How much does outsourced HR cost?

Outsourced HR, HR services, or HR consultancy…there are many different terms for a business like ours. Put simply, however, we support organisations with their people. This is whether they already have an in-house HR Manager who needs additional support through our mentoring service, or if there’s no one in the business looking after HR. Outsourcing HR functions can be a game-changer, but the burning question for most is, “How much does outsourced HR cost?”

Core HR functions: the essentials

Outsourced HR costs hinge on the specific functions a business chooses to delegate. For example, essential HR functions, including recruitment, onboarding, payroll processing, documentation and contracts form the core. Businesses can opt to outsource all or select specific areas based on their unique needs.

The pricing structure for core HR functions often involves a monthly or annual fee. This fee varies based on the scale and complexity of the outsourced tasks. Smaller businesses may find it more economical to outsource their entire HR function, while larger enterprises may strategically select specific tasks for outsourcing. This is particularly relevant if they already have an in-house team that needs external support. Read our case study on how we work alongside in-house HR teams.

Types of HR provider

Costs can vary hugely when it comes to outsourced HR companies and so can their offerings. There are typically three types of outsourced HR provider, these are:

• Independent freelance HR consultants – often you can negotiate a fee based on the nature of the HR support needed.
• Independent HR consultancies – these will have a more structured price plan and may charge either by the number of hours required or by the number of employees.
• Large national HR companies – again these will have a set price structure but they could vary depending on the size of the business.

Smaller or newer HR outsourcing companies may offer more competitive pricing. However, businesses must balance cost considerations with a thorough evaluation of the provider’s capabilities and reliability. HR support can also be provided as a one-off on a project basis through a contract or a monthly retainer.

How much does outsourced HR cost? Typical costs

Costs vary, with some providers charging by the hour, project, day, or number of employees. At Bespoke HR, you can sign up for a simple plan offering two hours of support per month from around £222. At the higher end, you can receive around 32 hours per month for around £2,752 per month.

Cost varies from provider to provider and some charge per project, per day, or per hour. Some HR advisors offer a tiered package system that gives you access to a specific number of hours per month. The cost also depends on how long you need the support. You can pay for ad-hoc projects or sign into long-term agreements so you know you have peace of mind that your business is fully protected.

Other costs to consider

Be aware of additional costs from an HR consultancy. It’s important to understand whether travel to the site (if needed) is included. If the business doesn’t have any HR processes in place then the HR consultancy will usually recommend implementing an HR system, such as Breathe, which wouldn’t be included in your general outsourced HR cost. If the HR consultancy offers fixed hours per month, be clear on whether unused hours are rolled over or lost at the end of each month.

Additional HR services

Many providers will offer additional HR services like training, payroll, and access to employment law advice. Some of these will be included in the overall cost but others may charge for these separately. We’ve put together an outsourced HR provider comparison tool for you to use when shortlisting HR consultancies – download it here.

Contract terms and duration

The terms and duration of the HR outsourcing contract are critical factors in determining costs. Longer-term contracts may offer cost savings, as providers often provide discounts for extended commitments. However, businesses must carefully consider the flexibility of the contract, especially if their HR needs are subject to change. This includes reviewing things like the notice period and auto renewals. Some providers, like Bespoke HR, will charge an ad-hoc rate but often it can be more cost-effective to join a plan as these will have a lower hourly rate.

Shorter-term contracts or month-to-month billing structures may be more suitable for businesses experiencing rapid growth or those with fluctuating HR demands. While this flexibility may come at a slightly higher cost, it provides businesses with the agility to adapt to changing circumstances.

By conducting a thorough analysis of their HR requirements, exploring different providers, and understanding the various cost components, businesses can make informed decisions. Outsourcing HR is not merely a cost-cutting measure; it’s an investment in efficiency, expertise, and strategic focus. With a clear understanding of the costs involved, businesses can leverage outsourced HR to enhance their overall performance and competitiveness.