Still a novice among business models for hiring employees, outstaffing rapidly gains popularity, becoming one of the most seeking-after methods of delegating IT and digital services. It is no surprise, as, with outstaffing, you can access a vast pool of highly skilled and specialized professionals from around the globe without the high costs and administrative burden of traditional hiring. Keep reading if you want to join the outstaffing revolution and take your business to the next level.
- What is outstaffing, and how can you use it in IT?
- Why does outstaffing model win over traditional hiring practices?
- Outstaffing vs. outsourcing: When opting for one instead of the other?
- What services do outstaffing contractors provide?
- Typical terms of an outstaffing agreement
- Outstaffing benefits: 12 reasons why you should consider this business model
- Why choose MWDN as your staffing provider?
What is outstaffing, and how can you use it in IT?
Outstaffing is a hiring model which allows you to augment your staff with particular specialists without overhiring employees. With the ability to scale up or down quickly in response to changes in demand, outstaffing is a highly attractive option for businesses looking to stay competitive in the dynamic IT environment.
The situation in the IT labor market in 2022-2023 revealed even more benefits of outstaffing. November 2022 and January 2023 were full of massive layoffs among tech giants like Meta, Amazon, and Google, and, according to the market analysis, one of the reasons behind this negative trend was the overoptimistic overhiring during the pandemic months. Fortunately, outstaffing can help your business avoid such a mishap as your new remote teammate is going to stay an employee of your outstaffing provider.
Overall, outstaffing is a way to delegate recruiting, hiring, and HRM services to third parties. However, this model comes with additional services that might be specifically beneficial for tech companies. Check them out below.
What services do outstaffing contractors provide?
Apart from recruiting, screening, interviewing, and background and reference checks, an outstaffing contractor stays a strategic partner of its client during the whole period of cooperation between a remote employee and a customer. Here are some other services provided by reliable IT vendors, like MWDN:
Contracting. During the contract signing, MWDN acts as a mediator, evaluating the needs, rights, obligations, and responsibilities of a client and an employee.
Onboarding. When the job offer is sent and the agreement is signed, we help your new employee get acquainted with your managers and in-house team. We provide them with the necessary technical equipment and software, so your new remote teammate can become a valuable part of your business right away.
Employment and legal supervision. Your remote specialists stay official employees of our company. They are subject to Ukrainian, Hungarian, Israeli, or other country legislation, and we take care that all their rights demanded by law are guaranteed.
Accounting and taxation. Our accountants make sure that your teammates receive their paychecks every month and that taxes are deducted according to the law.
HRM supervision. Days off, sick leaves, maternity leaves, work time tracking, insurance, additional lectures, and lessons… Our HR managers take care of all the organizational issues that make the life of your new employees more comfortable.
Conflicts resolution and management. Whenever you want some amendments to be made to your cooperation mode, or there are some personal issues arising, our conflict resolution specialists will help you reinvent productive relations with your employee.
These are the exact services you can get from an in-house HR and recruitment department, right? Let’s take a closer look at the advantages of outstaffing over other business models, like traditional in-house practices.
Why does outstaffing model win over traditional hiring practices?
The main reason businesses are searching for new recruiting and HRM models is the abundance of potential flaws in traditional hiring practices.
- Limited pool of talent. If you work with local recruiters, chances are, they will search for new employees in your local region. This might not be enough if you’re looking for a rare narrow specialist or a person with vast experience in your field.
- High recruiting costs. Technical recruitment is quite expensive, as a recruiter should understand the peculiarities of your technical requirements towards applicants and know how to select the best matching candidates. However, it might be more affordable if you opt for experienced staffing contractors.
- Office space and equipment. When hiring in-house developers, you have to provide them with office space, equipment, and other resources, like software. Altogether, it can be quite expensive.
- Onboarding and training. They both take time and resources which your business might use for other core priorities.
- Administrative tasks. Traditional hiring practices mean that your HRM and Accountant departments take care of payroll, taxes, time tracking, insurance, etc. As it takes a bunch of time and resources, delegating these tasks to a third party is a good alternative.
- Legal and regulatory compliance. When you officially hire an employee, you have to comply with various legal and regulatory requirements. They are not just expensive and complex to navigate but also might be excessively strict in your region.
- Limited flexibility. Apart from hiring new employees, there might be a need to scale your workforce down. As in most countries, the latest is linked to additional expenses by the business, delegating staffing in and staffing out to a third party looks like a good choice.
These flaws can make traditional hiring practices more time-consuming, expensive, and challenging to manage. In contrast, the outstaffing model can offer greater flexibility, reduced costs, and a larger pool of highly skilled professionals from around the world.
Outstaffing vs. outsourcing: When opting for one instead of the other?
