Outsourcing vs. Outstaffing: Which Is the Best Option for Small Business?

For the success of the whole enterprise, every process should be backed up by qualified personnel. Whether it is engineering, security, or other functions, your business will only have a chance if you fulfill your teams with the right people.

Unfortunately, not all companies always have the possibility to maintain large staff. Some, especially startups and small businesses, may find their natural resources scarce. That's when alternative management patterns like outsourcing and outstaffing come in handy.

What do these terms stand for? How are they different? And which one fits your business objectives best? In this article, we are going to answer all these questions.

What Is Outsourcing?

The name of this form of management is made up of outer, source and using. As you could already guess, the main concept behind this term is the use of an external resource to close the business's need for qualified personnel.

Choosing this form of management, an organization finds a reliable provider of personnel. Then, a business can pass over the responsibility for certain functions to another company. The other company has to operate in the desired field. The relationships between the two are based on an exclusive contract.

Currently, outsourcing has found a wide application in a variety of niches. These include IT, engineering, HR, law, and more. For example, a contractor can be anyone from an essay writer to a software engineer. This form of management is rather popular among businesses. It allows to secure smooth functioning of the core processes. Outsourcing can improve the efficiency of the enterprise as a whole.

Another big benefit of this approach is that it lets businesses to save a part of their own resources. This makes it possible to use the spare organizational, financial and human resources for the development of other tasks. Specifically, those that can't be outsourced.

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What Is Outstaffing?

Unlike outsourcing that basically brings in personnel from the outer source to complement your business processes, outstaffing purposes to withdraw some specialists from the office personnel of the organization.

Using this management model, a business transfers a share of its human resources to an external agency. This implies that those specialists will have a different official employer. Meanwhile, nothing else changes for the workers. They continue performing the same roles for the same company but are registered in a different enterprise.

In most cases, the main goal of this action is to cut down the company's expenses.

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Top 5 Distinctive Features

Both of these approaches are being adopted by enterprises, and each has its own purpose. However, before you can decide which one works best for you, it is vital to see the difference.

So, here are the main features that differ these concepts.

  • Form of labor relations. When outsourcing, the chosen provider selects the right personnel for the customer. The choice is based on the specified criteria. Then, the provider assigns them to perform certain tasks for a company. With outstaffing, the employees continue doing their job but are registered in the provider company.
  • Form of employment. With outstaffing, the workers are officially registered in the contractor's company. In the case of outsourcing, you sign a subcontracting agreement.
  • Personnel functions. Outsourcing is more characterized by intellectual work, while outstaffing can be done for all types of roles.
  • Payments. Outstaffing implies that your employees will continue receiving regular salaries, just like with regular hiring. When outsourcing, depending on the type of contract, employees can receive either monthly wages or piecework pay.
  • Purpose. The main difference is that outstaffing is a way of passing over the employer's responsibilities to a provider. It rids you of the need to manage personnel records, engage in the payment of salaries, and other related duties. Outsourcing, on the contrary, implies a complete transfer of certain tasks. In this case, the provider is supposed to coordinate the work of employees, monitor the progress of its implementation, while you get a ready-made result from the process.

Outsourcing vs. Outstaffing: Which One Is Best for Small Businesses?

Now, as you know the difference between these two concepts, you are probably wondering which one is the right for your business. Since these two models generally have different purposes, the only way to make the right choice is by keeping your company's needs at the core.

Outstaffing will be a good choice for enterprises that strive to optimize their expenses. It enables you to reduce office expenses, optimize taxation, and reduce your overall spending by up to 30%. In the meantime, it can also help optimize internal processes and boost productivity.

Outsourcing is a good solution for companies that need to get certain tasks done. They may not have the relevant human resources or simply don't want to get distracted from more important tasks.

Which one is best? In conclusion, it is worth noting that, as a rule, those who resort to outstaffing are big companies employing at least 100 people. That's the case when it makes the most sense. Nevertheless, the final choice is yours.

3 min read

Help! My Friend Is a No Show

Email armchairpsychologist@swaaymedia.com to get the advice you need!

Help! My Friend Is a No Show

Dear Armchair Psychologist,

I have a friend who doesn't reply to my messages about meeting for dinner, etc. Although, last week I ran into her at a local restaurant of mine, it has always been awkward to be friends with her. Should I continue our friendship or discontinue it? We've been friends for a total four years and nothing has changed. I don't feel as comfortable with her as my other close friends, and I don't think I'll ever be able to reach that comfort zone in pure friendship.


Dear Sadsies,

I am sorry to hear you've been neglected by your friend. You may already have the answer to your question, since you're evaluating the non-existing bond between yourself and your friend. However, I'll gladly affirm to you that a friendship that isn't reciprocated is not a good friendship.

I have had a similar situation with a friend whom I'd grown up with but who was also consistently a very negative person, a true Debby Downer. One day, I just had enough of her criticism and vitriol. I stopped making excuses for her and dumped her. It was a great decision and I haven't looked back. With that in mind, it could be possible that something has changed in your friend's life, but it's insignificant if she isn't responding to you. It's time to dump her and spend your energy where it's appreciated. Don't dwell on this friend. History is not enough to create a lasting bond, it only means just that—you and your friend have history—so let her be history!

- The Armchair Psychologist

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