Outsourcing of employees: everything you need to know (updated 2021)
The use of outside resources in order to perform activities that could’ve have been carried out by a company’s internal staff and resources is what is regarded as outsourcing. Outsourcing external expatriates to handle your business needs can help the business to achieve several different goals. But along with the many benefits which outsourcing companies gain in engaging in this process, there also arises many challenges and difficulties attached to it.
This article therefore tends to highlight what is outsourcing as well as how provide your business with the needed guidelines on how to navigate through the challenges and technicalities that are associated with outsourcing.
Table of Contents
What is Outsourcing in Business?
A business practice whereby a company gives out some job functions and tasks to an external worker as a form of cost-cutting measure is what is known as outsourcing. This business practice cut across wide range of jobs e.g. IT, customer support services as well as manufacturing which ideally can be performed by internal staffs and employees of the company. Jobs are outsourced out so as to cut costs, creates more incentives for the business and also the effective allocation of resources to other areas of the company which are very much in need of it.
How Outsourcing works?
The effective outsourcing of job functions and tasks by a company has to do with having an ideal partnership with third party firms involved in outsourcing (outsource companies) for the effective handling of technicalities and logistics that comes with the process. Outsourcing involves effectively managing relationships well with the external employees as well as the ability to keep effective communication lines more than the agreements that was agreed upon by the parties involved. It is important to create a trusting relationship on the service-levels, but it is more vital that the relationship that is built between all parties is maintained sustainably for effective strategy.
The agreement which is agreed upon between the hiring company and the external employee must be clearly spelt out to all parties involved and obligations of every one involved should be duly met for effective management of the tasks designated.
Acquiring the services of a Global PEO will help work with you in order to jointly recruit international experts for your business and provide the necessary renumerations for the work which they render. This PEO service form a healthy partnership with you and helps maintain control over those that are hired and also relieved from your company without bringing any complications to your business.
Why do companies choose to outsource work?
You may be wondering about why a company choose to give out jobs to an external person rather than just delegating it to its workers. Well, there exists a quite number of reasons why this happens. Lowering labor costs, improving the productivity of the company and effective speed on the tasks are just some of the reasons why a company prefer to delegate duties to a third-party worker. Companies prefers to outsource tasks and duties because the external job provider tends to focus on a particular task at a time and therefore is able to do a job function better, faster and also at a cheaper rate.
These reasons give a hiring company that choose to delegate tasks out an edge over competitors. It also helps the company to pull more resources on some more critical areas in the company thereby improving the productivity of the company’s employees.
Which types of outsourcing there are?
There exist various ways of which to engage in international outsourcing of employees. The types of outsourcing include:
A hiring company is said to be onshoring if it delegates tasks and job functions to areas that are less expensive than the area where the hiring company is situated in the same country. This is also known as local outsourcing where a local provider that resides in the same country as that of the hiring company is contacted to do some tasks and job functions on behalf of the hiring company. The benefits of this type of outsourcing is the possibility of both parties to have the same language, same background and also the easy possibility of meeting physically.
The delegation of job functions to an external provider that resides in another country as the hiring company is what is regarded as offshoring. This is the best way by which to save on labor and material costs.
This form of outsourcing straddles between offshoring and onshoring. This involves a hiring company giving out job functions or tasks to an external provider who resides in a nearby bordering country or region. This form of outsourcing gives the advantages of both the onshoring and the offshoring types of outsourcing in that it helps to cut labor and material costs while also having the possibilities of the existence of same language spoken by both parties.
What is the best example of outsourcing?
An ideal example of outsourcing is taking a look at the model of a financial institution (bank). The bank tends to outsource their customer service operations out to a credible external provider. This therefore makes sure that all inquiries that are faced by customers or complaints with concerns with their banking service is handled by a third party instead of the internal staffs of the bank. This was embarked on by the bank as it creates a form of effectiveness on the part of the level of service that is provided by the bank in other banking areas. It also helps to prove as a very effective way by which capital is allocated as the services of the third-party that is hired is competent and credible thereby leading to saving of labor costs and at the same time delivering qualitative services to the customers of the financial institution.
What are the pros and cons for companies to outsource?
As earlier stated, there exists numerous benefits with engaging in outsourcing of employees and also with this comes challenges which are the cons.
A very major benefit of outsourcing job functions is the delivery of lower costs which results in provision of increased productivity of companies that engage in outsourcing. There is also the freeing up of resources such as cash, personnel and facilities that can well be channeled into other existing tasks. There is also the improvement in management, provision of solutions, new projects that are high yielding to the company than the job functions that were delegated out to external providers.
Tasks and job functions which originally should have taken a great deal amount of time to complete if it is done by traditional employees of the company are quickly finished and completed if these same tasks are delegated to outsourcing. This is because the external provider tend to focus primarily on such tasks and thereby provide a quicker service.
With the very many benefits attributed to outsourcing of employees, there comes challenges and some drawbacks witnessed by companies. A major drawback faced by hiring companies is the ability to maintain healthy relationship with the external service providers delegated with the job functions. The number of resources that is put into managing the relationships with external outsource providers far supersedes the resources that is devoted to completing the task successfully in the first instance which can cancel out the primary reason of hiring an external worker for the company which is cutting costs.
There is also the loss of control over some aspects of the delegated tasks by the company hiring an external provider for the outsourcing task. This therefore results in the reduction of quality in the service provided to the customers.
There is also the issue of security as hiring companies tends to face risks due to critical and sensitive information exchange with the external service providers in the bid to achieve qualitative service. There may arise the mishandling of these critical and vital information which could lead to the exposure of such information thereby causing irreparable damage to the integrity of the hiring organization.
In conclusion, internal employees of the business may encounter the difficulty of effective collaboration and communication with outsourcing providers especially if the type of outsourcing is an offshore type.
How WeHireGlobally will help
Outsourcing of employees is a very effective and sustainable process that helps companies improve their rate of productivity as well as improving the quality of their services. But with the numerous benefits attributed to this process comes the challenges. In order to effectively overcome these challenges, there is the need for you to partner with a proficient Global PEO provider such as WeHireGlobally which helps you to easily take care of the technicalities involved with the outsourcing process.
Outsourcing of Employees: Everything You Need to Know (updated 2021)
Outsourcing is a highly beneficial process if it is done well in partnership with a competent PEO provider.
Reduction of labor costs, increase in productivity, improved efficiency.
No, it does not. In fact, it helps to support the economy.
No, it is legal. However, we recommend you get the legal opinion for your territory.
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