HR outsourcing services vs. using HR tools: What is best for small businesses


When it comes to Human Resource Management, there are various ways of its optimization, including different software, techniques, and outsourcing services, so sometimes, for small business owners, it’s hard to make the optimal decision.

Often small companies use HR tools or HR outsourcing for help with different tasks.

HR tools refer to specific software solutions used for onboarding, talent development, performance assessment, and other HR management tasks. They help to automate the routine processes and provide a clear picture of HR processes structuring the data in one place. 

Using HR outsourcing services, in turn, is delegating people management operations to another company that offers highly-skilled professionals to set up and perform the operational activity either regularly or take part in separate projects like recruitment. The majority of HR outsourcing services cover all the HR functions and offer support in the different stages of the employee lifecycle.

What does it take to choose the best options for small businesses? There is no one-size-fits-all solution, so HR tools vs. HR outsourcing services depend on the problem you are trying to solve. Let’s have a look at some common cases where a particular option would perform better than another one:

Cases that call for HR tools 

Ongoing HR operations. Suppose you need help with regular functions like schedule management, personal development plans, performance assessments, and 360 feedbacks. In that case, HR tools will be your best friends as it’s possible to see all the data conflicts and keep all the information, notes, and profiles inside these systems, so even if HR specialists in your company are changing, the unified approach will contribute to smooth operational activity.

Cutting costs in times of pandemic. This year, cost-efficiency becomes more relevant, as the COVID-19 pandemic forced the business world to go remotely, affecting employees’ performance and productivity. HR tools can help them to adapt to new working conditions. There are free HR tools like Trello or Collage that can facilitate onboarding processes requiring minimum investments.  

Situations requiring HR outsourcing 

Resolving past issues. When it comes to assistance with one-time projects like developing a bonus program or set up a legal termination procedure, it’s better to consult with experts and opt for outsourcing since there might be specific cases that software cannot handle.

“Human” tasks. Usually, when small businesses are just at the beginning of their development, and the company includes up to 5 people, the CEO or the founder takes care of all the operations. Still, it gets overwhelming at some point, and it’s time to look for some help to structure management processes in a startup. In case you cannot afford a dedicated HR specialist, using just HR tools will not be enough, and to build people management workflows, optimize the recruitment and onboarding procedures, it’s better to opt for HR outsourcing companies.

Remote team management. If your team is already working remotely, choosing outsourcing HR services to another company is your option. It helps to reduce costs while ensuring proper people management with regular performance reviews. Your in-house HRs are overloaded with other tasks, providing adequate attention to how people feel in their workplaces, what they lack to stay productive, and helping them grow as professionals. No software can compare with humans in such situations. 


In short, comparing HR tools to HR outsourcing services may resemble the choice between sports equipment and a fitness trainer would help achieve better results, but if you know the drill, you still can achieve the same results with the assistive tools. 

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