Outsourcing – An Introduction

by Bernd on January 14, 2013 · 0 comments


“Do it yourself or pass it on?“ That’s the question here. Outsourcing is a popular discussion, not just for large corporations, but evermore for SMEs. It doesn’t just concern business economics however, but also employment law.

What is outsourcing?

Contracts for services required by a company are given to external service providers. It is however only secondary functions that are outsourced; those that are essential to maintaining the primary functions. One form of outsourcing is the branching out of IT research. Small organizations often use outsourcing as well, such as an accountancy firm managing their payroll.

Outsourcing allows an organization to focus on their main discipline, saving costs in the long run. The other tasks are carried out by specialist external organizations to a high quality level, due to their relevant know-how and technologies. One disadvantage however is becoming dependent on an external service provider. If an external organization arrives at quality or economic difficulties, then it can lead to heavy consequential costs for the main organization.

Employment Law Aspects

By redistributing a task to a third-party organization, inland as well as abroad, most departments will be no longer necessary, as well as their employees. These employees that once had internal security often have to become dependent on the outsourcing contract of an external organization.

Dos and Don’ts for Organizations

  • Before outsourcing complete sections of an organization, you should conduct an internal organization summary.
  • Employee representatives must be informed of plans to begin outsourcing, but their stance does not have to be accounted for, as outsourcing is a decision of the organization.
  • State exactly in the outsourcing contract, which activities the external organization are responsible for. Furthermore, it should be clarified which data will be transferred to the service provider and which employees will eventually have to change their location.
  • The employee must legally be informed in writing of the exact time, reason and consequences of any restructuring.
    Written objection on behalf of an employee can be submitted within a month of receiving the aforementioned communication.
  • If an employee submits an objection, the employment contract must continue to exist. Redundancies are possible however, if the job position is lost due to a transfer of operations.
  • The new employer receives all rights and duties from the old working relationship and contract.

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