HR Consultancy vs In-House HR: What’s Right for a Growing UK Business?
A growing business rarely notices the exact moment HR becomes a real job. It tends to happen somewhere between the recruitment emails, the payroll queries and the employee relations issue that lands at six o'clock on a Friday. The twentieth hire is on the way, revenue is up 40% on last year, and a question starts to form: is it time to bring HR in-house, or would a consultancy be the smarter move?
It is one of the most common crossroads growing UK businesses reach, and the honest answer is that there is no one-size-fits-all solution, and that is completely normal. Getting it right means weighing up a few things honestly: your budget, your growth plans, and how much HR work someone is genuinely carrying day to day, rather than how big the business feels.
In this guide, we have set out the real cost of each option, when a full-time hire genuinely makes sense, and how to weigh up the decision calmly and practically at this stage of growth.
Why this decision matters
This is a decision worth pausing on, because getting it wrong can prove costly in both directions. Hire too early, and the business ends up paying a full salary, plus all the hidden extras, for a role that does not yet have enough work behind it. Lean on ad hoc support for too long, and the business risks losing the knowledge, continuity and compliance it needs just as things start to scale.
For businesses of 25 to 100 people, the answer usually comes down to three things: what the company can sensibly invest, how consistent the HR workload really is, and how much flexibility your growth plans call for. Once you weigh those up honestly, the right route tends to become much clearer, and that is what the rest of this guide will help you do.
The real cost of HR: consultancy vs in-house
Before you can make a confident choice between the two, it helps to have a clear and honest picture of what you are actually paying for on each side.
What outsourced HR actually costs
Most UK consultancies price their work in one of a few familiar ways, and knowing what to expect from each makes the numbers much easier to compare.
Many charge by the hour, usually somewhere between £150 and £300. Where you land in that range depends on who you work with and what they specialise in: around £250 for a senior consultant's time, or closer to £150 for someone earlier in their career.
For bigger, more strategic pieces of work, such as an organisational redesign, redundancy support, or guiding a business through an M&A integration, consultancies will often quote a single project fee instead. These typically sit between £5,000 and £25,000, depending on how complex the work is and the size of the company.
If you are looking for ongoing support rather than a one-off piece of work, a retainer may suit you better: a set monthly fee that keeps a consultant on hand whenever you need them. For a company of fewer than 50 people, retainers generally start at £1,500 to £3,000 a month, rising as the business grows.
There are more flexible options too. Some consultancies offer pay-as-you-go packages: a set block of hours you can draw down as needed, without the commitment of a retainer. This can work well for businesses whose needs vary from month to month.
Prices vary so widely simply because the work does. Specialist employment law advice costs more than everyday support, London tends to be pricier than other regions, and consultants in high-demand specialisms often charge a premium. None of this should put you off; it just means it is worth being clear about what you actually need before comparing quotes.
To put it in real terms: picture a 40-person business drawing on a consultancy for around 8 hours a month, covering regular advice, a hand with recruitment, policy updates and the odd employee relations issue. That typically works out at £1,200 to £2,400 a month, or £14,400 to £28,800 a year.
What an in-house HR manager really costs
With an in-house hire, the salary is only ever the starting point.
In the UK, a full-time HR manager typically earns between £50k and £60k, depending on location, experience, and sector.
On top of the salary, there are a number of extras that add up quickly, and they are worth building into your thinking early. There is employer's National Insurance (typically around £6,500–£7,500) (GOV.UK) and pension contributions of roughly 3 to 8%, which works out at about £2,750 at a 5% contribution. It is also worth investing in training and development to keep your HR manager growing in the role, typically £1,500 to £3,500 a year, alongside HR software and tools at around £2,500 to £5,000. Then there is the one-off cost of finding and hiring the right person in the first place, which can run anywhere from £4,000 to £10,000.
Add all of that together, and a mid-range hire works out at roughly £68,000 to £81,000 in the first year. From year two onwards, the figure tends to settle between £64,000 and £71,000, as recruitment costs fall away and salary and training budgets gradually increase.
It is also worth being aware of the costs that rarely appear in the business case: the pressure that builds when the role becomes overloaded, the cover needed when your HR manager is on holiday, and the knowledge that can walk out of the door if they move on, particularly where processes have been built around one person. None of this is a reason not to hire; it is simply about going in with a full picture.
When does a growing business actually need an HR manager?
Most growing businesses do not really need a full-time HR manager until they reach somewhere around 75 to 100 people. Bringing someone in before that point usually means paying for more capacity than the business can keep busy, and that is worth avoiding if you can.
As a rough guide, it helps to think about where your business currently sits.
With fewer than 30 people, a consultancy is almost always the smarter choice. There is rarely enough complexity to justify a full-time salary at this stage, and most businesses will value the flexibility to grow into their needs rather than commit ahead of them.
