Outstaffing vs. Outsourcing: What is the difference and which one works for your business?

What are outsourcing and outstaffing

In the current economic realities, outstaffing is becoming increasingly popular, which many confuse with outsourcing. Of course, these concepts are similar in many ways, but some differences exist. So what are the main differences between outstaffing and outsourcing, and what is it all about?

Both of these processes are associated with the involvement of employees from outside. But the scheme of their interaction with the employer is different.

When outsourcing, the customer transfers some function to the contractor, for example, accounting, and receives only the final result. Employees work on the territory of the outsourcing company, and the customer does not control their current activities.

When outstaffing, employees are located on the customer’s territory and under his direct control. But legally, they are accepted into the staff of an outstaffer.

Functions performed by the involved employees in outsourcing and outstaffing

One of the main differences between these two processes is the specificity of the functions performed by the involved employees. If outsourcing conducts several fairly specific tasks that are not the main ones for the organization, then outstaffing is a slightly different situation. Engaged employees perform core functions and duties, i.e., carry out activities that are the company’s core.

In particular, outsourcing performs the following functions:

  1. Accounting services;
  2. Personnel issues;
  3. Maintenance at various levels;
  4. Transportation and other logistics;
  5. Minor building work.

Outstaffing is a broader range because it is characterized by removing employees from the state, although they continue to perform their professional duties.

Such cooperation schemes are typical for banking organizations, although they may also occur in other industries.

History of outsourcing

In the nineteenth century, the United Kingdom and several other European countries began to purchase services to hire security officers, domestic staff, accountants, and stenographers.

In the 20th century, outsourcing began to develop rapidly. One of the key figures can be called the company General Motors, which received a powerful impetus for development thanks to the attracted qualified personnel.

In the 1950s, the first highly specialized companies began to appear in the United States, which were engaged in searching and recruiting personnel in a specific field. For example, an IT outsourcing company or a company that hires accountants for small industries. Such services have become very popular because they have helped save the budget by not hiring full-time employees.

Outstaffing mechanism

One of the areas of personnel policy that has become widespread in the field of labor relations is outstaffing. It represents the use of hired workers without staffing in the company. In this case, providing services to the customer enterprise is the provision at its disposal of a certain number of employees, whose role is to provide services or work specified in advance by the contract. Relations of a civil law nature do not directly arise between the hired personnel and the customer. Outstaffing is synonymous with categories such as agency work, rent, or personnel leasing. There are two varieties:

  1. Use of newly recruited employees.
  2. Involvement of the personnel, which is part of the enterprise, in new areas of activity.
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The first type is that the enterprise receives at its disposal employees who are well aware of the necessary activities and can perform duties at the customer enterprise. This mechanism is used to reduce the tax burden and reduce their staff. An example of the savings that outstaffing provides is the complete abandonment of the personnel department since the task of selecting employees falls entirely on the shoulders of a third-party company. Outstaffing is the only effective way to organize the work of seasonal enterprises.

In the second variety, the provision of own personnel to other institutions is only a mechanism for optimizing activities. It is used within the divisions of significant holdings, where, if it is necessary to replace employees and optimize labor, the time and money spent on moving them between divisions would be unreasonable and inconvenient for both the employer and the employees themselves. Sometimes, outstaffing is used temporarily to reduce costs while retaining qualified personnel.

Despite the external similarity, outsourcing and outstaffing have several differences. The first term refers to the involvement of third-party specialists to perform services, and the second term refers to the transfer of employees under the management of another enterprise. Upon closer examination, the main difference lies in the words of work of the involved personnel. Outsourcing involves specialists’ temporary or periodic involvement to provide specific, strictly defined services.

Goals of outsourcing and outstaffing

When the maintenance of a highly qualified employee in an enterprise is unprofitable and inefficient, an outsourcing scheme is used. The amount of work required in this area does not cover the total working time of a specialist. And outsourcing provides adequate remuneration depending on the volume of consumed services.

Executing companies take care of the correct distribution of their employees’ time so that they can serve a large number of enterprises in the shortest possible time. The requirement for specialists to work in the outsourcing field is to find the right solutions to the tasks quickly.

When outstaffing, the main goal is the practical organization of the entire labor complex of the enterprise to achieve maximum cost savings. The lack of own staff of employees can help overcome the legal barriers that put forward the organizational forms of enterprises. Suppose an individual entrepreneur has a staff limit of 15 persons with a patent scheme of work and 100 for using a single tax. In that case, outstaffing will help him since, from the point of view of legislation, the number of employees will not increase when attracting outside personnel, while the size of the actual states may exceed such limits.

