Exploring Labor Outsourcing: Definition, Benefits, and Best Practices

The practice of outsourcing has been a continuously growing trend over the past decade. Its demand is also expected to rise, as more and more businesses tap into outsourcing a couple of their essential and non-essential tasks to third parties. 

Whether you’re a startup or an established company, outsourcing helps you improve your operations and increase your profitability over time. It can be of great benefit in expanding and serving more customers openly, especially during crises and calamities.

Here are a few things you should know about outsourcing labor to find out if it suits your business needs.

What Is Outsourcing?

Outsourcing, by its definition, is the way businesses delegate and offload certain services and functions to a third party. The third party, in the form of workers and computer systems, would then carry out tasks and handle operations for that business or organization. This business practice might sound more familiar to you as Business Process Outsourcing (BPO).

Types of Outsourcing

Now that you know the definition of outsourcing, it’s time to discuss its types. There are three different classifications of outsourcing: offshoring, onshoring, and nearshoring.

Offshore Outsourcing

Offshore outsourcing is the process of delegating parts of a company’s business functions to an external provider located in an offshore location. Western businesses often outsource to offshore locations like China, India, Vietnam, and the Philippines to enjoy the various benefits they offer.

 

Onshore/Domestic Outsourcing

Onshore or domestic outsourcing is the delegation of business functions to a BPO company located in the same country. Outsourcing locally helps businesses focus on their core operations. The closeness in proximity also makes it easier for quality control officers to check and handle the manufactured products and services.

Nearshoring

Nearshoring is the outsourcing of a company’s processes to external providers located in a nearby country. Usually, the nearshoring destination shares a border with the company’s headquarters. Companies that nearshore enjoy the same time zone and geographic proximity as their outsourced office.

How Does Outsourcing Work?

In the simplest terms, outsourcing happens when you choose to offload responsibilities and positions (even an entire department) out of your organization to a third-party service provider. This means unlimited growth without allocating too many resources, which means that you could focus on departments that hold your company’s core competencies.

With outsourcing, your business is actively participating in providing more job opportunities domestically and internationally, since offshore outsourcing has been ramping up for the past decade or so.

Outsourcing jobs isn’t a new venture for some of us—it’s merely a lucrative industry that’s friendly enough for rookies and seasoned professionals.

When outsourcing, all the processes are streamlined and laid out to be followed to the letter. You, as the primary decision-maker, can still call the shots when choosing outsourcing partners.

Roles of an Outsourcing Company

In terms of deciding what tasks to outsource, it usually depends on your company’s growth and demands. Specifically, your number of employees, the type of talent and expertise present, resources, and, of course, your business revenue.

There are plenty of roles and job positions that you can safely outsource to independent contractors and third parties. These positions can be within the ‘front office’ section (customer and client-facing) or within the ‘back office’ section (administrative tasks that don’t involve customer service). Here are some of them:

Sales and Marketing

It’s no doubt that sales and marketing roles are made to support and co-exist with each other. Sales-related positions, such as cold calling and inbound call receiving, can be outsourced and offloaded to your trusted outsourcing partners.

Marketing roles can also be contracted, provided that the goals and quotas are met as required.

Digital Marketing

With the recent upward trend of digital marketing and the roles it’s connected to, it’s not that hard to outsource positions that people are clamoring for right now. Numerous digital marketing companies are equipped with SEO specialists, graphic designers, email marketing experts, and more.

Before choosing a service provider, do your research and look for an agency that embodies or is aligned with what you need and want. In simple words, you have your pick of the crop.

Documentary Requirement Management

This job function plays a vital role in securing, organizing, and controlling the information of a business. As your business grows, a splurge in the volume of your transactions is also imminent. The growth of information and the increasing complexity of requirements are also expected.

A trusted outsourcing firm can provide you with document management software that adheres to all government regulations. At the same time, it allows you to store, scan, retrieve, and shred information while reducing privacy risks.

Office Management

Aside from the lack of finances, startups and small to medium-sized businesses often face other challenges, including a shortage of tools, resources, and manpower.

A concrete example of this is hiring an in-house back-office team. It requires expenses such as office space, technological equipment, and software tools. These requirements, if added up, could result in a considerable expenditure, not to mention the various overhead costs. Outsourcing allows your company to meet your workplace needs while saving on costs.

Applicant Recruitment and Screening

The recruitment process could be a tedious task. Finding the right talent to meet a company’s business requirements is not that easy. It requires staying up-to-date with recruiting technologies, asking the right questions, and nurturing relationships with successful applicants.

Recruitment process outsourcing (RPO) enables a more holistic approach to screening and recruiting the ideal candidates to fulfill your specific job requirements.

Employee Training

As businesses step up their game, so should the people behind it. Hiring employees should also come with training. This helps them improve the skills that they already possess and contribute more to the business success.

Outsourcing training programs will help your business attain its competitive advantage. This is because training service providers are made up of experts who have a passion for delivering successful training solutions. Additionally, by outsourcing specific training programs, you gain an advantage in tapping into experts with certified industry experience and high-quality resources. 

Workforce Management

One of the challenges in a workforce is maintaining and improving best practices within the organization. A growing company also demands additional job responsibilities, and sometimes it can be pretty overwhelming for the people the company already has.

By outsourcing certain job roles, specifically administrative tasks like bookkeeping and order taking, accounting, and recruitment, you can turn over these tasks more efficiently and sometimes even faster.

