Types and types of outsourcing
Based on the areas of activity and the number of services ordered, outsourcing can be roughly classified as follows:
- Full outsourcing. As a rule, it is used in the field of information technology, public relations and public relations and accounting, that is, when the services of attracted specialists are provided to the customer in full.
- Phased outsourcing. As a rule, it is used in the provision of legal advice, support of commercial transactions and audits conducted by independent specialists. Such services are sporadic, that is, gradual, in nature.
- Recurring outsourcing is similar to incremental outsourcing, but with minor differences. The need for it arises when there is a need for the services of employees conducting professional certification or consultations.
Based on their professional functions, they distinguish between production, economic, management, accounting, and information outsourcing.
Outsourcing and its types: general overview
By the word itself you can understand that it is borrowed. It came into the Russian language from English, and this word consists of several, which in translation mean “resources from the outside” or “external source”.
It is important to know! In other words, outsourcing is the attraction of human resources outside the company for a certain time to complete assigned tasks. That is, the customer organization transfers part of its functions to the outsourcing company. This could be calculating wages, creating a vacation schedule, consulting on legal issues, and more.
Such an action, as is commonly believed, allows significant savings on salaries for employees who would work in the organization on a permanent basis.
There are two areas of specialization for outsourcing organizations:
- having a narrow specialization;
- providing specialists of different categories and professions.
Of course, the second option is more profitable than the first.
However, this is not an exhaustive classification of this phenomenon. Outsourcing can be divided according to the following criteria:
- The entity to whom the services are provided. The division here is simple: small, medium, large businesses.
- The nature of the service provided. This criterion can easily be confused with the previously described one (service sector), but in this case we mean the duration and regularity of service (seasonal work, temporary, short-term, permanent).
- According to the degree of influence on the customer’s activities. There is a distinction between functional (the impact on the employer’s affairs is minimal) and business process outsourcing (the hiring person involves a specialist in the company’s working algorithms as a partner).
This classification affects the drafting of a service agreement, so it is worth taking a closer look at what type of external resources will be involved in the company’s work.
There are many areas of specialization for outsourcers:
- Accounting, analysis, accounting and audit, tax reporting.
- Programming, administration.
- Cleaning, in other words, cleaning of premises.
- Legal services.
- Advertising services.
- Educational services.
- Health care.
- Private security.
- Food sector.
- Repair and other construction work.
- Insurance.
The list goes on and on.
Advantages and disadvantages of outsourcing
By entrusting third-party organizations with highly specialized functions, the administration of the customer’s company gets the opportunity to manage only strategically important business processes, while saving money and optimizing the cost of attracting new employees.
For example, most small private firms do not have the opportunity to employ accountants and advertising and information technology specialists. They satisfy their need for these specialists by concluding outsourcing agreements with auditing, advertising and IT companies.
The benefits of the outsourcing order process are obvious:
- The customer saves money by reducing the company's staff.
- It becomes possible to concentrate all the resources of the enterprise on the main directions of development. There is no need for administration control over related and additional business processes, since they are transferred to outsourcers.
- The customer's company receives high-quality services at a high professional level using advanced high-tech technologies that are not available at a separate enterprise.
At the same time, these transactions also involve some risk associated with the possible leak of confidential information. The customer may lose, to some extent, control over the business activities of the company and control levers.
If outsourcers receive the majority of the company's administrative functions, then the costs of paying for their services may increase unjustifiably.
The law still does not regulate the activities of outsourcing entities. Changes in federal laws and the Civil Code in 2014 apply only to outstaffing, in which hired workers, and not services, are placed at the disposal of the customer.
If the outsourcer is fully responsible for the quantity and quality of its activities under the order, then the contractor under the outstaffing agreement is not responsible for the personnel leased out.
An outsourcing agreement has its pros and cons.
The advantages include saving time on recruiting personnel to perform the necessary functions to carry out current financial and economic activities, and the bulk of the time can be spent on developing the business and extracting maximum profits. By concluding an outsourcing agreement, the Customer organization reduces the burden of the tax burden and saves on taxes because it pays for the service performed, and not for the work of the staff themselves. An outsourcing agreement helps to quickly and efficiently resolve issues that are not key for the Customer. There is no need to additionally encourage staff with bonuses, promotions, social packages and motivate them for fruitful work.
The disadvantages include the fact that the work under the outsourcing agreement will be performed poorly and this will only become apparent after some time has passed, when the error will lead to unpleasant consequences for the life of the organization. We can only hope for the qualifications of the staff. There may be a leak of information; here we can only hope for the reliability and integrity of the Contractor. Lack of motivation of the Contractor's staff, because the Customer does not manage the process of performing the work and cannot influence its quality; he receives only the finished result.
