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While outsourcing and outstaffing aren't new concepts in the field of business and IT, but still there is a certain confusion between the roles of terms. In this case, I’ve decided, in the case of our firm, to explain how outstaffing works and compare it with the basic principles of outsourcing.

In the order, let's start with definitions of these concepts.

Outstaffing. The literal translation is "freelance". In other words, the company transfers the employees to the staff of another organization (in particular, the employment agency), and the employees continue to work at the same place and perform their former duties. Employer for them is a recruitment agency.

Outsourcing means “the use of other people's resources." In other words, outsourcing is the transfer non-core functions to outside agency, that’s a specialist in this area and has the relevant experience, knowledge, technical means.

Main differences. Outsourcing vs Outstaffing.

  1. Registration and schedule. The developer of the company-outsourcer has a flexible work schedule. The workplace isn't fixed. The agency pays him only for done work. Developers hired by outstaffer receives a salary every month, but he has to work under the customer rules.
  2. The recruitment process at outstaffing differs from the recruitment process at outsourcing. In the first case, the hired specialists have a legal relationship with the outside company (outstaffer), but they have a deal with customers’ rules. In the second case, the employees fulfill the conditions of the contract concluded between the customer company and outsourcing company-executor.
  3. Scope. Outsourcing is mainly used to solve the "intellectual" tasks. This concept is often associated with accounting and legal services, information technology. Outstaffing is more universal.
  4. The scheme of interaction. Outsourcing is always carried out on the same scenario: the client company transfers some of its functions to representatives of the company-outsourcer. Outstaffing includes two cooperation schemes between the parties:
  5. Client company officially dismiss several employees, and the outside-company formally hires them.They are registered in the state of outstaffer but work at the customer’s agency (on the same terms and in the same place). The relationship between customer and the developers are governed by the contract.
  6. Outside-company selects qualified employees and then provides them for temporary work to the customer. These workers may belong to the outstaffer developers and can be dialed on the side.

Our agency uses outstaffing way of cooperation with customers. The process can be outlined as follows.
Outstaffing process

All services under the outstaffing are carried out according to the service contract. There is developer’s second name, deadlines, statement of work and developer’s rate (salary/month). Outstaffing-agency provides information about developer’s work experience and skills.

In case, if there are some issues related to Labor Low, responsibility is shared between custom-company and outstaffing agency. In some cases, outstaffing agency takes full responsibility.
For example, our agency provides full support of our staff members, including the issuance documents that evidence the labor, salary bank cards, and payment transfers, the solution of current problems with the developers, personnel management, tax reporting to public authorities. Our agency has voluntary and compulsory insurance of developers, training courses, and staff development.

So, outsourcing and outstaffing are different ways of B2B cooperation. But, these two concepts have the common feature, the main task of both of them is the focus to minimize the risks, financial and resource expenses, tax optimization and staff expenditure decreasing.


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