In a nutshell, outstaffing equals inviting skilled experts, via staffing contractors, into your team to work on your business goal. Outsourcing, on the other hand, is taking a business need away from your in-house team and giving it to a third party.
Both business models are quite efficient and popular. However, they are not one-size-fits-all solutions. Here are some key differences between the cases when you might need traditional outsourcing or staff augmentation:
|Traditional outsourcing||Staff augmentation|
|For projects with strict requirements and stable end goals.||For projects requiring agility due to a lack of once-and-for-all requirements.|
|A legit option in both cases: When you have an in-house IT department and when you don’t have one.||It can only work if you already have an in-house team of tech talent you want to reinforce with skilled remote specialists.|
|It is usually more expensive due to the additional risks the IT vendor covers.||It can be more affordable depending on the residency of your new hire.|
|Presumes customer/vendor relations. One party pays the money while the other party provides a service.||Presumes partnership. Both parties are mutually interested in the success and development of the other party.|
|Your team might not be entirely dedicated only to your project, which can lead to a lack of quality or missed deadlines.||Your new teammates work only for your project, 40 hours a week. There might also be other models of cooperation depending on your needs.|
Here is a quick example. If you’re a healthcare institution without a software development department and need a very specific billing application, you will most likely opt for outsourcing and delegate your specific task to an IT vendor.
At the same time, if you’re a medical software development company that requires two skilled backend developers with medical backgrounds and hands-on experience on similar projects, you will most likely choose outstaffing and delegate finding, hiring, and onboarding your new tech talent to a staffing contractor.
Typical terms of an outstaffing agreement
Like every employment contract, a typical outstaffing agreement has some obligatory terms and conditions. There might also be other miscellaneous, depending on the specific needs of the client and the service provider. These are some common articles you would find in any outstaffing agreement:
- Scope of services. Declares the functions that the outstaffing company will provide to the client, such as recruitment, hiring, payroll, benefits administration, and other administrative tasks.
- Payment terms. Outlines the billing rates, IT vendor fees, and payment frequency. Some outstaffing companies charge a fixed fee, while others may charge an hourly rate.
- Employee benefits. Fixes the benefits the employee will receive, like healthcare insurance, days off, sick leaves, etc. As a rule, the outstaffing company takes responsibility for providing and administering these benefits.
- NDA and confidentiality. This part is usually signed between the IT vendor and the client and the employee and the client. It includes the non-disclosure and confidentiality obligations of the parties that usually have access to sensitive information of one another.
- Intellectual property. This section outlines the ownership of any intellectual property developed by the outstaffed employees during their engagement with the client. Typically, the client retains ownership of any intellectual property developed in the course of the engagement.
- Termination. Declares the conditions under which either party may terminate the agreement, including notice requirements and any penalties or fees that may be incurred.
- Dispute resolution. Explains the procedures for resolving disputes between the client and the outstaffing provider.
Before signing an outstaffing agreement, carefully negotiate, clearly define its terms, and make sure that both you and your outstaffing contractor understand your roles and responsibilities.
Outstaffing benefits: Reasons why you should consider this business model
When opting for an outstaffing company, your business gets access to a larger pool of talent, as most staffing companies have their personal databases with technical candidates to offer to their clients. You can also save money on direct labor costs to your tech talents and a fee for recruiting and administrating best-fitting candidates. However, these are not all of the reasons why you should consider outstaffing. Here are some more:
- Your IT outstaffing vendor will provide your new remote employee with office space, utilities, technical equipment, and necessary software, so you don’t have to.
- Outstaffing offers you greater flexibility in hiring and scaling your workforce. This is a huge advantage for businesses that experience fluctuations in demand.
- By finding necessary tech talents faster, you can accelerate your time to market and quickly respond to changing market conditions.
- With the help of outstaffing contractors, you get access to specialized expertise and professionals who may not be available locally.
- By signing a contract with an outstaffing provider, you reduce your legal and regulatory risks, as outstaffing companies typically take care of legal and regulatory compliance.
- High motivation of their employees is an excellent investment into the outstaffing contractor’s reputation. So, you can expect that your outstaffed employees will be focused on their work and highly motivated, which can lead to improved productivity for your entire team.
- Outstaffed employees are often more loyal to their employers, which can lead to lower turnover rates.
Why choose MWDN as your staffing provider?
MWDN is a reputable IT outstaffing provider which has been operating on the international market for more than 20 years. Today, we help our clients hire the best tech talent in Ukraine, Poland, Hungary, Israel, and around the world.
For our clients, we do the hiring, recruiting, and onboarding, as well as managing and administrating their employee’s needs. We take an affordable fixed fee for our services and are always open to negotiations. Contact us now to find out more about our expertise and capabilities and make an appointment with our managers.