Despite the existing disadvantages of a personnel outsourcing agreement, many companies quite often and successfully use it in their production activities. These are IKEA, NIKE, NOKIA, Kodak
If you decide to introduce personnel outsourcing in your company, then you need to go through some steps:
- Conduct an analysis of the organization’s economic activities and determine whether you need to attract additional personnel, which will lead to an increase in your profits.
- Conduct a summary analysis of the costs of a personnel outsourcing agreement and an analysis of the costs of your own staff
- After weighing all the pros and cons, we choose the best option. If all the advantages are in favor of personnel outsourcing, we decide to conclude it.
- Choosing an outsourcing company
- We sign a personnel outsourcing agreement
- We get the result of the finished work
Each stage of concluding a personnel outsourcing agreement requires careful analysis, calculation, and careful study. The future success of the company will largely depend on how you approach the conclusion of the contract. If you choose an unreliable Contractor, you may lose success in a competitive market and vice versa. Good luck!
Procedure for completing an outsourcing transaction
Expert opinion
Semenov Alexander Vladimirovich
Legal consultant with 10 years of experience. Specializes in the field of civil law. Member of the Bar Association.
Legal practice notes the greatest demand for outsourced accountants, IT specialists, logisticians and lawyers. Many companies also completely transfer their administrative and economic activities to the management of outsourcing companies.
The contract for this transaction does not require notarization and is drawn up in writing. The format is standard, including the date and place of execution, document number, details of the parties. Appendices and additions to the agreement that specify the conditions are allowed.
Powers of attorney for authorized representatives of company owners must be submitted. Temporary performance of duties as the head of an enterprise does not give authority to conclude a transaction.
All copies of the agreement are signed by both parties and certified with their seals.
Particular attention should be paid to detailing the list of contractual services provided. The more detailed, specific and unambiguous you describe the outsourcer’s scope of activity, the less likely it is that mutual claims will arise, especially regarding payment.
The following items in the contract are required:
- Rights and obligations of the contractor and the customer.
- Criteria for assessing the quality of activities performed by an outsourcer.
- Reporting throughout the entire contract period, including monthly and quarterly.
- Responsibility of both parties for delays in information and reporting.
- Prices by type of service and the full cost of the contract. Debt repayment schedule.
- Duration of the outsourcing agreement (at least six months). Conditions under which its extension is possible.
- Procedure for consideration of claims of the parties. Conditions under which a transaction may be declared invalid.
- The name of the documents attached to the main contract and the conditions for the need to conclude additional contracts.
- License number for the right to provide services by the contractor.
How to step by step introduce personnel outsourcing into an organization
Step 1. Analyze the actual state of the company
No business should be started without preliminary detailed analysis and calculation. Try to draw up the project in documentary form, using numbers, in order to have a clear idea of the feasibility of attracting an outsourcing company. What are the goals of a company in a competitive market? What are her priorities? Are there significant challenges to development at the current level? What type of work can be outsourced?
Try to calculate your costs using outsourcing of personnel and when carrying out activities on your own (how many additional employees need to be hired, how much to invest in expanding space for new employees, purchasing additional equipment, computer equipment, etc.).
Step 2. Make a decision
Only after weighing all the pros and cons, considering possible development paths, and calculating the upcoming costs, can you decide to switch to personnel outsourcing. As we have already mentioned, hiring outside employees also has its risks, and the contract fee will also be an expense line, so it is important to understand which option will be less expensive specifically for your organization in carrying out any function. Remember that the result of outsourcing services largely depends on the choice of the performing company.
At this stage, a development plan must be formed, otherwise it would not be possible to analyze it. The goals and objectives of the project have been established. Therefore, it is necessary to appoint a leader and create a working group. And now all that remains is to determine the amount of work that will be entrusted to the outsourcing company and, in fact, choose a company.
Step 3. Select an outsourcing company
There is no doubt that selecting a reliable counterparty is almost 90% of success in starting a business. If the executing company is identified incorrectly, it means that in the middle of the implementation of the business process, you will have to terminate the personnel outsourcing agreement and look for a new contractor, which will result in real losses.
Before concluding an agreement, carefully study the market, conduct a thorough search for a partner and examine his business reputation. Having identified a list of organizations that are of interest to you, analyze each of them according to the following parameters:
- speed of response to requests for on-site visits, remote administration or requests for consultation;
- the scope of services included in the contract;
- does a change in the number of the company affect the cost of the contract;
- the degree of control the outsourcing company has over its employees;
- form of interaction with the outsourcer in unforeseen situations;
- employee qualification level;
- procedure for terminating a contract for the provision of outsourcing services;
- security system in the outsourcing company.
