What is an HR Retainer - and do you need one?
If you’re looking for HR support for your small business, you will no doubt have seen many HR companies offering HR retainers. In this article I am going to help you understand what an HR retainer is, and how different types of HR retainer operate.
This will help you to decide whether an HR retainer is right for your small business now, or whether it would be better for your small business to access HR support another way.
What is an HR Retainer?
An HR retainer is a formal agreement where, in return for a fixed monthly fee, an HR company provides an agreed set of HR support services.
HR retainers can be a really cost-effective way for a small business to get support from a highly qualified HR professional, at a fraction of the price of employing someone with the same skills.
HR companies usually offer a choice of retainers which include different mixes of services. It is for you to decide, along with the HR company, which services are right for your business.
A good HR retainer will operate a bit like private medical cover. You’ll get some agreed services throughout the year, such as keeping your HR documentation up to date, providing email or telephone advice for problems that crop up, and keeping you informed about changes in employment law.
If you need additional HR services that aren’t included in your retainer agreement, these can usually be arranged and will be charged separately from your retainer.
Why might I need an HR Retainer?
Every business is different, of course, and it’s important to think about what HR services your small business might benefit from.
Our clients tell us they really value having someone with extensive HR knowledge at the end of the phone, who can answer queries straight away and offer options they hadn’t thought of to solve their HR problems.
This saves them hours of scrolling online, and worrying about whether the information they have found is up to date – or if any of it is actually legal in the UK!
Here are some other reasons our clients have given for taking out their HR retainers.
We had nothing in place. We’d operated for a few years without any policies or contracts, and without any problems. But suddenly we had a pregnant employee, another with a long-term absence problem, and we wanted to quickly grow our business. We had no idea what we could or couldn’t do so wanted an HR expert to come and help us manage our people the right way.
Our employment contracts, HR policies and other documentation were very out of date. A retainer was a great way of spreading the cost of updating them, while also accessing consultancy time to help implement the new documentation and deal with any queries.
We have really ambitious growth plans, but HR is our weak point. We’ve tried template HR documents, but they never seem to fit our circumstances or deliver what our business needs. We want HR support that gives us options so we can choose the right way forward for our business.
We needed to restructure our business, but we weren’t sure how to manage possible redundancies and recruitment effectively.
It just feels that HR is getting more complicated as our business grows. When we do have problems we worry that we’ll get it wrong and make things worse.
We had problems with performance and attendance which we had been ignoring for too long because we didn’t know what we could or couldn’t do. We wanted help to manage them legally, and also to learn what we could do to avoid similar problems in the future.
We wanted to introduce new performance management and absence management processes, and a retainer allowed us to spread the cost and get help for a few other issues that cropped up from time to time.
As more and more people joined the business, our HR issues seemed to multiply. We were struggling to manage them alongside running a company.
Are all HR Retainers the same?
No, they aren’t. Each HR company designs its own HR retainers, based on the services they choose to deliver to their clients, and their own business model.
Some companies are less flexible than others. Some have set retainers that cannot be varied, which is fine if they are exactly what you need, but if not, you might be paying for services you are never going to use.
You might be offered template HR documentation – that means every client gets the same contract of employment and the same HR policies, regardless of their size or how their business operates.
You’ll need to consider whether your business operates the same as other businesses, because if it doesn’t, standard documentation might not be right for you.
Remember that if you have an HR policy, you must follow it. Some retainers offer lots of policies, and this can make small business HR much more complicated than it needs to be.
Also bear in mind that your HR enquiry could be answered by someone in a call centre who has never met you or seen how your business operates. They may even be reading advice from a script. And many large HR companies actually offer advice that very risk averse, which might mean you have to go through a longer process than you need to in order to resolve a problem.
To put it bluntly, a cheaper HR retainer might save you money in the short term, but could end up costing your business a lot more if HR issues aren’t dealt with quickly and pragmatically.
At Parrish HR Consulting Ltd, all our HR retainers are fully bespoke to each client. We do show some broad descriptions on our website of what you could have in each level of our retainer, but we build your retainer with you, up front, to meet your business needs. You can find out more about the retainers we offer here.
Likewise, all our documentation is bespoke to you, our client, and the way you do business. That means that when an HR issue arises, you have the right documentation to be able to resolve it quickly and effectively.
