In house vs outsourcing HR solutions for small businesses

Human resources issues (or not having the right HR solutions) are one of the toughest challenges a small business will experience in its growth.

While you have to compete against the more prominent companies in your industry, the simple fact is that you don’t have the budget to match a full scale in house HR team. And so you, the business owner, handles it on your own.

Here’s the problem… HR is commonly overlooked by business owners because they can’t see the direct benefit in terms of profit or cost savings. 

Ironically, a company’s most vital resource is its people. Without reliable and trustworthy employees, a business ceases to operate smoothly.

So for companies serious about growth and protecting their future, it’s time to answer the question: Is it time to get an in house hr team or would outsourcing hr make more sense?

HR Solutions for the Workplace

When a company hits about 50 employees, it may be time to start thinking about having a dedicated HR team to manage staff.

This number may vary depending on the type of business, speed of growth and how much time other managers (or the business owner) are spending on HR functions.

Human resource professionals (whether in house or part of an external team), can manage a wide range of responsibilities.

  • Hiring and training new staff
  • Managing relationships between employees and employer
  • Payroll and benefits
  • Handling complaints and requests
  • Leave management, performance management
  • Implementing policy changes
  • Employee record-keeping
  • Staying updated with MOM’s regulations

These are just some basic roles HR plays. By working with human resource management, the small business owner can provide competitive training, pay and benefits (which is proven to have a direct correlation to the longevity of an employee). 

With a conducive work environment and a safe place where individuals feel valued, productivity will improve and the company becomes more efficient, saving more cost and generates more profits.

You might be interested in: 29 Common HR metrics every organization should be measuring

In House HR and the Small Business Owner

Especially for companies that want to have full control of all their business activities, it makes more sense to hire an in house HR team, with other HR solutions as an add-on (eg. HR consultant to help during crunch time).


  • Can meet with the team face to face any time and issues can be resolved faster
  • You keep your intellectual property and organisation practices internal
  • They are on the ground and can provide unique insight to managing employee relations
  • From an employee point of view, they can understand attrition and how to retain talent
  • As employees, they are most vested in the company


  • Can be expensive since they draw a full-time salary
  • Because they are team members, other employees might be more comfortable making requests that can cost the company money
  • Internal relationships may cause bias
  • It can be hard to find the right fit

Getting Started: In House HR

HRM Software

Say you’ve decided to handle all your HR tasks internally. The first step to getting started would be to adopt HR software.

The HR department receives the brunt of the inter-office pressures. They are sandwiched between employees and management. That’s why HR software is designed to ease their load.

HR software offers a simple way to integrate all of the core and strategic HR functions into one solution. 

  • Enforce compliance with all your company’s rules and procedures
  • Increase the productivity of your HR team and your entire workforce
  • Boost staff morale
  • Accede to requests faster and have operations executed on time
  • Reduce and prevent costly human error
  • Increase the accuracy of reporting
  • Improve the security of employee details

You might be interested in: Top 7 key features every HRM system must have (for Singapore SMEs)

Outsourcing HR and the Small Business Owner

With so many individual tasks going on, smart business owners understand that outsourcing HR to professionals can help make the business run more smoothly.

Most businesses already use external help, be it accountants, suppliers, warehousing services. In a constantly-changing market, it might be wise to find external HR solutions too.


  • You have more time to focus on growing your core business
  • They are specialists and can get the job done faster
  • The best talent can be hired from around the world since physical presence isn’t required
  • Provide objective solutions since they are not biased or emotionally attached to the company’s problems


  • Might be lack of understanding of the company culture since they are not directly involved in day-to-day activities
  • Communication cannot be done as often and miscommunication/misunderstandings may arise
  • Employees don’t feel like they are heard as much since there is no personal interaction between them and HR

Getting Started: Outsourcing HR

HR Consulting Firms to Support Your Existing HR Team

HR solutions like these may cost a bit more upfront but could prove to be extremely beneficial in the long run.

An HR consulting firm can act to bolster an existing human resource team. Outsourcing work can be great during seasons when your team is maxed out or completing large short-term projects. 

Many offer on-call services to answer HR questions, compliance checks, employee handbook reviews and training. 

A consultant can help a business find new ways of doing things, eg benefits solution. They are typically more deeply tapped into the HR world than your team is, so they’ll know their way around. 

Your consultant can then train your current team on how to continue down this new pathway to save time and reduce overhead expenses. 

HR Consultancy firms will work hard to produce the best results to guarantee that they receive a favourable testimonial from you or get recurring hires for future projects. This is unlike in house HR workers who may earn a fixed salary regardless of the outcome.

Outsourcing to an HR Freelancer

Completely outsourcing one’s HR department is a global trend. From top banks to small businesses, the benefits of working with an outside professional are considerable. 

For the purpose of this topic, let’s presume you go with an HR professional that has a reputation for consistent, quality work. 

Most freelancers or independent contractors would have a network of contacts or a team of specialists from a wide scope of industries. They have the breadth of experience to manage, analyse and promote the work for a small business.

The best thing is they report to no one but you. This means they can execute their responsibilities without fear of reprisal or retribution from your staff.

Additionally, because they are already experts in HR solutions for many other businesses, they likely already have a solution for whatever problem you’re facing.

You don’t have to train them and they can produce the results as agreed upon. 

You’ve just saved yourself from the trouble of trial-and-error that you’d have faced building your own in house HR team.


Smart business owners know that delegation is important and finding HR help is one of the smarts delegation choices one can make. 

By knowing the internal needs of your business, your leadership team can work with the in house or outsourced HR team to best coordinate a strategy to create a good workplace for employees.

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