Outstaffing, also known as “staff augmentation” or “outsourced staffing,” is a legal arrangement in which a business entity (the “client company”) contracts with a third-party service provider (the “outstaffing company”) to temporarily transfer certain employment-related responsibilities and obligations associated with its workforce. This contractual relationship is established according to applicable labor and employment laws.
Legal aspects of outstaffing
Employment relationship. Under an outstaffing arrangement, the client company retains control over the day-to-day tasks and supervision of the individuals who work for it. However, the outstaffing company formally employs these individuals, becoming the legal employer of record.
Compliance with employment laws. The outstaffing company assumes responsibility for complying with labor laws, including but not limited to wage and hour regulations, tax withholdings, workers’ compensation, and employment discrimination laws. It’s obligated to ensure that the workers are treated under applicable employment standards.
Contractual agreement. The client company and the outstaffing company enter into a legally binding contract outlining the terms and conditions of the outstaffing arrangement. While the specific content of such agreements can vary depending on the parties’ needs and preferences, these are the common sections of a typical outstaffing agreement:
- Introduction and definitions
- Scope of services
- Duration and termination
- Payment and fees
- Employee benefits and compensation
- Confidentiality and intellectual property
- Indemnification and liability
- Insurance
- Compliance with laws
- Dispute resolution
- Conflicts of interest
- Force majeure
- Governing law and jurisdiction
Risk mitigation. Outstaffing can help the client company mitigate certain employment-related risks, such as legal liabilities associated with wrongful termination, workplace injuries, or employee disputes. By transferring these responsibilities to the outstaffing company, the client company may reduce its exposure to such risks.
Cost control. Outstaffing can offer cost savings to the client company by eliminating the need for full-time employees and associated expenses like benefits, insurance, and payroll administration. Instead, the client company pays a fee to the outstaffing provider for its services.
Confidentiality and intellectual property. The contractual agreement between the parties often includes provisions to safeguard the confidentiality of the client company’s proprietary information and address issues related to intellectual property created by the workers.
Outstaffing advantages and benefits
- Money saving. Outstaffing allows you to access skilled professionals without the overhead costs of hiring full-time employees. You pay for the specific services you need, reducing expenses like benefits, office space, and equipment.
- Access to global talent and technology. Outstaffing providers often have access to a global pool of talent, enabling you to tap into specialized skills and expertise that may not be available in your local job market. You can also take advantage of the outstaffing provider’s technology infrastructure, software, and tools, avoiding substantial upfront investments in technology and software licenses.
- Reduced administrative burden. The outstaffing company assumes HR and administrative responsibilities, including payroll, tax compliance, and regulatory adherence, freeing you from these tasks.
- Scalable workforce. Add or remove workers as needed to match project scope, allowing for efficient resource allocation and improved project management.
- Cost predictability. Budget more accurately with predictable outsourcing costs, as opposed to the unpredictable costs associated with hiring and retaining full-time employees.
- Competitive advantage. Stay competitive in your industry by leveraging outstaffing to quickly adapt to market changes, innovate, and maintain a lean, efficient workforce.
The difference between outstaffing and outsourcing
IT outstaffing and IT outsourcing are distinct approaches to managing IT functions.
IT outstaffing involves hiring external IT professionals who work as an extension of the client company’s in-house team, with the client maintaining direct control over project management and tasks.
In contrast, IT outsourcing entails contracting a third-party company to handle specific IT functions or projects independently, with the outsourcing provider taking full responsibility for project execution and management.
IT outstaffing offers greater control and integration of external resources into the client’s workflow, while IT outsourcing provides a turnkey solution with less client involvement in day-to-day operations and decision-making.
Whenever you have questions about outstaffing or want to try this strategy for your project development – give MWDN a call and estimate the cost of your dedicated remote teammate.
