Advantages of Outsourcing

The benefits of outsourcing are:

Less capital expenditure - For example, by outsourcing information technology requirements, a company does not have to buy expensive hardware and software.

Less management headache - For example, by outsourcing business process such as accounting, a company no longer has to hire and manage accounting personnel.

Focus on core competencies - Outsourcing non-core related processes will allow a business to focus more on it's core competencies and strengths, giving it a competitive advantage.

Disadvantages of Outsourcing

Before deciding on outsourcing your company's business process, keep in mind the disadvantages of outsourcing:

Less managerial control - It may be harder to manage the outsourcing service provider as compared to managing your own employees.

Outsourcing company goes out of business - If your outsourcing service provide goes bankrupt or out of business, your company will have to quickly transition to a new service provider or take the process back in-house.

May be more expensive - Sometimes it is cheaper to keep a process in-house as compared to outsourcing.

Security and confidentiality issues - If your company is outsourcing business processes such as payroll, confidential information such as salary will be known to the outsourcing service provider.

A precise definition of outsourcing has yet to be agreed upon. The term is used inconsistently. However, outsourcing is often viewed as involving the contracting out of a business function - commonly one previously performed in-house - to an external provider.^[2] In this sense, two organizations may enter into a contractual agreement involving an exchange of services and payments. Of recent concern is the ability of businesses to outsource to suppliers outside the nation, sometimes referred to as offshoring or offshore outsourcing (which are odd terms because doing business with another country does not mean you have to go offshore.^{[3][4][5][6][7]}) In addition, several related terms have emerged to grasp various aspects of the complex relationship between economic organizations or networks, such as nearshoring,multisourcing^[8][9] and strategic outsourcing.^[10] One of the biggest changes of recent years has come from the growth of individuals using online technologies to use outsourcing as a way to build a viable service delivery business that can be run from virtually anywhere in the world. The preferential contract rates that can be obtained by temporarily employing experts in specific areas to deliver elements of a project purely online means that there is a growing number of small businesses that operate entirely online using offshore outsourced contractors to deliver the work before repackaging it to deliver to the client. One common area where this business model thrives is in provided website creating, analysis and marketing services. All elements can be done remotely and delivered digitally and service providers can leverage the scale and economy of outsourcing to deliver high value services at vastly reduced end customer prices.

Leasing (Outstaffing, Outsourcing, Temporary staffing, Staff leasing) of personnel

Many Companies in their activities faced the situations when the stuff is overloaded, and to hire a new employee is unprofitable, and the work should be made professionally and in time. In this case the personnel lease could help. The lease personnel concept becomes an integral part of the lexicon of the top management of the domestic Companies. Though its practical use in Ukraine is quite seldom, at the same time the USA and the Eastern Europe has already developed this tendency, which brings about $60 billion income per year. So, what is this and what advantages it may give to the domestic Companies?

The fashion or necessity?

The term «personnel lease» appeared in everyday life not that long ago, though many Companies from time immemorial used its advantages in practice. For instance, hiring the specialist for short-term work or seasonal work, fulfillment of the given project and etc. As the rule, Companies signed labor contracts with such employees.

At the same time the personnel lease necessity has highly increased. Planning the business process and bringing about them, the Company in advance or «in fact» to single out those tasks, which will be constant or temporary within long-term, let's say within a year or more. For instance, in financial and economic domain. It may be the internal audit, restructuring programs in HR, in IT domain – the development and introduction of the corresponding soft and hardware and etc.

The list of all possible tasks, which are not performed by the Company on the permanent basis, may be much broader and diverse. Their beginning is due to the decision of the current issues decision making and special ones as well, which rise in virtue of unforeseen leave of the highly qualified employee, unlawful actions of the third persons and so on. Besides the necessity in specialists from the outside, when developing and implementation of the development program of the Company  (new product development, new brand creation and market implementation and so on), fast promotion of the certain scope of activity and so on.

The necessity of personnel lease may come also if the Company's personnel is on vacations.

