Any business needs qualified personnel. But not all companies have the opportunity to hire the required number of employees due to high costs. That is why many organizations use the services of freelance specialists as necessary, transferring the management of their business processes to third-party companies. Organizations engaged in the search for highly specialized personnel first appeared in the USA in the 1950s, and in Ukraine this service began to be in demand only at the end of the 90s.
Let’s try to understand the peculiarities of the concept of outsourcing and outstaffing, pluses and minuses of these services. Due to the fact that these directions are quite new for the Ukrainian market, many companies confuse the concepts or interpret them in their own way, so it is important to clearly outline the difference between outsourcing and outstaffing.
Outsourcing refers to the transfer of certain responsibilities to a third-party company or private specialists who are not directly related to your company. For example, instead of organizing its own IT department, the firm signs an agreement with executors (a specialized organization or private individuals). In this case, you don’t have to worry about equipping workplaces, taxes on employees. It is quite simple to pay staff salaries, which are often lower compared to full-time employees.
Any processes can be outsourced, for example, maintenance of computer networks, accounting, transport, cleaning of office premises. In return, you will receive quality service and detailed reports on the work performed.
It is worth using outsourcing in several situations:
Let’s highlight the main advantages of outsourcing:
There are also some disadvantages of outsourcing, which are related to the risk of leakage of confidential data. Also, the company depends on external contractors, the quality of whose services may not always be at a high level. That is why it is important to choose a contractor with a good reputation.
Outstaffing refers to the involvement of external employees for project work (eng. outstaffing – taking personnel out of state). In this case, the freelancer is not a freelancer, but a specialist who is part of the contractor company’s team. It turns out that one company “rents” an employee from another for some time, necessary for the implementation of the project. The company transfers the payment for the specialist’s services not directly to the employee, but to the intermediary for whom he works. The latter itself calculates with its staff.
Outstaffing is used in several cases:
Outstaffing is a great alternative for small and medium-sized companies with less than 100 employees. This service is in demand in times of crisis, when it is difficult for organizations to maintain a full team. But there remains a certain amount of work that must be done without fail.
Outstaffing provides significant advantages to the employer:
The outstaff scheme is used to hire IT specialists, accountants, lawyers and translators, analysts, seasonal workers. The benefits for employees are the opportunity to engage in various interesting projects, avoiding the routine. Over time, an employee who performs his duties well may, if desired, become part of the company’s permanent staff. The contractor company usually values its reputation, so cases of violation of the labor rights of employees are very rare.
Despite a large number of advantages, outstaffing has not become the most popular form of personnel recruitment due to several disadvantages, the most important of which are problems in communication between the company and the employee. When all communication with personnel goes through an intermediary company, he needs more time to understand the project. In addition, the company often offers various incentives and bonuses for its permanent employees, and freelancers lack motivation, which leads to staff burnout.
Despite the fact that outsourcing and outstaffing imply cooperation with performers who are not part of the company’s permanent staff, there are significant legal and functional differences between the concepts, which can be presented in the form of a table for clarity.
| Category | Outsourcing | Outstaffing |
| The need to conclude a contract | With a company or private person that provides services | With an employee who is being searched for by a recruitment agency |
| Term of employment of an employee | Long-term contract with the possibility of extension | Short-term cooperation (usually up to 9 months) |
| Workplace | The territory of the contractor company or the personal territory of the performer | The territory of a company that provides personnel, or the office of a company |
| Pay | Depending on the volume and quality of the work performed | Fixed payments |
| Benefits for the employer | Savings on office maintenance, assigning work to narrowly specialized specialists, regular reporting on work performed | Ability to “rent” employees for time to perform specific tasks, saving on wages by calculating fixed payments |
Many are sure that the services of third-party specialists can only be used in the field of IT. There is a small amount of truth in this, but there are other areas in which outsourcing is in great demand: accounting, jurisprudence, logistics, catering, cleaning, repair.
Another false stereotype is related to the fact that outsourcing and outstaffing is available only to large companies. In fact, it turns out to be the opposite: turning to external specialists is a good way out for small organizations that are not profitable to keep a separate specialist on staff to perform one or another job.
Here are some examples of hiring freelancers. Outstaffing: for the organization of an international conference, the company needs interpreters for simultaneous translation. After the end of the conference, there will be no need for such employees. Therefore, they are hired for a certain time through outstaff.
Outsourcing: A car dealership prefers to outsource the services of an IT company instead of setting up its own IT department to develop applications and maintain a website.
To clearly mark the difference between the two concepts, one more example can be given. Suppose you conclude a contract with an outsourcing company that provides IT services. If you want to create a site, the company itself decides which employees will take on the task and when exactly they should start work in order to complete it on time. If you need additional development of the landing page, you will contact the company again with a new task, and they themselves will decide with what resources to achieve this. Outstaffing assumes that the company will allocate employees for a certain time and you will distribute their duties yourself.
Finally, it is worth adding that according to studies conducted by the independent organization Whiteline Research, 89% of companies are satisfied with the services provided by freelancers. Outstaffing and outsourcing enable companies to optimize business processes, reduce personnel costs, solving the problem of attracting specialists for a short or long term. The main thing is to correctly approach the choice of a contractor company or a specialist to whom you will entrust the performance of certain duties in order to personally see all the advantages of outsourcing or outstaffing.
