Economic Benefits of Outsourcing

benefits of outsourcing

Outsourcing has now become very popular across all major and small enterprises and companies; and there are many benefits of outsourcing. Outsourcing is composed of the terms outside, resource and use, and is a company strategy in which the company outsources individual tasks, sub-areas or even entire business processes to third parties. So far internally self-performed services are now related by a specialized external service provider. However, only secondary functions, i.e. tasks the company needs to perform its main activities, are outsourced.

Outsourcing is also often found in other sectors. Thus, many small businesses do not have their own payroll accounting but have the wage bill run by another company. Also, the processing of personnel recruitment by external service providers is practiced more and more. In the following section, there are other several economic benefits of outsourcing that will be mentioned:

No Additional Staff and Training Costs:

In the process of appointing additional staff and their training is a key part of the cost for the company. They represent the biggest cost factor in the most companies. Thus, the cost advantages in the personnel area are also the most serious. If the company outsources for this factor, that makes this the largest savings in terms of personnel costs. This obvious cost factor is underestimated in a company. It is not enough to use its payroll software optimally. Rather, the employees of a wage department have to cover all the costs incurred by social insurance and tax issues.

No Software or Hardware Costs:

Another huge cost factor for the company is investing in the software and hardware. The personal work takes an unnecessary amount of time. Also, in claiming and costing, a lot of money is spent in the form of wage costs. Initially, the purchase cost of outsourcing is very expensive but that offers a good comfort and it results in work which is faster, better and more reliable. In addition, monthly maintenance fees are incurred by the software manufacturer to keep the program up-to-date. Add to that due to the massive statutory changes in the wage and salary statement even completely new program modules have to be purchased. As far as hardware is concerned, companies have to spend a lot of money on rental, electricity, and maintenance costs. While, in outsourcing, the outsource company pays a portion of these costs - adjusted to the number of employees’ settlements - and shares them with all other customers. The outsourcing thus entails enormous costs, increases the liquidity and are freeing up capital for the expansion of the core business.

Independence of Labor Obligations:

A flexible design of own personal requirements is economically necessary, due to the legal provisions but usually not or only in a limited framework. This problem is circumvented by the outsourcing, since employees in the personnel department on the grounds of protection against dismissal consists. Thus, one does not run the risk of settlements or over time holiday allowances to pay extra. This is important when in economic difficult times; the number of employees must be reduced to decline in sales or other unpredictable setbacks. Because just then the money is scarce and you can get these settlements and compensation the company cannot afford it. Even the collective agreement of the client is not applicable since the outsource company is an external service provider which is not subject to this collective agreement. Companies always have to face the risk of loss of work due to leave and illness of the employee, while in outsourcing; the company needs to pay only for the work or task which has been successfully fulfilled.

Cost Transparency:

By a fixed price per employee departed, there is a maximum cost transparency and calculability. The company has to pay only for the work which has been done or submitted. So, the cost transparency will be in the process and ultimately, the settlements can be quick, inexpensive and free of errors. The advantages of outsourcing are obvious. By outsourcing the secondary functions, the company can concentrate on the core business, i.e. its own business services. Another important point is the cost savings. It is created, for example, by the reduction of investment in equipment and the elimination of the necessary training for its own employees. In addition, tax advantages can also arise as a result of the external cover. The benchmark for rewarding outsourcing is at least 20% cost savings. Of course, there are often qualitative advantages in the case of external cover.

Conclusion:

By choosing a specialist supplier, which is almost always state-of-the-art, access to the most modern technologies becomes possible. The task is therefore fulfilled more efficiently and of higher quality. The fact that new business fields can be opened through strategic partnerships should not be overlooked. All in all, outsourcing can be a beneficial step for any company.

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