In such situations to hire the specialist, who will fulfill temporary tasks to the Company’s staff, as the rule, is unprofitable. In the connection with that after determination the list of temporary tasks, the Company first of all is trying to redistribute them on the staff personnel. But to do it completely, as the rule, is impossible due to different kinds of reasons. The reasons may be as the following: the lack of highly professional staff in a given domain, overloading employees with the work etc.

That's why the recruitment the specialist from the outside is almost always necessary. It may be not just the specialists (hiring him to the Company’s staff on the permanent basis), but also Companies majoring in lease services. That process is called personnel leasing in the broadest meaning of the word. In the narrow meaning it is the recruitment of the specialists from outside exceptionally from the lease Companies or with their help.

Of course, any business process, the leasing has its advantages and disadvantages, and requires prior calculations and financial expenditures.

What is the benefit?

There are a great deal of advantages in fulfilling the temporary tasks for the Leasor-Companies. For instance, if necessary the Company may get the qualified specialist at any time and in short-term period. At the same time there is practically no cost increase for compensation packages of the personnel. And if the leasing employee doesn’t meet the Company’s requirements for task fulfillment, he may be quickly replaced without any extra costs. Besides, the volume of paper work is lessened, which at the constant and immense overloading of the personnel has significant meaning.

It is clear that taking into consideration all positive features of the leasing process, it is necessity to resort to it on the assumption when fulfillment of “temporary tasks” by any other Company is unprofitable or impossible in view of its lack. For instance, there are no Companies, which could professionally build effective distribution network in Ukraine, let’s say for alcohol or any other products. That’s why the only decision of the given problem is the hiring of highly professional employee from outside. Total expenditures in the given case are the sum of the salary of the leasing employee and remuneration to the Lease-Company.

The first item of expenses consists of some consistuents. In the first place, it is necessary that the lease personnel is highly professional and skilled. The salary of such level of the professionals as the rule in  1,2/1,5 times higher than average market level of the salary of the given specialists. Besides at the calculations of expenditures on the salary for personnel lease it is necessary to take into consideration the time for one Company from work end to the beginning to work for another. That is to say the period between two projects (the given interval sometimes may reach the period of several months). In the connection to the above said, as the rule, it is necessary to increase the coefficient from 1,3 up to 1,5 at the calculation of the expenditures for salary. So, the total costs for the salary of one leasing employee is 1,5-2,5 of the average salaries of the employee of the given category.

As for the leasing Companies remuneration, in Ukraine they are usually commensurable to the expenditures on personnel search and hiring by the recruitment agencies. Approximately they correspond to the doubled monthly salary of the leasing employee. Though there are some exceptions. In some cases the remuneration to lease-Companies are calculated as 20-35% from the employee's monthly salary multiplied by the number of the leasing months. 

It may seem that in practice it is more profitable to hire employee to the staff of the Company and not spend money on other financial supplements and commissions to the Lease-Company. But after making some calculations, as the rule, the total expenditures for leasing of an employee are less than expenditures on the staff employee fulfilling the same functions. It is due to the fact that the staff is less experienced than leasing employees, and they need some time, which exceeds the leasing period in 2 or 2,5 times to reach the qualification level of the leasing specialist. 

All nuances to some extent are inherent to the leasing personnel in all over the world, but in Ukraine there are some peculiarities, which stipulated by the national and economic features.

The features of the domestic leasing 

Compared to the USA and the Eastern Europe there are no leasing Companies, which provide personnel leasing among their staff. In practice there are of course cases when Companies do provide Client-Company with its personnel for fulfillment of temporary works. But they cannot be considered as true leasing agencies, because they do the usual sending of the employee for temporary fulfillment of the services, which Company offers. For instance, the lease of the lawyer from the law firm, an accountant from the accounting firm, IT specialist from the IT Company. 

According to the practice of recruitment agencies, which provide lease services in Ukraine, it is obvious that the sales managers, IT personnel, and office employees are of great demand. Lease of the financial managers, economists, top managers is quite seldom.  

