Outsourcing of employer functions (outstaffing)
Doing business does not require mandatory full-time enrolling of all employees in the company. There is a legal way to reduce taxes and contributions without losing the staff efficiency – outstaffing.
What is Outstaffing?
“Outstaffing” literally means “external recruitment”. This term refers to the provision of employer services – some employees will be directly hired by outstaffer rather than by the client company.
That new employer takes care of all aspects related to the employment “logistics”:
- preparation of staff-related documents, including conclusion of labor and other contracts with employees;
- deduction of employees’ taxes and contributions;
- recruitment and training of personnel, skill improvement;
- payment of salaries, advances, and bonuses;
- record and payment of sick leave and vacations;
- legal responsibility for employees.
Outstaffing does not affect the employee duties – employees will perform their functions and scope as before, while staying at their regular workplaces.
Ordering of outstaffing helps reduce administrative costs of the company, save on incentives, training and HR development, benefits package and expenses. Transition to outstaffing is relevant in the following cases:
- growth of the company fixed costs;
- efficiency decline of cash accounting dept. due to increased workload;
- exceeding of the upper staff limit (if legislative restrictions are in place);
- problems with registration of foreign employees;
- efficiency decline of HR dept. due to increased workload;
- problems with audit or regular inspections.
Also, outstaffing could be potential solution for provision of seasonal work or to fill unpopular vacancies.
Advantages of outstaffing
Company which orders outstaffing receives significant benefits. Main advantages of this service:
- Reduction of HR and accounting dept. workload. Reducing the number of employees in service allows work optimization of these departments and making them more efficient;
- Reduction of wage fund and staff costs. The client company pays only for the outstaffer services, and outstaffer takes full responsibility for the running costs and employee expenses, as well as entire responsibility for personnel. Productivity of employees is not impaired – for them, apart from legal aspects, nothing has changed;
- Reduction of taxable base. Due to reduction in the wage fund, company pays less taxes on profits and wages. Such a solution allows maintaining legal status of a small enterprise even with a large number of employees;
- Growth of investment attractiveness of company. Cost reduction entails an increase in the company’s profits. Positive financial results attract investors willing to invest in the expansion and development of the company.
Contacting us will not only significantly reduce costs and optimize employees’ work. By delegating employer functions to us you will have an opportunity to concentrate on your core business, without thinking about the staffing and its support.
How to arrange outstaffing
Prior to phasing employees out of the staff, it is necessary to conclude an outstaffing contract first. Then the client fires employees, or if he can find proper employees by himself and just outstaff them. After that the outstaffing company will hire employees, having formalized all necessary documentation.
The “outstaffing” concept is not fixed legislatively. In fact, a service contract is concluded between the companies. All of its provisions shall be in compliance with the norms of Civil and Economic Codes of Ukraine.
When deciding to order this service, you should pay attention to the following points:
- we recommend that client issues an order that explains the reason for involvement of external staff (for example, optimization of business processes or cost reduction for keeping non-core units or subsidiaries);
- contract shall indicate that it provides employees hire services, rather than human or resources or personnel;
- contract shall indicate that payment is made not for the labor input of employees, but for the service provided by the outstaffer;
- in the labor contracts, client’s location is indicated as the employees’ place of work.
Responsibility of parties in outstaffing
Mutual obligations undertaken by the parties are formalized in the outstaffing contract.
Outstaffer company (subcontractor) undertakes to provide staff units of the required qualifications. The client shall pay for the services provided in a timely manner and in full.
If employees will be found inconsistent with the required parameters, they should be replaced. If the client refuses to pay the invoice for the services provided, employees can be withdrawn, and such withdrawal does not relieve client from payment obligations.
It is possible (if a need arises) to enter into additional agreements with employees, for example, full property accountability, collective or individual liability or other responsibility.
If the parties fail to resolve any dispute through negotiations, it should be brought to the court.
Why pick on Financial Chain Corporation first?
Cooperation with us will be relevant not only to the companies already operating in Ukraine. Companies that are just planning to step in the market will be relieved from studying Ukrainian labor code and standards if they choose outstaffing. Here it is possible to cooperate both on regular basis and provide employees for one-time assignment.
Outstaffing services can provoke keen interest among supervisory and regulatory bodies. That is why it is important to ensure that all documents are properly issued and comply with the law.
Our long-term experience allows not only to ensure all stated benefits to the client, but also to guarantee the legal validity and security of the outstaffing contract.
Outstaffing of the personnel not only saves your company up to 20% in tax collection, but also allows to fundamentally solve the employment issue. By entrusting your employees to the care of outstaffer, you can develop your company without being distracted by minor issues.