HR outsourcing

Running a business in the UK means keeping on top of a lot — from payroll and staff wellbeing to changing employment laws. For many businesses, HR management can quickly become a full-time job in itself.

That’s why more business owners are turning to HR outsourcing. According to the Chartered Institute of Personnel and Development (CIPD), outsourcing HR allows companies to focus on core operations while accessing specialist expertise and compliance support.

Whether you’re scaling fast or just tired of HR admin, outsourcing can help you save time, reduce costs, and stay legally compliant all while giving your employees the support they deserve.

What is HR outsourcing?

According to the CIPD’s Outsourcing Factsheet, HR outsourcing involves delegating selected people management activities to an external provider with the aim of improving service quality, achieving cost efficiency, or accessing specialist expertise that may not exist in-house.

The specific HR services that are outsourced vary from company to company. Some may outsource all their HR processes, while others may only outsource a particular HR function, such as payroll or recruitment.

Common HR functions businesses will outsource include:

• Payroll

• Recruitment and onboarding

• HR admin and documentation

• Employment law and compliance support

• Employee development and training

• Heath, safety and workplace wellbeing (EAP services)

Making HR outsourcing a viable option for small businesses in need of specialists to manage some or all HR activities.

Outsourced services may also be provided by one specialist or a team of specialists. This all depends on who you choose to support you and the needs of your business.

Types of outsourced services for HR

there's a wide range of solutions for business owners looking for services. From BPOs offering a full-scale HR offering to SaaS providers offering self-service HR software and additional support. Knowing what is available to you, makes your decision even easier.

The following are some of the most popular types of HR service providers:

Business Process Outsourcing (BPO) and Human Resources Outsourcing (HRO)

Many businesses will use a BPO to outsource back-office functions, including HR.

BPOs operate as third-party providers to handle tasks for their clients.

By deciding to work with a BPO, you remain in total control of your HR strategy, and don't lose access to any of your employee data. The BPO simply stands to provide services for functions you don't have the time or resources for.

Managed Service Provider (MSP)

A managed service provider takes on a similar role. Traditionally used in IT, this model has expanded and these third-parties now provide businesses with services such as recruitment, payroll, and general HR tasks. The day-to-day responsibility of which is handed over to the provider. Overseeing these processes and providing clients with real-time reporting. Much like BrightHR's managed payroll service.

Software-as-a-Service (SaaS)

An often cheaper option for businesses, taking a self-service approach, is HR software solutions. SaaS can be considered a type of outsourcing, as it allows you to input all your HR processes into one system. Using cloud-based software means you can access a range of HR tools from anywhere and give access to your staff too! So everyone can see information such as annual leave calendars, employee schedules, and HR policies.

A software provider like BrightHR is backed by a team of HR and employment law specialists too, so you're not left in the dark. Employment law advisors are just a call away for when you have a HR question or are worried about legal compliance.

Risks/challenges

While the expertise of external suppliers can provide a host of benefits to small businesses, there are some risks and challenges to be mindful of:

Loss of control

As with any external service, you will lose some degree of control over your processes. While this isn't necessarily a bad thing, it can be difficult to adjust to. It could pose some challenges too if you there's a lack of communication or difficulties in accessing information.

Data protection risks

When working with an external team it's important to consider your data security. Handing over control of sensitive employee data and HR records may put your business in a vulnerable position.

In order to reduce the risks of data leaks and cyber attacks, you must consider reputable service providers and applications with strict security.

Priorities may not align

If you've never worked with a service provider before, it may take some time to find the right one. An initial search could put you in contact with the wrong type of service, leading to a mis-alignment between the needs of your business and the solutions they offer. Doing some quality research into your options is always advisable to avoid this situation.

Setting up and adjustment periods

It may take time to see the benefits of some services. Particularly if the supplier is taking over the management of your entire HR processes. They may need time to set up and adjust to your business needs.

Key Benefits of Outsourcing HR

Outsourcing HR isn’t just about saving money, it’s about working smarter, reducing risk, and giving your business the foundation to grow.

Save Time on Admin and Compliance

According to The Independent,  small firms spend over a day each week on administrative tasks much of which is HR-related.

Outsourcing HR helps you reclaim that time. Our HR software automates routine admin while keeping your business fully compliant with ACAS and GOV.UK guidance.

Reduce Costs Without Cutting Corners

According to Office for National Statistics (ONS) salary data, hiring an HR manager in the UK can cost upwards of £40,000 per year, excluding training and benefits.

Outsourcing gives you access to the same level of expertise for a fraction of that cost. It’s an affordable way to keep HR standards high, without stretching your budget.

Stay Legally Compliant with Confidence

UK employment law changes frequently. In 2024 alone, GOV.UK published numerous employment-related updates, from flexible working rights to statutory pay changes.

With outsourced HR, you don’t have to keep up with every new rule yourself. Our HR experts track updates from ACAS and the Department for Business and Trade, ensuring your contracts, policies, and processes always stay compliant.

Access Expertise You Don’t Have In-House

Not every SME can justify an in-house HR expert, but every business benefits from having one on call.

CIPD research shows that smaller employers often lack access to specialist HR knowledge, particularly around complex issues like disciplinary action or redundancy.

With outsourcing, you gain access to qualified HR professionals who understand UK law and best practice. 

Improve Employee Experience and Retention

A positive employee experience doesn’t just happen it’s built on consistency, fairness, and wellbeing.

The CIPD Good Work Index highlights that clear HR policies and fair processes are key drivers of employee satisfaction and retention.

Our HR software makes people management simpler, fairer, and more transparent, which helps reduce burnout, sick leave, and staff turnover improving both morale and productivity.

Scale HR Support as Your Business Grows

As your workforce grows, so do your HR challenges. Outsourcing gives you flexible support that scales with your business.

Whether you’re hiring your first team or expanding into new locations, your HR provider adapts so your compliance and processes never fall behind.

It’s a future-proof solution for ambitious UK businesses.

Strengthen Focus on Core Business Goals

Finally, outsourcing HR gives you back your most valuable resource: time.

Instead of getting lost in paperwork or chasing timesheets, you can focus on the big picture — strategy, customers, and growth.

With our HR solution managing your admin and compliance, you can spend more time leading and less time managing.

When Is the Right Time to Outsource HR?

There’s no fixed rule, but outsourcing HR is the most practical step when:

• HR admin is consuming more time than core operations.

• You’re hiring new staff or scaling your team.

• Employment law changes are difficult to keep up with.

• You’ve faced an HR issue that took too long to resolve.

If any of these sound familiar, outsourcing could be your smartest next step.

Final Thoughts

Outsourcing HR gives you expert advice, legal peace of mind, and more time to focus on your people and your business.
Talk to our HR consultants today and discover how our HR experts and HR software can help your organisation thrive.