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Outstaffing helps to avoid other issues related to the organization of labor, providing an opportunity to reduce the number of employees in the accounting and personnel departments. Contracting companies select candidates according to precise customer requirements and participate in employees’ work only from a legal point of view.

Outstaffing and outsourcing: main differences

What is the difference between the concepts of outsourcing and outstaffing? Most often, this is the management of personnel and legal issues, accounting, production of secondary and auxiliary products, and sales of goods.

Outstaffing – a form of employment in which personnel is employed by one organization but is provided “on temporary use” to another company. It is suitable for any sphere of economy, starting from production and ending with trade. The peculiarity of this personnel selection is that legal employees remain assigned to the outsourcing company. They are bound by a temporary contract with the customer company, according to which the company undertakes to pay the agreed amount after completing the work.

Outstaffing is often confused with outsourcing. However, these are entirely different services. They have legal and functional differences.

The primary meaning of outsourcing is to transfer parts of business processes to third-party companies, which is the main difference between outsourcing and outstaffing. But there are other differences. An employee of an outsourcing company, as a rule, receives a job, a salary, and several job instructions. In essence, he differs from a full-time employee only because he is hired for a short period. If an outsourcing company attracts a specialist, his schedule is usually not standardized, and he is only required to perform the assigned tasks.

Examples of using outsourcing and outstaffing

Both of these processes relate to the issue of hiring personnel from outside, but this is enough of a general characteristic. To differentiate between the two concepts, it is necessary to clearly understand their specifics, functions, and definition.

Outsourcing is a unique form of labor relations between a company and a provider organization specializing in providing certain services. The specificity lies in the fact that the company resorts to the help of external labor directly at the moment when it is essential.

For example, a company is engaged in producing some product, after which it prepares it for sales. Advertising services are needed to make the product known everywhere for the load to move.

Maintaining an advertising department from the moment the product is manufactured is not always practical and profitable, so the company resorts to the services of third-party help – an advertising agency.

The same practice occurs when a system administrator or programmer is involved. A company may not need it permanently because the need to install programs or software does not arise so often. The preferable option, in this case, seems to be attracting the programmer from the side, paying for his services based on the actual work performed.

As for outstaffing, there is a slightly different interaction scheme here. The company has its staff but outsources a specific part of it to other organizations-providers.

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In outstaffing, employees continue to work at their workplaces, i.e., in the companies themselves, although officially they are listed in other organizations.

A company that includes such employees is called an outstaffer. There is also another cooperation scheme. An outstaffing company has at its disposal a staff of employees whose services may be required by other companies. These can be loaders, welders, bank employees, and other specialties.

An outstaffing contract is drawn up, based on which a company transfers to another organization the staff of its employees to perform profile tasks.

Outstaffing is the IT sphere.

All kinds of projects that require the improvement of platforms or the installation of fundamentally new software, related to the reconstruction of the engineering of some business processes, its qualitative reorganization, or planned expansion can’t go without IT specialists, especially when there are relatively limited time frames. But the project is coming to an end, and IT specialists in increased numbers are no longer needed. What to do? Give them another job? Dismiss?

And here comes one excellent and intelligent decision – ordering IT outstaffing. It means resolving all issues at a higher quality level, which is more profitable than ever in such situations.

When you open a company branch in a city far from you (and sometimes in another country), the first thing to do is to find good staff. But for this, at least you have to send a good personnel officer. The outstaffing system offers recruitment services in a remote location. The IT sector is a different sector of the company’s work. Any personnel policy should be built based on priorities and motivation for developing business ideas. IT is more of a secondary support structure. To order IT outstaffing, in this case, is to find an excellent alternative to a full-time employee.

IT outstaffing is an excellent decision when solving issues related to the expansion of business by small companies. This process can qualitatively deal with the needs of optimizing tax accounting in an enterprise. Its use is exceptionally acceptable when an increase in staff can entail significant financial losses in the “taxes” section.

Quite often, there are restrictions on the number of employees of the enterprise, even in reasonably large holding companies. In such cases, it is not possible to increase the number of staff. But the development and growth of key indicators of the entire business may well be facilitated by IT outstaffing.

When hiring an IT developer for a specific technical work, staffing guarantees a high level of employee qualification, time-tested and provided by the experience of one or another specialist. Ordering IT, outstaffing means significantly saving your time searching for an IT professional and saving your money related to various labor issues. You pay only for the work, and IT outstaffing solves all other tasks.

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