Between 30 and 60 people, things become less clear-cut. This is the grey zone, where a part-time HR person alongside a consultancy can be the right mix, though for plenty of businesses, consultancy support on its own still does the job nicely. A lot depends on the nature of the work too: a 40-person professional services firm can carry a much heavier HR load than a 60-person business with a simpler structure, so it is worth looking at the workload rather than just the headcount.
From 60 to 100 people, a full-time manager starts to earn their place. Even so, many businesses of this size still run perfectly well with an in-house manager and a consultancy on hand for the trickier moments.
Once a business grows beyond 100 people, having someone in-house is usually the right call. Even then, a hybrid approach often works well, bringing in specialist support for the things you do not need day to day, such as executive coaching, change management or more complex legal work.
What matters is not whether the business is big enough but whether there is enough recurring work to keep someone genuinely busy, week in and week out. If you are honest about that, the answer usually points you in the right direction.
The flexibility factor: why it matters more than the spreadsheet suggests
There is one more cost that never shows up in salary benchmarking data, and it can change the sums entirely: your needs will not stay still, and that is a normal part of growing.
One month, recruitment takes four hours; the next, an employee relations issue takes eight; the month after, a new policy takes six; then a redundancy needs three hours of legal input. Hire a manager, and you are paying the full salary whether you use five hours that week or forty. Use a consultancy, and you only pay for what you actually draw on.
That flexibility becomes more valuable as the business grows, because the mix of what you need keeps shifting: equity schemes and tax compliance one quarter, executive coaching or change management the next, then industry-specific hiring, cultural work, or a tricky point of employment law. A good consultancy brings all of that under one roof. An in-house manager may be strong on recruitment but lighter on employment law, or the other way round, and through no fault of their own; it is simply a lot for one person to cover. In practice, that often means buying in extra expertise anyway, and effectively paying twice to fill a single gap.
How this plays out in practice
Two realistic situations show how the same decision can land quite differently.
Scenario one: a growing tech company of 50 people.
Founded four years ago and growing fast, it has reached 50 people and expects to be at 75 within a year. There is no HR function to speak of; the operations manager has absorbed it alongside everything else, and is understandably stretched thin.
Hiring an HR manager would cost around £74,000 in year one, once salary (£55,000), National Insurance, pension, training, software and recruitment are added up. A consultancy, estimated at 16 hours a month across recruitment, people advice and policy work at £200 an hour, would come to £38,400 a year.
At 50 people, the consultancy costs roughly 48% less in the first year and saves the business the time and effort of recruiting. So that is the route it takes: deliberately choosing a firm with strong tech-sector experience, because its real pressure point is finding scarce talent.
The following year tells the rest of the story. At 75 people, recruitment is still busy, and employee relations have become more complex, with competing teams and seniority levels to manage. Consultancy hours gradually rise to 25 hours a month, around £60,000 a year, which is now much closer to the cost of an in-house hire. So the business brings in an HR manager, and it feels like a natural next step rather than a leap. The point is that it did not make the move a year too early.
Scenario two: a professional services business of 35 people.
An established business, stable for three years, with a good culture and steady rather than explosive growth of around 15% a year. The director handles HR informally. There are no major issues, but there are no formal policies either, and the business is aware that a single employment law misstep could prove costly.
A full-time manager would carry a first-year cost of £68,000 to £81,000 to do perhaps 20 hours of work a week while being paid for 40. A consultancy, estimated at 6 hours a month at £200 an hour, comes to £14,400 a year, and the business chooses one with the specialist knowledge its sector calls for. The total is around 79% lower than hiring in-house, and the business gets a specialist rather than a generalist.
This business simply does not yet have the complexity to justify a full-time person, and that is no bad thing. What it needed was expert advice and peace of mind, and a consultancy provided both.
The hidden costs nobody puts in the business case
When a business hires in-house, there are a few costs that rarely make it onto the spreadsheet, and they are worth thinking about upfront. If your HR manager moves on in year two, as people sometimes do, a lot of knowledge about the business goes with them, and you can expect to pay £3,000 to £5,000 for a temp or consultant while you find the right replacement. If you have hired a generalist but find you need a specialist, in employment law, recruitment, or diversity and inclusion, you end up buying in that expertise anyway, on top of the salary. When the person is on holiday or off sick, urgent work either waits or needs to be covered. And it is worth remembering that a new manager will need a good three to four months to properly understand the business before they can add real value, which is completely normal, but worth factoring in.
A consultancy works differently. You get people who have done the same thing many times before, at a specialist level, available straight away and without any gaps in cover to worry about.
How to actually make the decision
Rather than treating this as a straight cost comparison, it helps to step back and ask yourself a few honest questions.
