When it comes to managing human resources, businesses have two main options: hiring an in-house HR team or using fractional HR services. Both options have their own benefits and drawbacks, and it's important for businesses to understand the differences in order to make the best decision for their organization.

To help you understand this difference better, we have covered this article. We will explore the differences between fractional HR and in-house HR, and how each option can benefit your business.

What is Fractional HR?

Fractional HR, also known as outsourced HR, is a model where businesses hire a third-party HR provider to handle their HR needs. This can include tasks such as recruiting, onboarding, benefits administration, compliance, and employee relations.

Fractional HR services are typically provided on a part-time or project basis, allowing businesses to access HR expertise without the cost of hiring a full-time HR team. Fractional HR providers are often experienced HR professionals who work with multiple clients, providing a wide range of HR services.

Benefits of Fractional HR

• One of the main benefits of fractional HR is cost savings. By outsourcing HR tasks, businesses can save on the cost of hiring and maintaining a full-time HR team. This is especially beneficial for small businesses or startups that may not have the resources to hire a full HR team.
• Fractional HR also allows businesses to access a wide range of HR expertise. Instead of relying on one or two in-house HR professionals, businesses can tap into the knowledge and experience of a team of HR experts. This can be particularly helpful for businesses that are just starting to build their HR infrastructure.
• Another advantage of fractional HR is flexibility. Businesses can choose which HR tasks they want to outsource and can adjust the level of support as needed. This allows businesses to scale their HR services as their organization grows.

Drawbacks of Fractional HR

Every benefit comes with a drawback. The same is true with Fractional HR.

• One potential drawback of fractional HR is the lack of in-house presence. Since fractional HR providers work remotely, they may not have the same level of understanding of the company culture and dynamics as an in-house HR team. This can make it more challenging to address employee issues and concerns.
• Another potential drawback is the potential for miscommunication. Since fractional HR providers work with multiple clients, there may be a delay in response time or confusion about specific company policies and procedures.

Now, let's move on to understanding In-house HR.

What is In-house HR?

In-house HR refers to a team of HR professionals who are employed by the company and work on-site. These HR professionals are responsible for managing all HR tasks and functions for the organization.

In-house HR teams are typically made up of HR generalists who handle a wide range of HR tasks, as well as specialists who focus on specific areas such as recruiting, benefits, or compliance.

Benefits of In-house HR

• One of the main benefits of in-house HR is the level of control and oversight businesses have over their HR functions. Since the HR team is on-site, they have a better understanding of the company culture and can address employee issues more effectively. In-house HR teams also have a deeper understanding of the company's policies and procedures, making it easier to ensure compliance and consistency across the organization.
• Another advantage of in-house HR is the ability to build long-term relationships with employees. In-house HR professionals have a better understanding of employee needs and can provide personalized support and guidance.

Drawbacks of In-house HR

• The main drawback of in-house HR is the cost. Hiring and maintaining a full-time HR team can be expensive, especially for small businesses or startups. In addition, in-house HR teams may not have the same level of expertise as fractional HR providers, as they are limited to the knowledge and experience of their team members.
• Another drawback is the lack of flexibility. In-house HR teams may not have the capacity to handle sudden changes or spikes in HR needs, which can be challenging for businesses that are growing rapidly.

Which Option is Right for Your Business?

When deciding between fractional HR and in-house HR, it's important to consider the specific needs and goals of your business. Here are some factors to consider:

Size of Your Business

The size of your business can play a significant role in determining which HR option is best for you. If you have a small business or startup, fractional HR may be a more cost-effective option. However, if you have a larger organization with a high volume of HR needs, an in-house HR team may be more beneficial.

HR Needs

Consider the specific HR tasks and functions that your business needs support with. If you have a high volume of HR tasks, such as recruiting, benefits administration, and compliance, an in-house HR team may be more suitable. However, if you only need support with specific tasks or projects, fractional HR may be a better fit.

Budget

Budget is a significant factor to consider when deciding between fractional HR and in-house HR. Fractional HR can be a more cost-effective option for businesses with limited resources, while in-house HR may be a better fit for businesses with a larger budget.

Growth Plans

Consider your business's growth plans when deciding on an HR option. If you anticipate rapid growth, fractional HR may be a better fit as it allows for more flexibility and scalability. However, an in-house HR team may be more suitable if you have a stable or slow-growing business.

Conclusion

Both fractional HR and in-house HR have their own benefits and drawbacks, and the best option for your business will depend on your specific needs and goals. Fractional HR can be a cost-effective and flexible option for businesses with limited resources, while in-house HR provides more control and oversight for larger organizations.

Ultimately, the decision between fractional HR and in-house HR will depend on your business's unique needs and budget. By understanding the differences between the two options, you can make an informed decision that will benefit your organization in the long run.

Author: Oksana Day, SHRM-CP