The short version: most small businesses do not need a full HR retainer, they need cheap, sharp advice at four or five specific moments a year, so shop for expertise at the moment of need rather than a monthly subscription sold on fear. Expect to pay somewhere between £95 and £250 an hour for a fractional HR consultant, or £150 to £800 a month for an outsourced HR provider, and treat every sales call as an interview, not a purchase.
Start by working out what you’re buying
“HR support” gets sold as one thing but it is really three different products wearing the same suit.
- Outsourced HR retainers. Companies like Peninsula, Citation, Croner and Ellis Whittam sell monthly packages that bundle a phone helpline, template documents, and often legal expenses insurance. You are paying for access and cover, not a person who knows your business.
- Fractional or freelance HR consultants. A qualified CIPD-level HR professional who works with a handful of small clients, usually charged by the hour or a fixed monthly retainer for a set number of hours. You get a named person who learns your business.
- HR software with a helpline bolted on. Tools like BrightHR, breathe, or Sage HR give you a system for holiday, sickness and contracts, with phone or chat support included or as an add-on, priced per employee per month, typically £3 to £8 per head.
None of these is wrong. Each one solves a different problem. The mistake most owners make is buying the first one they get a slick sales call about, without working out which of the three problems they have.
My own experience getting this badly wrong
Three years ago, when I was rebuilding my business with two people on the books and a contractor who was threatening to claim employee status, I rang one of the big outsourced HR names because a fellow business owner recommended them. The saleswoman was warm and quick, quoted me £299 a month plus a £150 setup fee, and promised “unlimited HR advice.” I signed on the phone, which was my first mistake.
The advice I got when I called with my contractor problem was a template letter written for a company of fifty staff, full of clauses about “line managers” and “HR departments” that did not exist in my business. The advisor on the phone had never seen my contracts and could not, because reviewing individual documents was billed separately at £85 a time. I was paying £299 a month for a script.
I cancelled after four months and instead found a freelance HR consultant through a recommendation on LinkedIn, someone who had left a corporate HR director role to work with small businesses directly. She charged £110 an hour, read my actual contractor agreement in the first call, told me straight that the wording made the contractor’s claim weaker than I feared, and drafted a proper resolution in under three hours of billed time. Total cost: £330. Less than one month of the subscription I had cancelled, and it solved the actual problem.
The uncomfortable bit nobody selling HR retainers wants said out loud
Here is the part that gets left out of most guides on this topic. A large share of small business HR support is sold by companies whose real revenue comes from legal expenses insurance, and their advice is written to protect the insurer against a claim, not to give you the best commercial answer for your business. That is why the templates are so generic and so cautious. It is not that the advice is wrong, it is that it is defensive by design, aimed at the lowest common denominator of risk across thousands of clients, not tailored to your two-person company.
If you have fewer than ten employees, you rarely need someone on permanent standby. You need someone brilliant for the handful of moments that matter: writing your first proper contracts, handling a disciplinary or grievance correctly, managing a redundancy without triggering collective consultation rules by accident, and setting up a fair recruitment process. Paying a flat monthly fee for a service you might use twice a year is how these companies make their money, not how you get the best value.
Work out your trigger points before you shop
UK employment law changes what you’re legally required to do at specific headcount and situation thresholds, and knowing these before you talk to anyone stops a salesperson deciding your needs for you.
- From day one of employment, staff are entitled to a written statement of terms, so you need this sorted before you hire your first person, not after.
- Statutory redundancy pay applies once someone has two years’ continuous service.
- Collective consultation rules kick in if you plan to make 20 or more people redundant at one establishment within 90 days, which most small businesses will never hit, so don’t buy cover for a scenario you’ll never face.
- Auto-enrolment pension duties apply to almost every UK employer regardless of size, from the day you take on your first staff member.
You can check the current detail on employment status, redundancy and dismissal rules directly on the government’s own employment guidance at gov.uk, which is free and more current than most paid HR portals.
How to compare providers
Once you know which of the three models fits, run this six-step check before signing anything.
- 1. Ask who will answer the phone. Get the name and background of the actual person you’ll speak to, not the sales rep. If they cannot tell you, walk away.
- 2. Ask for the cancellation terms in writing. Many outsourced HR contracts run 12 months minimum with a rolling renewal, and the £299 headline price often hides a setup fee and a per-document charge for anything beyond phone advice.
- 3. Test them with a real question. Before you sign, give them an actual scenario from your business, not a hypothetical, and see how specific the answer is. Generic answers mean generic service.
- 4. Ask how many clients your named contact handles. A fractional consultant juggling 40 clients cannot know your business the way one juggling eight can.
