How outsourced HR services can mitigate rising employment costs
- Mike Clyne
- 3 days ago
- 3 min read
Regulatory changes and increasing salary expectations are steadily driving up employment costs. On top of this, the ongoing challenge of retaining and engaging top talent is putting mounting pressure on employers.
Against this backdrop, outsourced HR services are becoming an increasingly attractive proposition for businesses looking to contain costs without compromising on the quality of support they provide to their workforce.
The growing appeal of HR outsourcing among SMEs
According to a recent CIPD survey, 53% of organisations already outsource at least one HR function, with SMEs more likely to do so than larger firms1. The reasons are clear. Outsourcing offers flexibility, scalability, and access to expert advice and execution without the financial burden of a full in-house team.
Combatting the high cost of employee turnover
Employee turnover is one of the most significant hidden costs for any business. A 2016 fluctuation study revealed that an employee's resignation could cost a company more than £35,0002, whilst research from Oxford Economics estimates that ‘productivity loss varies across firms… ranging from a total of £35,307 in the legal sector to £16,240 in retail’.3
An outsourced HR provider working on a retained basis can proactively manage employee engagement strategies and performance reviews - key tools in reducing attrition while guiding leadership development. They are also proven drivers of loyalty.
Addressing the cost of employee disengagement
Employee disengagement is another silent drain. Disengaged employees may not leave, but they underperform, costing UK businesses an estimated £98.26 billion annually4.
Outsourced HR professionals can bring an objective, experienced perspective to workplace culture, performance management frameworks, and engagement initiatives, ensuring that employees remain connected to their roles and motivated to contribute fully.
Reducing admin burdens and operational inefficiencies
Rising costs also stem from administrative inefficiencies. Manual HR processes, such as tracking leave, updating personnel records, or onboarding new hires, consume valuable hours. A study showed that HR staff spend up to 57 per cent of their time on routine admin5.
With the support of an outsourced HR team, businesses can transition these tasks to streamlined, tech-enabled systems, reducing the administrative load and refocusing internal resources on strategic growth.
Tackling absenteeism through proactive wellbeing strategies
Absenteeism - particularly related to mental health - is increasing, further straining business resources. A Booz & Company study estimated related costs at almost £2,000 per employee per year6.
Outsourced providers are well-placed to help implement proactive wellbeing initiatives and advise on benefits schemes that mitigate such costs, creating a more resilient workforce in the process.
The long-term value of a retained HR partnership
What makes a retained HR service particularly cost-effective is the ability to access flexible support aligned to your business's ebb and flow. Whether handling employee relations issues, managing redundancies, or supporting recruitment and onboarding during periods of growth, a retainer ensures expert support is always available.
This continuity also allows providers to build a deep understanding of your organisation's culture and goals over time, something our longstanding clients value greatly.
At FeMan Consulting, our retained model is based on partnership and trust. We recognise that some months will be busier than others, and our role is to be there when you need us, whether it's revising an employee handbook, navigating a disciplinary, or advising on benefits and incentives.
HR outsourcing: a strategic investment, not just a saving
Outsourcing HR isn't just a cost-saving exercise; it's an investment in better outcomes. By minimising turnover, enhancing employee engagement, and streamlining administration, outsourced HR services provide a strategic advantage in a challenging employment landscape. A retained HR partnership enables you to stay ahead of employment trends, manage risk, and focus on what matters most in growing your business.
To find out more about our retained services, please get in touch with us here.
References:
1. CIPD. (2022). The People Profession in the UK and Ireland 2022. Chartered Institute of Personnel and Development. Retrieved from https://www.cipd.org/globalassets/media/comms/news/asa1people-profession-uk-ireland-2022-report_tcm18-111972.pdf
2. I.O. Group® Wolf® Consulting. (2016). Fluktuation, Fluktuationskosten: Verdeckte Gewinnvernichtung, from https://io-group.de/fluktuation-fluktuationskosten-verdeckte-gewinnvernichtung/ (translated into English)
3. Oxford Economics. (2014). The cost of brain drain: Understanding the financial impact of staff turnover. Commissioned by Unum. Retrieved from https://www.oxfordeconomics.com/resource/the-cost-of-brain-drain/
4. Gallup. (2023). State of the Global Workplace: UK Edition.
5. Deloitte. (2023). Modernizing HR: Design Thinking and New Technologies to Help Enhance Employee Experience. Deloitte Development LLC. Retrieved from https://www2.deloitte.com/content/dam/Deloitte/us/Documents/consulting/us-servicenow-ffex-pov.pdf
6. Booz and Company, 2011 original study unavailable, information found in: European Agency for Safety and Health at Work. (2014). Calculating the costs of work-related stress and psychosocial risks – A literature review. Publications Office of the European Union. https://publications.europa.eu/resource/cellar/c8328fa1-519b-4f29-aa7b-fd80cffc18cb.0001.01/DOC_1