Benefits of Outsourcing

Here are some of the benefits of outsourcing your day-to-day operations:

Process Optimization

Firstly, outsourcing can help you either create or improve your processes. Whether you’re new to outsourcing or have been doing so in the past, your service provider can help you simplify any process you have and align it with your goals and objectives.

Not only this, you can learn more about how a part of your business works when you outsource it. This can introduce you to streamlining and using SOPs and metrics to measure your successes.

Cost-Efficiency

Delegating your services offshore also helps you keep your operations cost-efficient. Compared to in-house hiring, outsourcing enables you to save on resources and costs needed in building a team, such as office space, tools, equipment, and even salaries.

Businesses mainly outsource because it can help them save up to 70 per cent on employment costs. This is especially applicable to companies that prefer offshore outsourcing.

Employees in offshore locations have a lower cost of living, which is why they can live comfortably on a US$600 monthly salary. Compared to the wages of an employee in your home country, this is very favorable for any Western company.

Business Continuity

Even businesses can be affected by unavoidable calamities in an area. When this happens, operations are halted, whether front or back office, and this affects the services you provide to your customers.

One of the benefits of outsourcing is that your service provider can provide an effective business continuity plan for you. Since your team will be miles away, they won’t be fully affected by the calamities that might occur in your area, such as hurricanes and earthquakes.

Shared Risk

Hiring a team comes with several risks. For instance, in-house employment usually costs more due to the high cost of living in the West. This usually affects the costs of different aspects, including tools, equipment, and even the salaries of workers. Startups with minimal funding often struggle to keep up with these, and their businesses frequently fail during their first year.

With outsourcing, you get to share all of these risks with your service provider. They will take care of the requirements needed for hiring, including office space, documentary requirements, and the hiring and recruitment of employees.

You, meanwhile, get to handle and manage the team together with your service provider through co-managed solutions. Whenever you have any adjustments in your processes or metrics, they can help you implement these in your team.

Larger Talent Pool

Offshore outsourcing exposes companies to a diverse range of talents from around the world.

Previously, Western businesses only delegated their manufacturing and back-office functions to BPO firms. However, through the years, these companies realized that offshore talents have so much more to offer. Today, some companies outsource even their core operations, including engineering, software development, and IT.

Flexibility

Another benefit of outsourcing is that you get to hire employees more flexibly, depending on your demand.

Some of your roles won’t always be needed depending on the demand and frequency of your tasks. With this, keeping and maintaining your workforce in-house might cost you more in the long run.

This is where project outsourcing comes in. You can hire a freelancer or a team and delegate tasks depending on their demand and volume, within a short period. This is mainly recommended for roles such as design or accounting.

You can also convert a full-time salary into a pay-what-you-need service. This frees up your cash flow for expenses or investments in other parts of your business.

Having ample room in your cash flow is crucial for investing in revenue-generating activities. If your company isn’t saddled by unnecessary fixed costs, you can be flexible and adaptable to trends, new ideas, and changes in the market.

Your external provider would also handle your equipment and other logistical needs for your operations. You won’t need to purchase them for temporary-based projects anymore. Not having to make these investments and worry about their unnecessary costs will make it much easier for your business to grow.

Fast Recruitment

When you decide to partner with a recruitment agency, you will have access to a pool of skilled and experienced candidates who have already been assessed and trained to be dedicated to your industry needs. They are ready to start working when your company needs them.

Your outsourcing firm will provide candidates the chance to be evaluated during a trial period, just to see if they are a good fit for the role you’re seeking. This can be achieved with the temp-to-hire approach, in which the employee and employer agree that candidates may, or may not, be offered the job when their temporary project ends.

If the job was formally offered by your provider, your company can decide if you want to keep your teams in a contract, whether it is contingent, freelance, or even a full-time position.

Focus on Core Tasks

Most entrepreneurs have become accustomed to multitasking that they often end up feeling burned out. They also don’t have enough time to focus on more critical tasks that would enable them to grow and expand their business. You might find yourself in the same situation, especially when you are just starting up.

Outsourcing takes this burden away from you. Third-party providers can take on non-core, repetitive tasks and delegate these to talents who can do them better. Meanwhile, you get to focus on what your business does better and how you can improve it.

Round-the-Clock Services

It is nearly impossible for you to hire in-house customer service teams that would work the graveyard shift. Aside from being costly, you might also find it difficult to hire local employees who will agree to do the work.

Offshoring can provide you with the 24/7 service your customers need. Since most outsourcing companies work in a different time zone, you can delegate after-hours or even 24-hour support to them.

Customer Satisfaction

Satisfied customers are more likely to return to your business, fostering customer loyalty and increasing their lifetime value. When you outsource your services efficiently, you have the chance to improve your products and services, streamline your process, and make it easier for your customers to reach you.

With this, you get to satisfy your existing customers and attract new ones more easily. This increases your profit and enhances your chances of growth and expansion.

Grow Your Business Successfully

Make the most out of outsourcing to scale your business. When you outsource, you boost your customers’ satisfaction, expand your business, and stay competitive in the marketplace.

Outsourcing not only helps you to unload all the extra work, but it also pushes you to keep growing your business. Choosing to outsource with a reliable external provider, such as SixEleven BPO, will give you the peace of mind that your operational tasks are expertly handled.