The comparison can be made in the form of a table. This analysis will help you make an adequate and informed choice.
Step 4. Prepare the contract
Drawing up a personnel outsourcing agreement is a very important stage of cooperation. It can be called the foundation of successful business relationships. The stage of concluding an agreement is preceded by lengthy negotiations, during which goals, objectives and nuances are discussed that determine the rights and obligations of the parties in various situations. Don't be afraid to ask again and return to the same issues. Partners must have an extremely precise understanding of how to implement planned projects. The moment of transition to outsourcing should also be determined as clearly as possible.
Considering that the performing company must have extensive experience in solving the problem that the customer organization sets for itself for the first time or from time to time, sometimes you should listen to the advice of the outsourcer. They can be very helpful.
It is not worth concluding such a serious agreement without legal support. If the customer does not have a lawyer on staff, you can always hire an outside specialist. Competent drafting of the agreement will allow you to avoid future problems with interpretation and delimitation of rights and obligations. The contract must indicate the scope of functions that will be outsourced.
Step 5. Switch to a new work format
A new stage in the development of an enterprise, associated with the involvement of an outsourcing company, has certain features associated with changes in the psychological microclimate of the team. It is worthwhile to provide instructions to employees, and perhaps more than one, to carry out detailed explanatory work in order to convey to people all the details of the new format of activity. Explanations must be accompanied by written materials. At the end of the briefing, employees leave their signatures in the appropriate journal, order, instruction or other internal documents.
Particular sensitivity must be shown with dismissed employees. Often people leave an organization with resentment and disappointment. Some of them file complaints with supervisory authorities.
It would be highly desirable to develop and approve some local documents that would provide for the systematic implementation of the project and the procedure for the new staff. It would be useful to write or revise job descriptions.
Step 6. Request reports on the work done
Instead of a working group, the organization now has a specific employee who is assigned an important function. It is necessary to establish an obligation for him to provide reports to his superiors at a certain frequency.
As a result, the customer’s management analyzes the functioning of the outsourcing system based on feedback from employees, managers and partners, evaluates the results of the outsourcer’s services in accordance with planned indicators and makes a decision on the advisability of further implementation of the project.
If you are not satisfied with the result of cooperation with an outsourcer, do not shift all the blame onto the contractor. Analyze, perhaps the reason for everything was an unsuccessful project, but its implementation was completed quite adequately. The entire process of carrying out the assigned task must be carried out under constant supervision. And the more important the drafted project is, the greater the risks associated with its implementation, the more carefully and thoroughly you need to control its implementation. Methods of supervision depend on the type of activity.
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Important nuances of an outsourcing transaction
The contractor, represented by the outsourcing company, does not provide intermediary services, but directly carries out activities on behalf of the customer. The contract does not specify the manufactured product, but describes the services.
It is mandatory to record the service in as much detail as possible regarding quality characteristics and time periods for reporting, and methods of information delivery.
The conclusion of a contract must be preceded by a comprehensive discussion by the parties of all controversial issues and specification of services in a draft version.
If, due to objective circumstances, it is not possible to avoid vague wording in the text of the agreement, then the terms of additional agreements aimed at clarifying the boundaries of the executor’s powers are prescribed in a separate paragraph in the document.
Provision of personnel: tax issues
If the hiring document defines the customer as a client, then the question of tax payments arises automatically. The law provides that the obligation to pay contributions to the Federal Tax Service rests with the company that is the direct employer of the personnel.
It is in this company that wages are paid to employees. Accordingly, payments to the tax office will be deducted here according to the standard procedure. As for the accounting documentation, it defines payment for hired work as ordinary expenses of the company.
Standard sample document
The parties to the contract have the right to draw up a document in any form based on a sample contract for the provision of services, provided that all the essential conditions listed above are recorded in it. When contacting a lawyer, you can avoid general formulations and ambiguous descriptions of the object of the transaction, and correctly specify the description of the services.
Optimization of the production and management process of an enterprise can be carried out simultaneously in several directions. To transfer the performance of certain functions to third-party specialized companies, an outsourcing agreement for the provision of services is used.
Differences between outsourcing and outstaffing agreements
One of the types of outsourcing is outstaffing, which involves the termination of employment relationships with a number of company employees and their subsequent transfer to a specialized recruitment agency. At the same time, the scope of functions performed by these specialists does not actually change, but there is a formal change of employer.
