“If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.”
This famous quote reflects one key proposition that every business organization must be aware of. Whether it is a big or small business, outsourcing is an essential strategy for successful business expansion. Using outsourcing, businesses can focus on their core activities and expand their business by engaging in a cost-saving operation.
We can’t deny the fact that outsourcing offers a range of solutions and services that fulfill several needs for business expansion. At the same time, we are also aware that outsourcing has certain limitations in handling remote employees.
Have you been working with outsourcing companies? Or are you looking to build a remote team for your business expansion? In either case, have you considered the employer of record (EOR) as an alternative to outsourcing? If you want to find out the best possible ways for building a remote team or managing remote work efficiently, this article is right for you.
What is employer of record and how is it different from outsourcing?
To many, the term “employer of record” is synonymous with outsourcing but they have differences in many aspects.
Employer of record specializes in administrative services such as HR-related activities that include various departments – recruitment (onboarding and offboarding), health insurance, employee payroll, taxes, legal compliance, and back-office support. EOR service providers handle these non-core services for professional employees working for an overseas company.
Although EOR and outsourcing offer similar services, they differ in many areas but the key difference is in the degree of transparency in every activity that is undertaken. It also differs in the way activities such as employer-employee relationships, communication processes, management risks, etc are handled.
To understand more, let’s first identify a couple of challenges associated with hiring a team through an outsourced partner.
Key challenges of outsourcing
Considering the pain points of businesses and outsourced employees, five major challenges can be discussed.
Lack of control and authority: The absence of direct control over the hiring and pay package decisions of the outsourced team is a key issue for businesses dealing with outsourcing partners. In outsourcing, the team selection is handled by their outsourcing partners. Here, businesses tend to rely on the expertise of their outsourcing partners in hiring & retention of the team and distributing assigned tasks. Since businesses aren’t directly involved in these affairs, they may lose their control and authority over the team.
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Communication gap & unfair negotiation: Communication barriers and miscommunication are other major setbacks of outsourcing. Businesses have no direct access to the outsourced team as it is the responsibility of the outsourcing companies to handle the team and complete the tasks. The lack of direct communication can cause work delays and hamper productivity. The communication gap may also lead to unfair policies for employees. Some employee benefits can be denied without the knowledge of businesses as the decision is entirely in the hands of outsourcing service providers. Finding a trustworthy outsourcing vendor remains a major headache for overseas companies.
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Risks of choosing an inappropriate team: Businesses often decide to outsource some of their operations when they have less expertise or less resources in certain domains. This is mostly seen when a company needs to update its technical knowledge and integrate the latest technology in its operation. Companies may end up choosing an inappropriate service provider due to a lack of awareness about the team and their existing technical skill in handling the assigned tasks. This issue is most prevalent in leasing software-related services such as IT software outsourcing.