- 5. Check what happens at a tribunal. Ask directly whether legal representation is included if a claim goes to an employment tribunal, or whether that’s a separate insurance product sold on top.
- 6. Get three quotes, not one. The spread between outsourced HR providers for an identical five-employee business regularly runs from £150 to £600 a month for near-identical cover, purely because of how aggressively the sales team negotiates.
What good HR support looks like day to day
A useful HR service, whether it’s a person or a software subscription, should be quietly making your admin easier rather than only showing up during a crisis. Some of this overlaps with the same tools that also save time on the rest of your business, and it’s worth reading how AI powered productivity tools help small business owners save time before you pay someone else to do things a tool could handle for a fraction of the cost, like drafting a first pass at an offer letter or summarising a policy update.
If recruitment is part of what you need help with, most small businesses now run at least part of hiring communication through messaging rather than email, and a proper HR setup should sit comfortably alongside that. If you haven’t set this up yet, our walkthrough on setting up WhatsApp Business for your small company covers exactly how to manage candidate and staff messages professionally without mixing them into a personal phone.
And if part of your HR need is simply making it easier for candidates to find and apply for roles, a basic careers page does more work than people expect. You don’t need a developer for this, our guide on how to choose a DIY website builder for your small business will get you a functional careers page in an afternoon, which is often cheaper and faster than the “recruitment support” add-on many HR retainers try to upsell.
The moments where paying for a real person is worth it
There are a small number of situations where I would never recommend going it alone or relying on a template, no matter how tight money is.
- Dismissing anyone with more than two years’ service, where an unfair dismissal claim becomes possible.
- Any grievance that mentions discrimination, harassment or a protected characteristic.
- Redundancy involving more than one role, where selection criteria need to be defensible.
- Reclassifying a contractor as an employee, or the reverse, which is exactly what caught me out.
- Maternity, paternity or long-term sickness situations where the rules on pay and job protection are fiddly and mistakes are expensive.
For everything else, a good template, a bit of common sense, and the free ACAS helpline will usually get you through. ACAS gives free, impartial employment advice by phone and its website has model letters and step by step guides that are, frankly, better written than most of what paid providers hand you as an “exclusive template.”
What it should cost you in year one
To give you a real anchor rather than a vague range, here is roughly what a five person UK small business should expect to pay across a first year if it buys smart rather than reactively:
- Initial contract review and template set for five staff: £400 to £900 as a one off with a fractional consultant, versus £150 setup plus monthly fees with an outsourced provider that add up to more over 12 months.
- HR software for day to day admin (holiday, sickness, documents): £3 to £8 per employee per month, so roughly £180 to £480 a year for five staff.
- Ad hoc advice for one difficult situation (a grievance, a dismissal, a restructure): £300 to £900, billed once, when it happens.
- Total realistic year one spend for most five person businesses: somewhere between £900 and £2,200, well under the £3,588 you’d pay for a full year of a £299 a month outsourced retainer that you may barely use.
Questions to ask before you sign anything
- What exactly is included in the base fee, and what triggers an extra charge?
- Who is my named contact, and how many other clients do they support?
- Can I see a sample of the contract templates before I commit?
- What’s the minimum contract length and the exit process?
- Is legal representation at a tribunal included, or a separate insurance policy?
- Can you show me how you’d handle this specific situation in my business right now?
If a provider hesitates on the last question, that tells you almost everything you need to know about how much of their service is genuine expertise versus a script read off a screen.
Frequently asked questions
Do small businesses in the UK legally need HR support?
No, there’s no legal requirement to buy an HR service, but you are legally required to meet certain obligations yourself, such as giving employees a written statement of terms from day one and following a fair process for dismissal or redundancy, so you need either the knowledge or someone to call when those situations come up.
How much does HR support cost for a small business in the UK?
Outsourced HR retainers typically run £150 to £800 a month depending on headcount and included services, fractional HR consultants charge £95 to £250 an hour or a set retainer for agreed hours, and HR software with basic support costs £3 to £8 per employee per month.
What’s the difference between an HR consultant and an outsourced HR company?
A fractional HR consultant is usually one named, qualified professional who works directly with your business and learns its specifics, while an outsourced HR company is a larger firm offering a phone helpline staffed by rotating advisors working from templates, often bundled with legal expenses insurance.
Is it worth using free HR advice from ACAS instead of paying?
For straightforward questions, yes, ACAS gives free and useful employment advice by phone and publishes solid model letters and guides, and it’s worth trying before you pay for anything, though for complex situations involving discrimination claims, contested dismissals, or restructures you’ll usually still want a paid, named expert reviewing your specific documents.