You always get support from the same HR consultant, who has over 30 years’ HR experience. We’ll help you step by step through a legally compliant, pragmatic and commercially aware process that is matched to your own appetite for business risk.
How do HR companies calculate their HR retainer fees?
Again, this varies from company to company. Some charge a flat rate for the services they have provided. Others charge a fee per employee. Some give you a set number of hours per month, which you either use or lose, some will let you roll unused hours over to the next month, and some will allow you to use more hours some months and fewer in other months. Make sure you are clear which arrangement will apply to your retainer before you sign up.
At Parrish HR Consulting Ltd, we calculate our retainers based on the services we have agreed with you. We know from 10 years in business, approximately how much HR time each of the services will take, and the value those services will provide to our clients. We then divide the cost/value of the services we’ve agreed by 12 to give you a monthly retainer fee. This allows you to budget effectively and spread the cost of your HR support across the year.
We know that some months you will need a lot more support, and some months you will need less or none at all. In our experience, this tends to balance out over time. We don’t clock watch, which means you will never run out of hours to resolve a problem, you don’t have to worry about “use it or lose it”, or “rollover” policies, and you don’t have to wait to tackle an HR issue because you have run out of time this month. We see this as an important flexibility that works best for our clients, and for us.
Of course, there are always exceptions, and every once in a while (it’s only happened twice in 10 years) a client’s HR retainer usage either falls way below, or goes way above and beyond what either side anticipated at the start of the retainer agreement. So we build in regular reviews of retainer usage to make sure it is fair for both us and you. We will talk to you if we think you are consistently using significantly less – or significantly more – consultancy time than expected, and we’ll jointly agree a solution that works for everyone.
How long do you have to commit for?
This is really important to check before you sign, because some small business owners have had nasty surprises when they read the small print on their HR retainer contracts.
Some HR companies tie you into their retainers for 5 years or longer, and you have to give 6 months’ written notice at the end of the retainer to cancel it. If you forget, or you didn’t spot the renewal clause in your contract, it renews for several more years.
Now, I don’t know about your business, but most of my clients have changed beyond recognition in 5 years. Some employ more people, some considerably fewer, and a few are no longer clients because they no longer employ anyone.
5 years is a very long time for a small business.
At Parrish HR Consulting Ltd our initial retainer with you will be for 12 months. After that, it continues on a rolling month by month basis, and either of us can cancel with 60 days’ notice. At any point during your retainer, however long it lasts, you can add services in or remove services if you need to, and the fee will be adjusted accordingly, so your HR retainer with us will always deliver exactly what your business needs.
Are there alternatives to HR Retainers?
Retainers aren’t right for every business. In my opinion - and this won't make me popular in my industry - you probably won’t get value for money from a retainer if:
You employ fewer than 5 people and don’t plan to increase your headcount
You have had a stable workforce with no HR issues at all in the past 3-5 years
You don’t plan to make any changes to the way you employ or manage people in the next 12 months.
And it’s worth adding that when a business gets to around 70 - 80 employees, you should probably be thinking about employing a full time HR Consultant in-house.
For employers who can’t justify the cost of a retainer, I offer other ways that you can access HR support, including pay as you go services, and fixed price services. Here’s how they work if you buy them from me:
Pay as you go support
No surprises here, we charge you an hourly rate (currently £150ph) for the time your work takes. You can pay as you go for most of our services if you wish – we will tell you if we think it will be more cost-effective for you to take out a retainer but there is no pressure from us, and we will work with you whichever way you prefer.
We always quote pay as you go rates for disciplinary hearings, grievances, appeals, TUPE work, restructures and redundancies. The simple reason for this is that no two cases are the same, the time needed can vary hugely, depending on the complexity of each case, and it’s usually impossible to know at the outset how much work will be involved. If you need to set a budget then we can let you know when we get towards your limit, so you can decide what to do next.
Fixed price services
We can provide contracts of employment, HR policies, employee handbooks and management training or coaching on a fixed price basis.
We can also quote you a fixed price for putting a performance management or absence management process in place and training you how to use it.
Now you know a bit more about how HR retainers work across the industry, how my retainers operate, and other ways you can get HR support from me.
You might be thinking that this is exactly what your small business needs. If so, please give me a call on 07902 903086 or email marion@marionparrish.com to set up a free 30-minute chat.
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