Employees are considered the backbone of organizations.

Happy and motivated workers are more likely to be productive and help organizations achieve their goals.

However, if they are unhappy, unmotivated and lack morale, they are more likely to become inefficient.

If you consider the resources needed to train and educate employees who are being introduced to a new company, it’s easy to see why a lot of organizations are increasingly turning towards outsourcing staff from the get go.

But what is staff outsourcing in the first place?

Read on to find out!

Staff outsourcing is a business practice that involves hiring a third-party entity to perform tasks that were initially done by a business’s employees and staff. It is the process of getting specific organizational activities done by professionals outside the organization.

Organizations choose to outsource some of their business activities to increase productivity and efficiency while reducing costs.

In fact, a particular survey done on business executives revealed that cutting costs was the main reason for outsourcing.

This practice is important because it helps organizations save money, time and effort on business activities.

In the process, it increases efficiency and productivity.

Outsourcing also helps organizations focus on their core business activities, as administrative HR functions are transactional in nature and aren’t tied to organizational goals.

The outsourcing industry generated about $92.5 billion in 2019, before the coronavirus pandemic.

Technology outsourcing (IT outsourcing) generated about $66.5 billion while business process outsourcing (BPO) generated about $26 billion in 2019.

Experts estimate that organizations will downsize in-house HR administrative activities in favor of outsourcing services, with the latter set to increase over the next few years.

This article covers everything you need to know about outsourcing including how it works, different types, benefits and other reasons why you should consider such services.

How does staff outsourcing work?

Staff outsourcing is simply the process of getting specific business activities done by individual professionals or other companies outside the business.

Sometimes, companies choose to outsource business operations to other firms overseas in a process that is known as offshoring, whereas outsourcing domestically is known as onshoring.

Companies and organizations can also outsource non-core business activities, which are not essential to the core of the business.

A recent survey showed the most outsourced business processes include accounting, IT services, digital marketing, development, HR administrative functions, and customer support.

Commonly outsourced activities include copywriting, supply chain management, research and design, tax compliance, training, and computer programming services.

It is important to note that the activity outsourced greatly depends on the organization and the industry they are operating in.

Staff outsourcing can even be as simple as hiring independent contractors for small business functions.

On the other hand, there are large outsourcing service providers such as IBM who specialize in IT services.

What is an example of staff outsourcing?

Outsourcing is a more common practice today than it was a few decades ago.

For example, a smartphone company might choose to have internal components such as motherboards, screen displays and batteries produced by other manufacturers to save on time, and costs.

In doing so, the smartphone company increases its efficiency and product quality as they allow experienced manufacturers to handle production in areas where they might not be experts in.

Small and medium-sized companies might not always have the resources necessary to support professionals handling tasks such as accounting, tax compliance and payroll.

Staff outsourcing in this case is cheaper than retaining in-house professionals like accountants, digital marketing managers, programmers or customer support.

This is another major reason why companies opt for outsourcing services.

What are the different types of staff outsourcing?

There are many different types of outsourcing services.

However, the kind of service you choose will depend on your company’s operations and the kind of support your firm needs.

Here are the different types of staff outsourcing:

1. People/ professional outsourcing

Professional outsourcing encompasses just about all tasks essential to the day-to-day operations of a business, which includes administrative tasks, accounting, marketing, legal and payroll management.

This type of outsourcing has become popular in recent times because you can access a wide range of services, and pay for only those that you need.

2. Business process outsourcing

As the name suggests, business process outsourcing involves sub-contracting specific business processes to third-party service providers in a bid to cut costs, improve productivity and efficiency.

Initially, this concept was associated with manufacturing companies; but in recent times, it has morphed into a service that cuts across several industries and sectors.

3. Project outsourcing

It is common for businesses to have one-off tasks.

It would be best to outsource services involving such tasks when they require skills and capabilities that are beyond that of the staff currently employed.

4. IT Outsourcing

IT outsourcing is one of the most common types of outsourcing.

It involves hiring external professionals to handle activities relating to information technology.

