Software specialist delivers HR alternative to risky outsourcing and costly in-house staff

Pegasus Software, a leading supplier of accounting and business software, today warned of the tribunal dangers facing small business owners that ignore HR issues, as it opened up its innovative virtual HR department to SMEs.

Stuart Anderson, Operations Director for Pegasus Software explains: “Typically SMEs do not employ an HR specialist until they have around 80 employees. Before this size is reached, many small businesses could not afford to take on a full time HR position even if they wanted to. A full time employee is a large financial commitment and sits at odds with the peaks and troughs of activity that characterises early business growth.”

“Alternatively, the business may outsource its HR responsibility to third parties. As well as being expensive, this can open up dangerous gaps in procedure between the HR services provider and the SME.”

“The absence of any HR input means throughout early growth the business is hugely exposed to unnecessary risks. Ignorance of employment law leads SME’s to make decisions based on inexperience and that can become very costly. Shortfalls in simple points of process mean it is common for SMEs to find themselves going through tribunals.”

Between 2007 and 2008 there were over 4,000 employment tribunal claims for a failure to properly inform and consult personnel on redundancy issues. There were almost 5,000 claims over inadequate written statements of terms and conditions, and a further 1,000 for the procedural point of a written statement of reasons for dismissal.

Anderson continues: “The lack of HR expertise and consequent lack of compliance with points of procedure can hit SMEs hard. Even discounting compensation awarded for discrimination, the average costs awarded at such tribunals is £2,095 – that is money SMEs can ill afford to lose in this climate.”

“The answer is to have access to the HR know how you need, but keep it in house without resorting to a full time position that can drain resources.”

To ease the situation, Pegasus has opened up its on demand virtual HR department, PegasusHR, as a standalone service. Investment starts from £360 per year or just £1 a day. The service is free to Pegasus customers, with an Annual Maintenance Contract.

PegasusHR comprises a website containing downloadable legally compliant HR letters, employee handbooks, policies, advice and FAQs. The material covers issues such as recruitment, discipline and appraisal. There is also an option to ask questions, as well as a telephone advice line and on-site consultancy.

Established seven years ago, with a turnover of £1.5m, Jennings Morton Friel Associates is an accountancy recruitment specialist, based in Beckenham, Kent. Employing 10 staff plus an additional 40 temporary personnel it recently turned to PegasusHR to help with a variety of personnel issues. Director Colleen Friel explains:

“The first use was to ensure full compliance with proper procedure as sadly, we had to make two people redundant, so from the very start, PegasusHR has proven its value.”

“I have found it very easy to use and, compared with outsourced HR services, it is incredibly cost-effective. We are currently using PegasusHR to develop grievance policies, an employee handbook and to ensure a review of commission structures is performed properly. Prior to using PegasusHR, any one of these projects would have swallowed days of my time or cost thousands for limited return.”

Anderson concludes: “Keeping track of existing legislation is hard enough for SMEs looking to grow. Future changes such as equal pay for both sexes, increases in the minimum national wage, or flexible working entitlement uptake mean that staying on top of HR is vital to business success. PegasusHR is designed to keep SMEs ahead of the curve without detracting from vital business activity as small businesses look to survive the recession and build for future growth.”