In-house or contracted out? The benefits of outsourcing

It’s no secret that salary costs are the biggest single overhead for an organisation. And when times are tight, downsizing is often the first tactic employed to reduce costs. While it is important to review staffing levels and ensure your cohort of permanent employees is affordable and appropriate relative to your strategic objectives and available resources, there are other solutions to meeting business needs that are worth exploring.

The choice does not have to be one of either hiring additional headcount or placing more strain on the existing team. There are some tasks and activities that are ideally suited to the use of contractors or freelancers. How can using professional contractors benefit your business?

Cost-effective

Using contractors is very cost-effective. You pay for a specified set of deliverables in a set time frame. When the project is complete, you don’t have to continue to carry the cost of the employee. You also don’t have the “social costs” attached to employing a permanent employee (although this may vary depending on how the contract is structured). Generally, you don’t pay sick leave or holidays; and you don’t contribute to pension or medical aid costs. These are the responsibility of the contractor. For this reason, businesses new to outsourcing may perceive contractors as expensive, compared to the equivalent hourly or daily rate of employees. But it’s important to remember that contractors have set their tariff at a level that includes those benefits employed workers enjoy as part of their salary. Once you realise you are paying for results and not paying someone to go on holiday, contractors’ rates seem fair.

Access to scarce skills

South Africa suffers from the paradox of high unemployment and skills shortages. Training/upskilling is an important part of both national and organisational strategies. But in the short term you may find yourself in need of a specific skill that is in short supply. Using a contractor or freelancer can be a way to access talent that is in high demand and hard to find. It may not be possible to hire the skills you need on a full-time basis, either because they are not available in your locality or because those workers don’t want to be permanently employed by any one organisation; they have chosen the professional contractor model because they know their skills are in demand and they prefer the contracting lifestyle.

Outsourcing high-skilled activities can give you access to a much wider pool of workers; the person you need may be in another province or even another country. Depending on the nature of the task, they may temporarily relocate to work on your project if hands-on resource is needed (contractors tend to be highly mobile), or they may work remotely. Jobs like coding, writing, graphic design, strategy development, etc. can be done off-site. Modern technologies like Skype and video conferencing allow for virtual face-to-face contact; and cloud-based, file-sharing, collaboration and storage platforms like Box facilitate secure data transmission and content management, reducing the risk associated with conventional email. So the right person for your job may be based in another part of the world.

Specialist skills needed temporarily

Or, the person you need may live around the corner…but the project calls for a specialist skill for only one discrete activity out of the whole project plan. Perhaps a crisis has arisen and you need an expert to help you through it or meet a tight deadline. You don’t want to use a supplier; you want a closer relationship with more control. Using a contractor on a case-by-case basis gives you access to specialised knowledge when you need it, without the cost of having that knowledge on hand when you don’t need it.

Furthermore, the specialist can hit the ground running. Your business is not required to develop these skills in-house, which can be costly, time-consuming, and inefficient if the skills are not needed regularly.

Flexible

Is the nature of your business seasonal or variable? Many businesses hire temporary low-skilled staff at Christmas to fulfil orders, make deliveries, etc. There may also be a role for more highly skilled temporary workers at peak times, such as tax season or regular systems upgrades. If variable cash flow is an issue, outsourcing gives you the flexibility to refrain from using contractors’ services when times are lean and increase resources and tackle new activities when cash is plentiful. Having a professional resource available to complete a specific task or project in a set amount of time enables your business to scale up or down in terms of cost, reducing the impact on the budget.

Unencumbered

Many organisations appreciate the neutrality of contractors. A freelancer or contractor is able to concentrate on the job at hand without having internal company politics cloud their judgment and impede their progress. This task focus means they get the job done in the most efficient and effective way possible. Because contractors are outside of the permanent structure of the organisation they can sometimes feel a bit isolated, although most accept this as the nature of being an professional contractor and are not unduly distressed by it. However, they do appreciate being included in meetings that directly impact their work and value the occasional invitation to social events. If you bear this in mind as an employer, you will reap the benefits of an unencumbered yet engaged worker when you work with a contractor.

Tips for making it work

And this brings us to our final point: professional contractors are a valuable resource, but they are a human resource. Treat them like a treasured asset, not a commodity. Invest in the relationship, and it will pay you dividends in the long run. Having someone who is familiar with your business, even if they don’t work for you full-time, allows you to trust sensitive material to them and know your confidentiality will be respected and the nuances of your unique circumstances understood. You won’t have to explain your requirements over and over again.

But it is important to give clear instructions, even where the freelancer or contractor has a good grasp of your organisation. You may have moved in a new direction since their last assignment with you. If the relationship is current, it is still critical to communicate the deliverables, expectations, anticipated workflow and timelines for each project. Even contractors used to working independently need to know what is expected of them, in order to deliver the best possible results. Unclear direction will create frustration on both sides and may make the project more expensive, due to wasted time and rework.

Lastly, because your cherished freelancer is just that – freelance – they may not be available the minute you need them. You can get round this by retaining them for a certain number of hours per month, but if that arrangement is not appropriate for your requirements, for example you have occasional projects rather than continuous needs, it’s a good idea to have a small pool of resources you can call on, so that if your first choice is not available you have an alternative and are not left in the lurch.

What are you waiting for?

If you’ve never used an professional contractor or freelancer, we hope we’ve given you food for thought. Look at the gaps in your business and see where a contractor could help. Highveld has been helping clients reap the benefits of using contractors for 25 years. We provide a full contractor management service and take care of all the administration, leaving you free to focus on your business. For more information contact Highveld on 012 367 5600 or info@hveld.co.za.

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