Does the business have 75 or more hours of predictable, recurring HR work each month, across things like recruitment, payroll queries, employee relations, policy management and compliance? If it does, an in-house hire starts to make real sense; if it does not, a consultancy is likely the better fit. Do you need specialised expertise, such as employment law, executive coaching, tech recruitment or complex change management? A consultancy often works well here, because you get an expert rather than a generalist. Is your growth steep or steady? Steep growth tends to favour the flexibility of a consultancy, which can scale alongside you, while steadier growth brings an in-house hire into view sooner. Do the founders genuinely have the time to recruit and onboard a manager properly? If everyone is already stretched, it may be worth waiting until there is space to do it well. And what is the cash position? Consultancy support is a variable cost that is kinder to cash flow, while an in-house hire is a fixed cost that suits a stable, profitable business.
For many growing businesses, the honest answer is neither one nor the other, but a blend of both: one strong HR person, often part-time, with a consultancy on retainer for specialisms, projects and overflow. That way, you get embedded knowledge and outside expertise working together. For a company of 50 to 70 people, a hybrid model typically comes in at £30,000 to £40,000 a year, which is more than a consultancy alone and less than a full-time hire, and it is often a better outcome than either on its own.
The bottom line
There is no one-size-fits-all answer here, but a few patterns hold true:
Under 60 people, a consultancy almost always offers the better value and flexibility.
Between 60 and 100 people, a hybrid model, meaning a part-time HR person with consultancy support alongside, usually strikes the best balance.
Above 100 people, having someone in-house is usually the right call, though consultancy support for specialist work still earns its place.
Whatever the size of your business, the principle is the same. Do not let a consultancy talk you into more support than you genuinely need, do not let budget alone drive the decision, and do not hire an HR manager simply because the business is growing. The right time to hire is when there is genuinely enough work to fill the role, week after week. Until then, flexible support will almost always serve you better, and there is no harm at all in taking your time over the decision.
How JourneyHR can help
Decisions like this are exactly where the right HR partner can make a real difference. Whether you need occasional expert advice, a refresh of your policies and contracts, project support through a period of growth, or a fully retained HR team, we work with UK businesses to match the level of support to the stage you are genuinely at, protecting the business while keeping it a great place to work. And if you simply want to talk the decision through, with no pressure and no expectation, we are always happy to do exactly that.
Weighing up HR consultancy against an in-house hire? We would be very happy to help you make the right decision, in the right way, at the right time. A conversation is a good place to start.
Get in touch: enquiries@journeyhr.com or journeyhr.com
FAQs
What is a realistic monthly cost for outsourced HR support in the UK?
Most UK consultancies charge £1,200 to £3,500 a month for ongoing retainer support for SMEs of 30 to 80 employees, or £150 to £300 an hour for ad hoc work. Some offer flexible packages: a set block of hours drawn down as needed, which give flexibility without a locked-in retainer. The actual figure depends on how much support a business needs: a 40-person business using 8 hours a month might pay £1,200 to £2,400, while a 70-person business using 20 hours might pay £3,500 to £5,000. It’s worth asking for a clear estimate based on your specific needs before committing.
At what point should a UK SME hire a full-time HR manager rather than use a consultancy?
Most businesses benefit from a full-time manager at around 75 to 100 employees. Below that, there’s usually not enough work to justify the role week in, week out. The natural point to switch is when a business regularly uses 15 or more consultancy hours a month and the recurring work has become predictable. Rapid growth favours staying flexible with a consultancy; steady growth, with stable employee relations, brings an in-house hire into view sooner.
How much does an HR manager really cost, including the hidden extras?
A full-time HR manager in a UK business typically earns £50k to £60k, depending on location and experience. Add employer's National Insurance, pension contributions of 3 to 8% (or around £2,750 at a 5% employer contribution), as well as the costs of training and development, HR software and recruitment. The overall first-year cost is therefore likely to exceed the salary alone, although these additional expenses vary considerably between organisations and there are no official UK benchmark figures for them. From year two onwards, costs generally reduce as one-off recruitment expenses fall away, although salary and training budgets are likely to increase over time. Many businesses also underestimate the impact of holiday or sickness cover, particularly where responsibility sits with a single HR professional.
What is the difference between part-time in-house HR and a consultancy retainer?
A part-time HR person of two to three days a week costs around £15,000 to £25,000 a year and gives a business embedded knowledge and continuity. A consultancy retainer at £1,500 to £3,500 a month costs £18,000 to £42,000 a year, but brings specialist expertise, flexibility and no holiday-cover burden. Part-time in-house suits businesses that value consistency and someone who knows the culture deeply; consultancy suits those needing flexibility, specialist skills, or without enough predictable work to fill a role. Many businesses do both: one part-time person for day-to-day operations, plus a consultancy retainer for complex issues, projects and specialist support.
How do I know whether my business needs HR consultancy right now?
It’s probably time if a business is regularly spending five or more hours a week on HR, has faced an employee relations issue it wasn’t sure how to handle, is planning to hire ten or more people in the next year, lacks proper contracts and policies, or feels uneasy about compliance. It’s probably not yet if the business is stable, has fewer than 15 employees, isn’t hiring, and rarely runs into issues. Even so, most businesses of 25 or more benefit from at least one conversation with an HR consultant, if only to get clear on what they actually need.