Probably it is due to the fact that the domestic Companies have in the staff highly professional top managers and financial managers, and may be it is because there are no professional lease Companies, which could provide with the highly professional staff at any time upon the request. But the market develops constantly, and most probably that in a few years that kind of service will be very popular, and beneficial for the Ukrainian Companies. 

Highlight

According to the different estimates more than 1 % of employees from Western Europe and the USA are occupied in the Companies majoring in lease personnel. 

Information Personnel Lease Costs

The total personnel lease costs for one employee are calculated as following:

Sp=Ss+Sk=KpxSmxKm + PrxKpxSmxKm

Sp is the total costs for leasing of one employee;

Ss is the total cost of the salary of the leasing employee;

Sk is the remuneration to lease-Companies;

Sm is the average market value of the monthly salary of the corresponding category of the specialists;

Km is the quantity of leasing months;

Kp is the raising coefficient of the salary to leasing employee (1,5-2,5 times);

Pr is the percentage from the salary paid to the Leasor-Company (from 20 to 35 %). 

The formula shows that the total costs for personnel lease may be very essential. That’s why its use demands prior scrupulous estimate of financial necessity.  This estimate is made on the basis of comparison of expenditures on leasing an employee for fulfillment a project to the expenditures of hiring an employee to the Company’s staff for the same work. It is quite clear that their comparison should be made only at the condition that the new employees and the lease ones will fulfill the set tasks (qualitative and quantitative activities are estimated).

The lease personnel costs are expedient if value Sp is less than value So (the costs for making similar piece of work by the new employee, who hired to the Company's staff).

Information The ways of personnel Lease

The personnel lease is not a common thing in Ukraine and its terminology isn't quite, that's why in practice it is applied some process. The most common is stated below:

• Staff leasing is the lease of the personnel on long-term period. The Client-Company pays only for the services of the Leasor-Company, at the same time the Company doesn’t have any binding juridical obligations to the employee. The employee is hired to the staff of the Leasor-Company.

• Temporary staffing is the personnel lease on short-term period (in most cases no more than three-months period). This kind of services is demanded most often in holding marketing activities or small projects fulfillment. The employee hiring is performed by the recruitment agency, and it bears the responsibility for the employee.

• Outstaffing is the situation when the leasing agency hires the employee, who has been working with in a Client-Company. At the same time both parties bear responsibility, and about the formal work (paper work, taxes payment and so on) takes care the recruiter.

• Outsourcing is the acquisition of the services provided by the specialist needed by the Company in a certain period of time. The lost of issues, which could be solved in such a way, is rather long. Mostly it is concerned those tasks, which are not connected to the scope of activity of the Company.

Необходимость в outstaffingе возникает, если компания:

• рассчитывает оптимизировать расходы на персонал

• планирует сократить штатную численность без потери квалифицированных кадров; 

• рассчитывает принять временных сотрудников для выполнения конкретного проекта без оформления их в штат; 

• заинтересована в снижении административных расходов на ведение кадрового делопроизводства и бухгалтерского учета; 

• имеет ограничения по численности персонала;

• хочет передать взаимодействие с трудовой и налоговой инспекциями квалифицированным специалистам.

«ProfiStaff» становится юридическим работодателем для сотрудников Клиента и принимает на себя решение следующих вопросов:

• прием на работу и увольнение в соответствии с законодательством и в указанные Вами сроки 

• ведение кадрового делопроизводства 

• ежемесячный расчет и выплату аванса и заработной платы 

• оформление справок, полисов ОМС и свидетельств пенсионного страхования 

• консультации сотрудников по вопросам трудовых отношений

• открытие индивидуального банковского счета для перевода заработной платы 

• расчет и отчисление установленных подоходного и социального налогов 

• ведение налоговой отчетности 

• проведение инструктажей по охране труда и технике безопасности

Outstaffing (putting the staff out of the staff roaster of a company) – involving a freelance expert having appropriate knowledge, professional skills and experience for the time of implementation a particular project.

     Outstaffing is the system of putting an employee outside the payroll of a company and entering that person on to the payroll of the company-provider. The person will continue to work where he/she was working fulfilling same functions, but the employer’s functions are will be carried by the company-provider.

Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments.