To Outsource Labor or To Keep In House. Pros and Cons of Each

When you’re busy managing the day-to-day operations of your business and an important job role opens, your first thought is filling the position. The decision about whether to outsource the role or fill the position with a permanent, in-house employee will most likely track with what was done before. But it is beneficial to hit pause and contemplate which approach is ideal for a specific role, or even for an entire job category. Read on for a run-down of the pros and cons of in-house employees and labor outsourcing so you can optimize your workforce strategy.

What is Outsourcing?

Outsourcing is a strategic business decision in which companies use outside people to accomplish specialized tasks, fill a specific role, or work on a short-term project. Many companies today turn to outsourcing labor, and to outsourcing specific business functions such as IT, marketing, or human resources.

What is In-House Labor?

In-house labor simply refers to the employees who work directly for your company. These employees receive company benefits, and you are responsible for withholding payroll taxes.

The Advantages of Outsourcing

The range of jobs and services being outsourced today is expanding rapidly and covers a wide variety of industries, including professional and business services, IT, institutional facilities management, logistics, manufacturing, renewable energy, food production, healthcare, and call center customer service.

One of the top advantages of outsourcing is lowering costs related to your workforce. You can hire the employees you need to help your business grow without the cost of health and retirement benefits, and paying FICA taxes for that employee.

Outsourcing employees is also a flexible option for roles you don’t need filled on an ongoing basis. For example, logistics operations that experience a steep increase in business around the holidays every year, benefit from outsourcing. You can scale your workforce up rapidly when needed and reduce overhead quickly when business slows down. You can also bring on specialists for temporary projects, such as onboarding a new customer management software program. Small startups and mid-size companies probably won’t have the IT staff size needed for a seamless roll-out, or tech workers with the exact skills needed for the project. By outsourcing, you get the talent you require and can scale your team down easily when the program is fully launched.

Another benefit of outsourcing is improved speed to hire. If you are engaging a recruitment agency, you’ll have access to a pool of skilled and experienced talent already assessed and ready to start work exactly when your company needs them.

Finally, outsourcing gives businesses an opportunity to give new employees a “trial run” to see if they are a good fit for the role and your company culture. This can be managed through a temp-to-hire approach, in which the employee understands they may (or may not) receive a job offer when their temporary assignment ends. Less formally, companies that are happy with the work of a contract, contingent, or freelance worker, can always ask if they are interested in full-time work.

The Advantages of In-house Labor

The value of in-house labor comes from the teamwork and deeper understanding of a company’s culture and business goals that only develop over time. Your in-house workforce is critical to any organization’s long-term success by providing the ongoing skills required.

Direct hires offer important continuity, both in the day-to-day operations of a business, and in interactions with clients and customers. There will naturally be less turnover among your permanent employees, especially if your employer branding is strong. Your customers will also feel more confidence in your products and services when they build relationships with their point people at your company.

The Negatives of Outsourcing

When it comes to outsourcing for highly specialized, short-term roles, and for seasonal positions, the downsides are minimal. The main areas of concern boil down to whether your contingent workforce has the skills and professionalism needed to do the job well, and possible security issues regarding confidential information and intellectual property.

Here is where due diligence is important. Whether you are working with a recruitment agency or hiring independent contractors, do your research, ask for examples of previous successful outcomes, and seek out recommendations. If the nature of the work is highly sensitive, contracts should always include clear confidentiality and non-compete clauses.

The Negatives of In-House Labor

There will always be a need for permanent, in-house employees who comprise the core of your workforce. The cons of in-house labor are, unsurprisingly, the inverse of the pros of outsourcing. The salaries and benefits of full-time employees are a major expense, the hiring process if often slower, and there is less agility to expand and contract your permanent workforce in response to shifts in the economy.

The Benefits of a Blended Talent Strategy

Today, organizations are increasingly taking a blended workforce approach, in which they utilize a combination of outsourced and in-house labor. This lets them develop an agile, cost-efficient workforce that matches business needs over the long haul. If your organization is blending its workforce for the first time, or increasing your use of outsourced labor, take your time at the start to create lasting, positive outcomes. Here are some important steps:

  • Decide which roles would benefit from outsourcing. Roles that are core to your business benefit from permanent employees. But specialized, temporary roles, and seasonal positions are strong contenders for outsourced labor.
  • Clarify workforce goals and expectations at every level of your organization—from company executives, to full-time hires, to your contract workers.
  • Partner with a respected recruitment agency specializing in your industry. They will have the most knowledge and experience finding and assessing the skilled, work-ready people you need.
  • Include your outsourced workforce in employee engagement efforts and talent management.

With fast-changing markets, and an expanding freelance and gig marketplace, the best workers for your organization at any given time is always changing. Being prepared to leverage outsourced labor for specific skills, territory expansions, or sudden business growth is the key to competitive, successful enterprises.

Contact LINK today for help building a blended workforce for your business.