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Why Do Companies Outsource Employees: The Benefits

Here we will discuss why companies outsource employees and why it benefits society and the economy.

It started in the 1980s with the outsourcing of functions to such places as Bangalore, Bombay, and Riyadh. But in the 1990s and 2000s, the discussion was dominated by the outsourcing of call centers in India, Brazil, and China.

Following that, it was the outsourcing of call centers, back-office functions, software development, data processing, manufacturing, administrative support, and many more. In fact, India alone has about 1 million call center employees.

Controversy and public outcry followed the hiring of cheap foreign workers in the United States for jobs that Americans could have easily done. However, the debate on outsourcing jobs is still on.

But the public has come to recognize the beneficial aspects of outsourcing. As a result, the global outsourcing industry continues to grow rapidly, and it contributed $2.06 trillion to the global economy in 2017.

Here we will consider the reasons why companies outsource employees.

Outsource the best tasks

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Of course, an outsourced worker will not work hard, but an outsourced worker is less likely to steal your company's productivity because she doesn't have to work as hard and take on those tasks herself.

For example, using outsourced IT services by Irdeto Software Technologies in Singapore increases the productivity and accuracy of global internet traffic monitoring.

A highly skilled software developer in a company like Accenture can produce more efficient and effective software without the need to work long hours and at the same time does not risk the safety of her own company's applications, data, and users.

Also, the use of outsourced workers gives you more flexibility in terms of scheduling, travel, and training time.

Outsource is safer

As it is said, all labor-intensive jobs are prone to misuse. However, outsourcing provides many benefits that labor-intensive jobs don't:

Outsourcing is a result of the companies' economic condition. Outsourcing, therefore, is an economic issue, whereas labor-intensive jobs are primarily a societal issue.

Employers can make adjustments that can reduce the potential risks. Outsourcing lets the company focus on its core business.

The business organizations will save money to cover the employee benefits. Finally, even though outsourcing is advantageous, it is not as safe as when an employee is working in his or her own company.

Fewer regulations

An important reason why businesses outsource their tasks is the risk of regulations, laws, and policies that are specific to each country.

Just as it was the case in developed countries, the lawmakers in developing countries are yet to have an open mind and allow for the outsourcing of jobs as long as the employee is a high-skilled worker.

To protect jobs, the workers in developing countries can choose to work at a less costly company. The workers are restricted by laws, policies, and regulations.

Workers in developing countries do not have a choice, because they either have to work at the company or live in extreme poverty.

With more companies outsourcing jobs, this issue will slowly change. This trend will undoubtedly be a change that brings many benefits.

Companies outsource to save money

photo of dollar coins and banknotes

For many businesses, there are good financial reasons for outsourcing.

Hiring someone full-time can be extremely expensive. Companies spend an average of around 50 percent of their annual budget on salaries.

For this reason, it is cheaper to hire an outsourced worker. Outsourcing will also allow companies to save on the cost of benefits.

Also, outsourcing of jobs will reduce the possibility of someone getting injured or making a mistake.

The disadvantages of outsourcing

The biggest disadvantage of outsourcing is a decrease in the overall productivity of the company. A highly skilled worker can have better productivity than an employee working part-time or working with an outsourcing agency.

In fact, a highly skilled worker has more knowledge and has experience working in different roles. This allows the outsourcing agency to have workers with high-skilled skills.

The companies who want to save money must invest in training the new workers. However, it will be very hard to find a highly-skilled workforce if the company doesn't have enough employees.

Due to the shortage of workers, the companies who outsource workers risk not being able to increase their productivity or output. Instead, it is expected that they will have a decrease in their output.

On the other hand, companies that do not outsource are faced with many challenges. Some of the problems are:

Employees who were trained in their company lose their knowledge

Employees who were trained at an outsourcing agency may be more expensive than the other employees. It is very hard to train new employees.

Lack of experience, because the new workers usually come from a different country. It is hard to establish a link between the outsourced employees and the company.

Not all companies are skilled in quality control.

Companies that hire new employees must also invest in training them.

Other solutions for the cost of outsourcing

A group of friends at a coffee shop

The cost of outsourcing is a big concern for companies who want to outsource their jobs.

However, several companies provide quality control solutions that can help companies lower their costs.

Some of these solutions are:

  • The use of the same language used in the country of origin by outsourcing workers.
  • Allowing the employee to speak the native language and making them understand the market.
  • Firing workers who do not perform or who are not cost-effective.
  • Requiring the new employees to complete the same training programs as the rest of the company's employees.
  • Offering lower salaries.
  • Introducing special packages, such as permanent positions and flexible positions, to outsource workers.
  • These solutions can be especially helpful for companies that do not want to have bad practices of outsourcing.
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