Outsourcing and outstaffing: definition and differences

Outsourcing and outstaffing: the meanings and main differences

Outsourcing literally stands for "outer source" and represents the transfer of certain functions and tasks of a third-party organization. That is, when a company needs non-major staff or services, they address an intermediary company that satisfies this need. Most often outsourcing works with accounting and legal support of business. Outsource company is paid upon the result of the work it is responsible for.

Outstaffing represents recruitment agencies on the market that offer a kind of rental of workers of a different specialization. Their activity is to select employees for temporary work. The scheme looks like this:

1. For example, a company plans to launch a new product and requires non-core specialists.
2. The company addresses the outstaff firm and provides specific requirements for new staff.
3. Employees are officially become part of the intermediary company, but they work for the customer.
4. Employees get paid by the intermediary company, but from the customer’s budget.

Main differences

The main difference between these terms is that outsourcing company performs a certain business process without the participation of the customer and receives payment based on the final result. In case with outstaffing, an intermediary employs staff, who works directly with the customer and gets a fixed salary that does not depend on the final product. Other differences include:

• Place of work. In case of outsourcing, work is performed in the place defined by an executing company, and in case of outstaffing the work is performed in the customer’s office.
• Duration of cooperation. Outsourcing offers a long-term contract with the opportunity to extend it, while outstaffing is usually a temporary contract, the terms of which are determined by the specifics of a particular project.
• Savings on resources. Outsourcing does not require any cost on the organization of the workplace, less administrative work and deductions from salaries. In case of outstaffing, you do not need to maintain a staff worker and recruiter, and you can also save money on the benefits package and salary deductions.

It’s totally a myth that only big companies address outsourcing and outstaffing. In real life, small companies, on the contrary, require more specialized services, because they don’t have sufficient human resources.