Outsourcing is a concept in which a company transfers the management or day-to-day running of activities to another establishment. It could also assist in sourcing assets and expertise that a firm lacks.
What outsourcing does is that it generally helps a company improve in performance. When a company lacks the expertise on some vital concept or is low on qualified staff with no knowledge of where to find them, the duty of searching can be transferred to another firm.
Also, outsourcing will come in handy when a company decides to expand its brand offshore. Outsourcing to another firm will help you determine the possible challenges that might ensue in the course of expansion, and they can also research the local business of the target country, meet with appropriate authority, and leverage on how to run the company without violating the local laws.
Forms of Outsourcing Agreement
- Off-shoring: This involves transferring a company’s responsibility to a firm of another country.
- On-shoring: This deals with employing the services of an outsourcing company situated in a nearby country.
- Near-shoring: This engages the services of outsourcing companies located in the same country seeking to outsource.
Benefits of Outsourcing
1. Cost Reduction
When outsourcing deals with the hiring or transferring of employees from an outsourcing company, such a company becomes the legal employer of the employees. Any risk or damages that ensue during the cause of business is shared between the original employer and the legal employer.
2. Exposure To Professionals
Outsourcing establishments know where to find the best brains when their services are sought; they take it upon themselves to hire top professionals for the efficient running of the host company. They help provide professionals with essential skill sets.
3. Cost Reduction
Rather than providing extra space for new employees, an offshoring form of agreement can be entered; with this, the new employees don’t need extra as they would have to work remotely.
Problems of Outsourcing
1. The Problem of Reliability
You need to ask yourself while on the verge of outsourcing is; how well can you trust the firm you’re contracting for outsourcing. Are they reputable enough? The lack of reliable outsourcing firms will hinder completely entrusting a company in the hands.
2. Conflict of Interest
Both the party seeking to outsource and the outsourcing company have different interests, and if not carefully managed, it can lead to conflict. For example, an employer could outsource in order to cut costs while the outsourcing company desires to make gain from rendering services. The difference in interest could lead to an unwanted conflict.
3. Hidden Cost
Sometimes, after agreeing on payment, outsourcing companies tend to bring up modifications in payment in the defense that prices of commodities have increased.
To every problem, there is a solution. The problems of outsourcing can be solved in different ways, one of which is the use of employer of record services.
How Employer of Record Can Help Solve Legal Issues
EORs are companies employed by another company to oversee the legal responsibility on behalf of the hiring company. They perform roles that another company deems to be overwhelming. In the case of companies seeking expansion, they find out the existing policies, local tax laws, etc., on behalf of the company to avoid violations of the rules.
EOR gives some reliability should in case any liability arises. Unlike some outsourcing companies that can not be traced, when the employer of record services are employed, you can rest assured of your company’s safety, and when a problem arises, you have those you can hash it out with.
When it comes to the fear of losing your company to an outsourcing company, EOR gives better assurance as they are only the legal manager of the company on paper. However, the ownership remains with the employer, and once the term for business is over, the shared ownership returns to the original owner.
In summary, outsourcing alleviates the stress and uncertainty of running a company. It also exposes the company to a skilled management team. When a company does not have the required skill set to perform a certain activity, hands can be hired through another company to help the company realize the set goal.
However, outsourcing also comes with its risks as well. These risks can come in the form of conflict of interest on the part of the hirer and the hired company or the problem of hidden cost and the problem of trust and reliability, but not to worry, employment of record services is literally in existence to solve the problems.