Definition: The practice of having certain job functions done outside a company
instead of having an in-house department or employee handle them;
functions can be outsourced to either a company or an individual
Outsourcing has become a major trend in human resources over the
past decade. It's the practice of sending certain job functions
outside a company instead of handling them in house. More and more
companies, large and small, are turning to outsourcing as a way to
grow while restraining payroll and overhead costs. How can you make
it work for your business?
First, make sure the company you're hiring can really do the
job. That means getting (and checking) references. Ask former or
current clients about their satisfaction with the client. Find out
what industries and what type of workload the firm or individual is
accustomed to handling. Can you expect your deadlines to be met, or
will your small business's projects be pushed aside if a bigger
client has an emergency?
Also, make sure you feel comfortable with who will be doing the
work and that you can discuss your concerns and needs openly. Ask
to see samples of work if appropriate (if you're using a graphic
design firm, for example).
One outsourcing option is to hire independent contractors.
Instead of hiring an in-house bookkeeper, for example, you might
outsource the job to an independent accountant who comes in once a
month or does all the work off-site. Independent contractors can be
more flexible and lower in cost than outsourcing firms. As with
outsourcing firms, however, before hiring an independent
contractor, make sure the individual you use can do the job.
If your outsourcing needs are handled by an individual, you're
dealing with an independent contractor. The IRS has stringent rules
regulating exactly who is and is not considered an independent
contractor. The risk: If you consider a person an independent
contractor and the IRS later reclassifies him or her as an
employee, you could be liable for that person's Social Security
taxes and a wide range of other costs and penalties.