
| Cost | Salary plus employer costs, recruitment and training | Agreed fee, often fixed monthly |
| Expertise | One person's knowledge and experience | Access to a wider team of HR specialists |
| Employment law support | Depends on the individual | Backed by senior HR advisers and, with Prime HR Partners, employment lawyers |
| Cover for absence or resignation | Gap until you recruit again | Provider covers the resource |
| Flexibility | Fixed role and hours | Scale up or down with business demand |
| Knowledge of your business | Deep, from day-to-day presence | Strong, especially with on-site support |
| Management time | You recruit, manage and develop them | The provider manages the HR professional |
When is an in-house HR manager the right choice?
An in-house HR manager makes sense when you have enough HR work to fill a full-time role every week, need someone physically present every day, and can afford the full cost of employment. Larger organisations with complex structures often reach this point, and some keep an outsourced partner alongside for specialist advice.
When is outsourced HR the right choice?
Outsourced HR is usually the better fit when your HR workload varies, you need expert advice more than a full-time administrator, or the cost of a dedicated hire is hard to justify. It is especially useful for small and growing businesses that need reliable compliance, policies and employee relations support without building a department.
Signs outsourcing may suit you:
- HR currently falls to the owner, finance lead or office manager.
- You need help mainly with contracts, policies and occasional employee relations issues.
- You want access to senior HR and employment law expertise when issues arise.
- Your HR needs rise and fall with seasonal or project work.
- You cannot risk being without HR support if one person leaves.
Is there a middle ground?
Yes. On-site HR gives you a dedicated, CIPD-qualified HR professional working in your business, on-site or hybrid, while they are employed and managed by the HR provider. You get the day-to-day presence of an in-house manager with the backing, cover and flexibility of an outsourced team.
With Prime HR Partners' On-Site HR Services:
- We only provide CIPD-qualified HR professionals, and we pay for their annual CIPD membership and keep them trained and up to date.
- If a member of the HR team leaves, we cover the resource and secure a replacement.
- You have access to our senior HR team and to the London employment lawyers who back us on complex employee relations issues, included in the price.
- Our HR system and payroll capability are included.
If you are weighing up a short-term option, our guide on whether to use an HR interim or outsource HR covers that choice.
How Prime HR Partners helps
Whatever route suits you, we can support it:
- HR Outsourcing: we act as your HR department or support your existing team, flexing quickly with the peaks and troughs of business demand.
- HR Advisory: expert advice across the employee lifecycle, from employment law and HR documents to conflict resolution and workplace mediation.
- Small Business HR Services: comprehensive HR support for SMEs for a fixed monthly fee.
- On-Site HR Services: a dedicated HR professional embedded in your business, on-site or hybrid.
Frequently asked questions
Is outsourced HR cheaper than hiring an HR manager?
For most small businesses, yes, because you avoid the full cost of employment: salary, employer National Insurance, pension contributions, recruitment, training and cover. With outsourced HR you pay an agreed fee for the support you need. The exact comparison depends on your workload, so ask any provider for a clear quote.
Can outsourced HR work alongside an existing HR person?
Yes. Many businesses keep an HR administrator or manager in-house and use an outsourced provider for specialist advice, complex employee relations cases, projects such as restructuring, or extra capacity at busy times. Prime HR Partners can support your existing HR team or operate as your sole HR provider.
Will an outsourced HR provider understand my business?
A good provider takes time to understand your needs and goals before building a plan. With on-site or hybrid support, your HR professional works within your business and gets to know your people and culture first-hand, much like an in-house manager would.
What happens if my outsourced HR consultant leaves?
That is the provider's problem to solve, not yours. With Prime HR Partners' On-Site HR Services, if a member of the HR team leaves, we cover the resource and secure a new person to take over, so your business is not left without HR support.
When should a growing business switch from outsourced to in-house HR?
There is no fixed point. Consider an in-house hire when HR work consistently fills a full-time role and you need someone present every day. Even then, many businesses keep an outsourced partner for employment law advice and specialist projects.
Find the right HR model for your business
Not sure which route is right for you? Prime HR Partners will look at your needs and recommend the level of support that fits, whether that is ad hoc advice, fully outsourced HR or a dedicated on-site HR professional.
Contact our team for a no-obligation chat, call +44 (0)7721 437537 or email caroline@primehrpartners.com. All queries are replied to within 24 hours.