10.08.2022

When to opt for employee outsourcing?

Key information:

  • Outsourcing is a popular solution that involves hiring temporary workers, benefiting both large corporations and smaller companies regardless of their size and market experience.
  • Companies using employee outsourcing services can reduce costs, increase efficiency and focus on key areas of the business, using external resources and specialists with the right skills.
  • Employee leasing can risk lack of integration, reduced employee engagement, and leakage of confidential information, so it is essential to properly manage the process and protect data.
  • Outsourcing does not relieve companies of their obligations to comply with labor regulations and contract workers.
  • Process outsourcing allows companies to focus on their core business, saving time, money and resources, improving the efficiency and flexibility of the organization.

Benefits of employee outsourcing

The concept of outsourcing is very popular these days. As a rule, it can apply to virtually all departments of a company, from production, logistics and customer service to financial management and accounting.

The name of this phenomenon is derived from the English words "outside-resource-using" and, according to the literal translation, means outsourcing certain tasks to external companies or using temporary workers. However, it should not be equated with a contract of mandate, as it differs in the nature of the relationship between the provider and the recipient of the service.

Outsourcing is a long- or short-term, win-win arrangement in which the outsourcing company and the contractor are equal partners. Nowadays, it is increasingly chosen by large corporations, tired of searching for the most talented managers and researchers, as well as keeping financial records, but outsourcing some activities to external partners can

What are the benefits of using employee outsourcing?

Companies that use outsourcing opt for it mainly for economic reasons. It significantly reduces the expenses associated with maintaining departments such as:

  • accounting,
  • law firm,
  • transportation,

because it removes from the company the responsibility for accounting for mandatory Social Security contributions for outside employees.

In addition, all the costs of the recruitment processes are on the side of the temporary employment agency, and this is additionally associated with significant time savings, since intermediary companies generally have a database of ready-to-employ employees with specific skills and experience.

The use of freelance workers also helps streamline the organization of work, since the maintenance of personnel and payroll records is the responsibility of the employment agency. It also helps reduce fixed costs. For example, those related to the storage of manufactured products and their distribution, by renting space and means of transportation in amounts tailored to the company's current needs.

The greatest benefits of using employee outsourcing are reported by companies dealing with thematically diverse projects that periodically need employees with specific skills.

 

Disadvantages of using employee outsourcing

Among the risks associated with employee outsourcing are the following:

  • Lack of integration between permanent and external employees, which can result in low identification with the company.
  • Lack of a sense of belonging to the company and awareness of the temporary nature of the duties performed, which often results in reduced commitment to work. Because of this barrier, communication between employees in different departments can also be hindered, leading to many difficulties in the day-to-day operation of the company.
  • Increased risk of confidential information getting outside the company, as they are available to a large number of people.

Leakage of sensitive data can have adverse consequences not only for the outsourcing company, but also for its contractors. Such a situation reflects negatively on the media image, affects the trust of customers and the opinion of the company, which translates directly into sales results and relations with partners.

In order to avoid it, it is usually drawn up NDA agreements non-disclosure agreement, obliging one party to keep confidential any information about the company's business, the disclosure of which could deprive it of a competitive advantage in the market.

Outsourcing and the Labor Code

Outsourcing, as the practice of using third-party service providers, has some implications related to Labor Code. First and foremost, outsourcing does not exempt a company from complying with labor regulations, such as minimum wage, working hours or health and safety.

Workers employed by a service provider must be covered by the same rights and protections as those directly employed by the company, which requires monitoring and control of legal compliance by both parties. At the same time, good outsourcing should include clearly defined contracts and liability clauses for compliance with labor rights to avoid potential disputes and ambiguities.

Which company departments should be outsourced and which should not?

Because of the wide scope of outsourcing, the question arises, then can there be a company that relies 100 percent on outsourced employees? In theory, this is possible, but there are some departments that should not be outsourced.

These include, first and foremost, the production and provision of services that are the backbone of the company's operations, such as the provision of legal advice at a law firm or the hair styling service at a barber shop. By performing production activities in-house, the company is assured that the product it offers complies with the highest standards, and any irregularities are immediately caught and corrected. This maintains a consistent level of service delivery and builds trust in the brand among its customers and business partners.

On the other hand, there are areas that are run by specialists are capable of generating much more revenue for the company than when left in the hands of people without the relevant experience. These include:

  • Marketing activities, broadly defined as building brand image among the public, mainly through media campaigns or organizing events such as trade shows and conferences.

Outsourcing marketing optimizes the activities undertaken so as to reach the audience of interest to the company, as well as to make better use of the budget allocated for advertising. Creating a campaign with the support of an expert allows you to target the most relevant advantages of the product offered and tailor it to the specifications of the target group. In addition, it is also a significant relief for the company, as it allows it to focus on activities directly related to the offered product, and increases the speed and efficiency of its activities.

  • All support departments in the company, such as human resources and payroll, accounting and legal services, can be successfully outsourced to qualified third-party companies.
  • Cleaning and security services, which seems to be a natural phenomenon and is applied regardless of the size and nature of the company.

Through the outsourcing service, the company can focus on other areas of the business, saving time and money, and commit more resources to research and development and additional employee training. The number of employees responsible for support activities is adjusted on an ongoing basis according to current demand, making the company's organizational structure flexible.

Prudent hiring of employees

Despite the range of potential benefits, outsourcing should be approached with caution. The decision to start working with an outside company should be preceded by an analysis of the benefits and costs involved.

For companies with short market tenure, any activities not directly related to the manufacture of a product or service should be outsourced to allow employees to focus their full attention on production and R&D.

Unfortunately, in the early days, limited financial resources are a significant barrier to establishing business partnerships. Accordingly, the first focus should be on those areas that the company cannot handle on its own, or whose handling involves the highest costs. These include, for example, warehousing of goods and distribution services, since investing in your own warehouse space and means of transportation involves huge expenses for their purchase and maintenance.

Also, departments such as accounting and legal services require the hiring of qualified staff in this area, so using outside agencies are a cost-saver, especially in small and medium-sized companies.

How to implement process outsourcing into your company?

As the company grows larger, previously delegated departments should be gradually integrated into the organizational structure, allowing them to be supervised more easily. However, this is not the rule, because in large corporations, where human resources processes are carried out on a massive scale, involving internal employees in these processes would involve huge financial expenses.

The order of transferring the branches in question should be determined primarily by economic factors and cost analysis. At the end of the day, it does not have to turn out that all outsourced departments
will be transferred to the internal structure, and only those whose inclusion is associated with the highest profits and lowest costs. Outsourcing is a tool that brings tangible benefits in the form of reducing the cost of operation of the company and streamlining the management process.

However, the advantages are not always directly visible in the company's finances, as there are times when outsourcing to external partners is a more expensive solution, but one that yields better results in aspects such as communication between different company departments or sales results.

Importantly, establishing business partnerships can be profitable not only for the employer, but also for the person taking on the job, as it will make it easier for him to find a job suited to his competence and experience.

Qualified employees are the backbone of the company's operations, directly influencing the quality of services offered and the course of project work.
Outsourcing allows to achieve a competitive position in the market and is an offer for companies aspiring to be market leaders.

You would like to streamline your company's processes and are wondering what steps to take - get in touch with us! Let's work together to determine how we can help you!

Karolina Rejniak

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