People | Dec 26

Hire or outsource? Making the right call on headcount

People | Dec 26

Weighing flexibility, trust, and long-term resilience in your staffing decisions

Ian Wylie Journalist, broadcaster, educator

Reading Time 5 minutes

For many small business leaders, deciding whether to recruit staff or outsource work will happen at some point in their growth journey and can be one of the most significant calls they can make. It affects not just cash flow, but can also impact customer service, the company’s culture, and even its long-term resilience too. The latest Quarterly Recruitment Outlook from the British Chambers of Commerce Insight Unit shows that while 54% of businesses surveyed had attempted to recruit, three-quarters had experienced difficulties in finding staff, despite rising unemployment.

Against that backdrop, a simple ‘hire good, outsource bad’ (or vice versa) mindset doesn’t always work. Small business leaders need a framework to help them judge when to add headcount and when external assistance is the smarter option.

Handle volatility first, not growth ambitions

If demand is unpredictable or sharply seasonal, then clearly defaulting to flexible options first is logical. Permanent hires only make sense when the workload is year-round.

Richard Sadler is director and co-owner of CJC Aggregates and Landscaping Supplies near Worcester. ‘We’re very much a seasonal and weather-dependent business,’ he says, noting that March, April, and May can generate more than double the turnover of quieter months.

For businesses like this, outsourcing and temporary labour aren’t about avoiding commitment; they’re about surviving peaks without being crushed by troughs. ‘Our hiring policy, while forecast in our budget, is not linear,’ says Sadler. ‘We need to be really creaking in order to justify the extra staffing levels’ – especially true given negative cash flow in winter months.

Separate flexibility from cost savings

Use outsourcing to absorb spikes or specialist needs, but don’t justify it purely on headline cost. Consider customer experience and potential impact on your brand.

A common assumption is that outsourcing is cheaper. Sadler’s experience challenges that. ‘Using agency drivers, for example, is not actually a cost saving,’ he says, pointing to agency fees on top of wages.

What outsourcing does buy is speed and flexibility. During peak periods, CJC can bring in agency drivers to protect its promise of delivering to domestic customers within 48–72 hours. But Sadler is clear-eyed about the trade-off. ‘Even if you do get a great agency driver, they will not have the investment and full engagement in what we do as CJC,’ he says. ‘If you look at our Google reviews, all five-star, at least half of the comments are about our drivers and the fabulous service they give.’

Ask whether trust and knowledge are strategic assets

If the role depends on deep business knowledge, judgement calls, or customer/client relationships, recruitment is usually the stronger long-term choice.

Chris Brewster, professor of international human resource management at Henley Business School, stresses that employment brings benefits that go far beyond filling hours. ‘Knowledge of the business and ability to contribute increase with employment. Trust gets built up,’ he says. ‘You can rely on employees more than on external hires.’

That trust comes with obligations. Brewster notes that employment involves emotional and moral commitments, especially in small businesses where people work closely together. Letting someone go ‘is a tough emotional decision,’ which means hiring decisions cast long shadows.

Use outsourcing to delay, not dodge commitment

Outsourcing can be a sensible interim step while you gather evidence that demand is durable enough to support a hire.

Brewster agrees that bringing in external help has advantages: ‘It involves less paperwork, less administration, and fewer commitments,’ with the ability to stop using those services when business slows. That makes outsourcing a useful testing ground.

He describes the shift from external resources to employment as one of the two most important decisions a small business owner will ever make, precisely because it requires ‘looking into the future and estimating how the business will develop in the next year or so’.

Reduce risk with staged commitment

There is a third option: part-time roles, fixed-term contracts, and trial periods can all bridge the gap between outsource and hire.

When the decision does tilt towards hiring, Brewster advises caution. ‘It’s probably best to offer the job on a short-term basis first and see how it works out over a couple of months before making a full commitment,’ he suggests. He also highlights part-time work as a powerful middle ground: lower financial cost but many of the same benefits in terms of commitment and trust.

Sadler’s own story illustrates why this matters. In CJC’s early years, the business took on too many drivers and entered winter with a cost base it could not sustain. The solution involved temporarily cutting hours, not jobs, after open discussion with staff who ‘believed in the future of CJC’.

Remember the human dimension

In summary, hire when the work is core, continuous, and relationship-driven. Outsource when demand is volatile, specialist, or uncertain. And in between, use flexible arrangements to learn before you commit.

Brewster reminds leaders that small businesses often see employment as more than an economic calculation. Owners may feel a strong responsibility to employees, their family, or community. ‘The crucial factor is people management – investing the time, energy, and sensitivity to manage people as people are the key to success.’

Ian Wylie Journalist, broadcaster, educator

Ian Wylie is a journalist, editor, and broadcaster for the Financial Times, Guardian, BBC, Monocle, and others. For 16 years he was a staff writer, feature writer, and section editor at The Guardian newspaper. He also teaches on Newcastle University’s undergraduate and postgraduate journalism programmes.

View profile