This form of relationship has the following advantages:
- The enterprise gets rid of the need to maintain a staff of employees registered under employment contracts, which significantly saves the budget of the legal entity;
- The enterprise gets rid of the risk of losing valuable specialists, for whose education and training significant funds were allocated;
- If necessary, the presented list of specialists can be expanded or reduced based on emerging production tasks.
After completion of cooperation within the framework of outstaffing, the specialists do not necessarily return to their previous permanent place of work, since formally the customer does not have any obligations to his former employees.
Differences between outsourcing and outstaffing
(from the English “outsourcing” - “external source”, “use of other people’s resources”) | (from the English “out” - “outside” and “staff” - “staff”) | |
Risks from concluding a contract | Absent if formatted correctly | Banned from January 1, 2021 . Outstaffing has been replaced by official activities to provide labor to employees, which can be carried out only in strictly limited cases by law. |
Subject of the agreement | The customer transfers to the contractor the execution of business processes or functions that were previously carried out by the customer’s internal divisions. The transferred functions are non-core for the customer. For example, legal services, marketing research, call center services, cleaning buildings, preparing and delivering lunches to the office, providing transportation services, maintaining the operation of a computer network and information infrastructure, providing advertising services, providing security, searching, recruiting and training personnel, etc. d. | The contractor sends its personnel (workers) to the customer to perform labor functions. In this case, the subject of the contract is not people, but services related to this area. As a rule, non-core personnel are transferred to an outstaffing agreement, for example, technical service employees, sales representatives, insurance agents, drivers, salespeople, etc. |
Actual place of work | The actual place of work for the employee remains the same. Outsourcing is not associated with the physical movement of personnel from the contractor’s company to the customer’s company | When outstaffing, employees work on the customer’s premises |
Factual Guide | The tasks for the employees are set by the performer. The customer does not have any rights to manage personnel | The personnel provided are under the control of the customer. It is he: determines the range of job responsibilities of assigned employees and the scope of their work; sets specific tasks; provides means of production; teaches, etc. In this case, the contractor may not know what the workers he provides are doing. |
Control | The customer can only evaluate the result of the service itself (clean office, properly prepared reporting, etc.), but not the process of the contractor’s employees. They are not under his control and management | The provided personnel is under the control of the customer |
Party responsible for the final result | The performer is responsible for the final result. If necessary, the customer can make claims against him | The customer himself is responsible for the results of the work of the provided workers. He can make claims to the contractor only if he provided him with personnel untimely or in insufficient quantities. |
Who can be the performer
The executor under this type of contract is a company that provides the customer with a certain list of specialized property assets and personnel to perform contractual functions. At the same time, a restriction has been established on the composition of performers - outsourcing can only be carried out by a business entity.
Such entities include legal entities (including non-profit organizations), as well as entrepreneurs without forming a legal entity. To provide services under this type of contract, the contractor must independently formalize labor relations with specialists and legally purchase special equipment and technical means.
Is it true that outsourcing of personnel is prohibited from 2021?
Agency labor has only recently been subject to legislative regulation. Since 2021, there has been a ban on activities at the direction of an employer in the interests and under the direction of another organization, but business owners still find ways to circumvent this restriction for economic gain. Chapter 53.1 of the Labor Code contains a number of conditions under which the transfer of specialists from one company to another is permitted.
The provision of employees to another employer is permitted only for a certain period, which cannot exceed 9 months, and for the following reasons:
- the employer needs workers only for a limited period in connection with the expansion of production;
- it is necessary to replace a temporarily absent employee;
- It is necessary to provide assistance in the household to individuals.
The range of entities providing personnel outsourcing services is also limited. These can only be those persons who do not plan to work permanently:
- full-time students;
- single and large parents raising minor children;
- released from correctional institutions.
These workers are sent to organizations under the same conditions as if an employment contract was concluded with them.
Temporary employees cannot be hired if:
- staff strikes;
- situations of forced downtime or the introduction of part-time work during bankruptcy proceedings;
- refusal of full-time employees to perform duties, including due to delays in wages for more than 15 days;
- the need to perform work at sites of hazard classes I and II;
- the need to perform work in harmful (3rd or 4th degree of harmfulness) or especially dangerous working conditions;
- replacing employees whose presence is a requirement for obtaining a license, a condition for membership in an SRO or the issuance of a certificate of admission to a certain type of work;
- the need to replace crew members of sea vessels and mixed navigation vessels.
Consequently, freelancers can still be hired, but the legislator has set many restrictions that do not allow the tool of personnel outsourcing to be abused.
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Is it possible to conclude an outsourcing agreement with an individual?