Because technology is paramount to many business operations today, companies would rather have third-party professionals and experts handle such activities as opposed to having in-house employees perform them.

IT outsourcing is particularly helpful especially when IT operations fall outside the core operations of the business.

Why do companies outsource staff?

Companies usually have varied reasons for outsourcing.

However, it usually happens because of a shortage of skilled labour or because of the need to save on costs.

But whatever the reason, the end goal is generally the same – to produce high-quality goods and services that a given company finds challenging to develop by themselves.

Outsourcing is a great business strategy that depends on the company’s context and actual needs.

Here are some of the most common motives behind outsourcing for businesses and companies.

• To reduce costs – Lowering operational and labour costs are among the primary reasons why organizations choose to outsource. Offshore outsourcing has proven to be more cost-effective compared to other types of outsourcing.

• To focus on their core business processes – Many business operations tend to be time-consuming and demand a great deal of effort. Yet, these operations are not related to the business’s core operations. Outsourcing allows companies to focus on their main operations while delegating mundane processes to external agencies.

• To leverage global talent and their knowledge base – Having access to world-class capabilities, through offshoring, enables companies to tap into world-class services which can enhance a company’s competitive advantage in the process.

Is staff outsourcing good for employees?

Yes, outsourcing may be good for talented employees as it allows them to focus on what they do best according to the organization’s core processes.

However, employees may also suffer from low morale and motivation as outsourcing can directly affect their own job security.

Employees might not “feel at home” as their sense of belonging may diminish.

So, as much as job outsourcing has its benefits, this strategy also has its drawbacks and risks.

How to choose the best staff outsourcing services

There are many service providers in today’s market.

However, finding one that meets your job requirements can be challenging.

It would also be best to choose an outsourcing service provider with who you can have a fruitful relationship within the present and the future.

Here are some considerations you should make when looking for the best outsourcing service provider.

• The cost of the service
• The reputation of the service provider
• Other offerings that come with the service
• Experience of the service provider
• How much the service will help you in freeing up resources to focus on your key competencies
• Determine if the service provider is a good cultural fit
• Consider other contractual obligations i.e., the span of control, recruiting charge buyout fee and an option to end the relationship.

Recent trends in staff outsourcing

Outsourcing is a great business strategy with a ton of benefits such as improved efficiency, reduced operational costs and access to skilled expertise.

As the year 2022 begins, there are a few trends in the business process outsourcing (BPO) industry that you should watch out for.

Increased remote working efforts

Remote work became mainstream after the pandemic.

As we head into a post COVID world, expect companies including outsourcing service providers to make this more of a permanent work option for their staff.

Utilization of cloud computing

More and more businesses are digitizing their business processes.

The importance of cloud in business operations could not be more evident.

Forbes estimates that about 77% of all businesses have one of their processes in the cloud.

For this reason, expect an increase in cloud services in collaboration with outsourcing service providers.

Nearshore outsourcing

Nearshore outsourcing simply refers to sub contracting services from professionals in nearby countries.

Chances are, professionals in neighbouring countries might be a better cultural fit compared to professionals in other countries far away.

Besides, this outsourcing option provides a better work collaboration compared to others.

Conclusion

Staff outsourcing involves asking for help outside your company’s abilities. This practice is a common business strategy designed to cut costs while improving product/ quality.

There are different types of outsourcing all of which are different and target different business operations.

Nonetheless, the aim remains the same; to hire professionals who can help with business activities that a company finds challenging to do themselves.

Just like all business models, outsourcing is not without risks.

Some risks that come with outsourcing include slow turnaround times, reduced control, and cultural barriers.

For this reason, we recommend working with a distinguished HR service provider to overcome most of these barriers.

Flexi Personnel is a top HR service provider with years of experience in this domain.

We offer a wide range of professional employment solutions including staff outsourcing services, HR consultancy, executive search, interim management, payroll and tax administration just to mention a few.

You can also check out our guide to staff outsourcing if you have further questions about this topic.

Alternatively, contact us today for this and other HR solutions.