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What You Need to Know About Offshore Outsourcing Before You Sign on the Dotted Line

March 7, 2017 Claire Ponsaran
What You Need Know About Offshore Business Process Outsourcing Before Signing the Dotted Line

Offshore outsourcing is not the same as offshoring, which moves resources as well as jobs to a remote location. The reasons for offshoring may not even be the same as offshore outsourcing. This kind of outsourcing sees the client going into a legally binding agreement with an offshore service provider. But, before signing on the dotted line, clients who are new to outsourcing or who have had bad experiences with it in the past should understand a few things about this kind of business partnership.

You’re Hiring Staff Abroad Without Going Through Immigration

What this essentially means is that you’ll have employees located in a remote location, but these employees are not part of your payroll. And so, the additional overhead costs you would have spent, if you’d invested in more in-house workers and a new office, are taken off your plate.

You don’t even have to worry about spending money to pay the mandatory contributions, the 13th-month bonus, or the early HMO subscriptions. All of these extraneous expenses do not significantly impact the total sum you see on your invoice.

More often than not, you’ll end up paying only for the work done by your offshore staff. Quality standards are often laid out in the contract with your outsourcing provider.

For best results, take a proactive stance when managing your outsourced staff. Assign a supervisor or keep a skeleton team to oversee the outsourced work from your domestic office. This not only keeps the communication lines open, but it’s also a good avenue for your onshore employees to get to know your offshore staff well.

Outsource to Countries with Reputable Labor Laws

Most countries considered as top outsourcing destinations have fair labor laws in place. For instance, overtime work is automatically noted once the employee’s work hours go beyond the prescribed 40 hours each week. In some countries, like the Philippines, rank-and-file employees are entitled to 13th-month pay provided they have worked for the company for at least a month.

Although the respective governments of top outsourcing destinations have fair labor laws in place, it’s still important that service providers and their clients must comply with these laws. Many countries in Asia have holidays that are not recognized by foreign businesses. When you outsource to these countries, acknowledge the value of these holidays to your offshore staff and pay for extra when they are required to work during those days.

In the Philippines, the government declares some days as special non-working holidayswhereby employees are to be given additional pay should they require their employees to work on these days. The rate will be 200% of their daily wages plus 30% more for work in excess of 8 hours.

Implement Proactive Outsourcing Remedies

It’s important that you not only check whether all bases have been covered in the outsourcing contract, but the agreement is followed through by all parties involved. As mentioned above, be proactive when managing your outsourcing initiatives.

A way to make sure outsourcing works in your favor is to implement proactive remedies.

Proactive remedies can be structured so that risks outside the control of both parties can be contemplated and prepared for. They can also be structured to address minor breaches, particularly where it is useful to shine a spotlight on situations that can ultimately impact on the relationship in an important way if not fixed, but for which it would not be practical for commercial reasons to rely on traditional contractual remedies.

You can include all these measures in your outsourcing strategy. Some of them may be outlined in your contract with an offshore provider.

Closely Collaborate with Your Offshore Outsourcing Provider

You’re expected to work hard at maintaining a mutually beneficial relationship with your outsourcing provider.

Make sure that you have an outsourcing strategy in place that includes measures for risk mitigation and performance evaluation.

Take care that your margins are not too ambitious or aggressive that your outsourcing partner will be forced to demand unpaid overtime work from their employees.

And, be sure that everything is documented, including the conversations you have with your staff through voice, email and chat.

It’s normal for businesses like you to be wary of offshore outsourcing companies, considering that a few bad apples have victimized so many companies. But, aiming for collaboration rather than a hands-free approach helps in clarifying the air and making things easier between you and your outsourcing partner.

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