Since only a business entity can act as a party to the outsourcing contractor, concluding this agreement with a citizen who is not registered as an individual entrepreneur is not allowed. If there is a need to use the services of a separate third-party specialist, a representative office may be issued with the issuance of a power of attorney.
The implementation of the main or additional functions of an enterprise by an individual who does not have the status of an individual entrepreneur will be regarded as an employment relationship with actual permission to work, even if an employment contract is not concluded in writing between the parties.
Any legal entity needs qualified staff. But not everyone benefits from keeping a full-time accountant, engineer, tax specialist, and so on as an employee, providing him with a job, a social package and a monthly salary.
That is why such a tool as outsourcing is rapidly gaining popularity.
However, before concluding a service agreement in an outsourcing format, you need to be aware of the nuances that an entrepreneur may encounter in the course of building such relationships.
- Concept and legal regulation
- Between whom can it be concluded?
- What should be specified in the agreement?
- Termination
- Responsibility for violation
- Differences in outstaffing
- Calculation of the cost of providing services
Agency labor: what is it and why is it prohibited?
In 2021, Article 56.1 appeared in the Labor Code of the Russian Federation, which provides a clear definition of the concept of “agency labor,” or labor at the direction of a nominal employer, but under the direction and in the interests of another company. Such work in Russia.
The essence of agency labor is as follows: one company or entrepreneur (contractor) transfers a certain number of workers to another organization or entrepreneur (customer). As a result, employees work for the customer, and the contractor is the employer. The contractor, in turn, enters into employment contracts with them, pays them wages and benefits, and maintains personnel records. Thus, employees work in an organization with which they are not connected either by labor or civil law relations (see the diagram below).
The state of affairs in outstaffing that existed before 2021 was unfavorable for the employee. An employee was hired to work for one company, and he worked for another. The employer did not bear any responsibility for the employee. Most often this concerned work in hazardous industries, where no payment was provided for hazardous work. Organizations with harmful and dangerous working conditions thus saved on insurance premiums for injuries. These conditions served as the reason for the adoption of a new article 56.1 in the Labor Code of the Russian Federation.
It is possible to lease employees from another company, but now outstaffing has changed and is regulated by a new one.
Concept and legal regulation
Outsourcing is a relatively new type of service provision to small, medium and large businesses. It represents the transfer by a legal entity or other organization, on the basis of a drawn up agreement, of certain functions of entrepreneurial activity in relation to another company.
At its core, outsourcing is simple professional support throughout the duration of the contract.
Outsourcing issues are regulated by the Civil Code of the Russian Federation. In accordance with Chapter 39 of this legal act, relations in the outsourcing format are built on the principle of paid services. This means that the contractor, represented by the outsourcing company, must provide the service of interest, and the customer undertakes to pay for these services.
- Article 779 of the Civil Code talks about the nuances of drawing up an agreement.
- Article 780 of the Civil Code talks about the fulfillment of contractual obligations.
- Article 781 deals with payment issues.
- Article 782 of the Civil Code speaks of the possibility of unilateral refusal.
- Article 783 contains the rules governing the contract.
Article 783 of the Civil Code of the Russian Federation. Legal regulation of a contract for paid services
General provisions on contracts (Articles 702 - 729) and provisions on domestic contracts (Articles 730 - 739) apply to an agreement for the provision of services for a fee, unless this contradicts Articles 779 - 782 of this Code, as well as the specifics of the subject of the agreement for the provision of services for a fee.
As you may have noticed, outsourcing is a legally regulated activity that is not prohibited in Russia
Between whom can it be concluded?
If, in matters of concluding an employment contract, an organization draws up an agreement with a direct employee, then if you use outsourcing, the agreement is concluded with an outsourcing company or an individual providing this type of service.
An organization that engages in outsourcing acts as a legal entity or individual. The second party, namely a businessman or entrepreneur, can also be represented by an organization, that is, a legal entity operating in a certain organizational and legal form, as well as an individual and an individual entrepreneur.
We shift the work onto someone else’s shoulders: an outsourcing agreement
In conditions of fierce competition, those companies that survive and achieve success are those that conduct their business in the most efficient way, achieving a reduction in overhead costs while maintaining an impeccable reputation due to the high quality of products, goods, works or services. In this regard, many organizations are faced with the question: is it profitable to maintain their own staff of programmers, accountants, and other personnel or to outsource their work to a specialized company? It turns out that it is sometimes cheaper to outsource some of your day-to-day support functions than to do them yourself.
Why do you need outsourcing? When conducting an on-site tax audit at an organization, tax authorities often check transactions that are atypical for the enterprise. Why? Because it is in atypical operations that the accountant has not “been trained” and can make mistakes. So, maybe we can delegate such functions to professionals?