What to outsource?

Indeed, one of the major discomforts felt by company executives and leaders is the inherent risk in the labor part of outsourcing. Let’s exemplify it.

Here at Albieri and Associates, we hired a cleaning company and, consequently, outsourced this activity. Due to financial struggles, this company did not honor the salary and some benefits for one of its employees who, upon being dismissed, filed for legal action.

Not to dwell on the details, but we were ordered by the judge to pay, in addition to back salary, some of the benefits to the professional. It is regrettable and horrible for who goes through this type of circumstance, that the logic of justice is to penalize the one who was outsourcing the service and, by the way, paying all the bills on time.

This scenario that, surprisingly, is somewhat common places an added spice to the processes of outsourced service contracts, whose rules are likely to greatly improve with the labor reform.

In short, the Bill establishes some interesting points, which we’ve listed below:

Article 9 expressly states that there is no employment relationship between the contracting company and outsourced employees, provided that the 180-day time frames, which may be extended for a further 90 days, are respected. After this, the same outsourced part may return to the contractor, as long as they serve a consecutive 90 days.

Activities of any company may be outsourced, without any penalties applied to the contractor.

Outsourcing companies should have paid-in and proven capital, according to the number of employees they have. This point in particular offers more security to the employees and marks outsourcing companies, since there are a number of players in the market that do not possess the conditions and financial health to honor their commitments.

It stipulates general terms for entering into a service contract, such as the time frame and safety provisions for the worker.

To wrap-up these brief comments on the labor aspects, we offered commentary on three points that we consider important for allowing outsourced contractors to have more peace and security during the process:

Service contract: always initiate an outsourced job after signing the contract that will support the service. We know that the need is often urgent and there is not a lot of time to comply with the formalities, but the contract can prevent future inconveniences. The trick is to have an “umbrella” contract so that your company can make use of third-party contracts without the bureaucracy of the ending a new contract.

Job supervision: even though the work is technically conducted by the employer’s internal staff, a supervisor or manager from the outsourcing company is required to monitor (even if only administratively) the team that is assigned to your company. This measure may help mitigate possible labor investigations, such as salary parity with the in-house staff, employment relationship and other mutual responsibilities.

Documentary evidence: requires proof that taxes withheld at the source are being collected for the outsourced employees in your company (INSS and IRRF), because they have been deducted from the employee and represent an additional risk to your company if there is any future labor process.

Fair enough.

Having gone over these reflections on the labor aspects, we would like to list some points related to the more modern trends we have seen at major companies pertaining to outsourcing in order to answer our initial question: What to outsource?

Transactional activities

Known as activities that have a relation between the number of hours spent to perform them that is far greater than the tangible result they generate; these procedures are excellent starting points for companies to save time (which are valuable hours) in activities that are not very strategic for the business.

At this point, we should note that there’s no relationship between the importance of the activity for the business process and its classification as transactional. We often offer the example of the law firm’s cleaning service. The activity itself does not add value to the business, but not having it could be a huge inconvenience.

With that said, some classic activities within the tax, accounting and financial area, such as (i) posting invoices (tax, commercial and physical receipt), (ii) accounting reconciliation in the cross-checking procedure, prior to analysis, adjustments and identification of the root cause of the differences, (iii) filling out ancillary tax obligations (the step prior to analysis and conferences), (iv) consolidating reports (excluding their analysis and decision-making), (v) stock inventories, and countless others can easily represent a gain of time and money when properly outsourced.

Seasonal and/or occasional activities

As a rule, the back-office departments are designed to withstand the normal demands from each sector, but are impeded by one-off events. Have you tried to call someone around New Years? If so, you experienced the difficulty of speaking to someone over the phone at midnight on December 31. This is because the networks are scaled for a daily demand classified as normal, and the exceptions are actually impaired.

In this sense, having funds available in the budget for these moments really makes the difference: the staff’s quality of life is not affected by endless overtime, it speeds up the response time to emergency situations and gives the company quick alternatives for solving problems.

Having pre-selected service providers, signed umbrella contracts and professionals that have previous knowledge of the company and the activities to be performed are great tricks for these peak-times and emergencies.

Special projects

A number of special and strategic projects for the company are carried out throughout each year and are often taking place for the first time in years. Some examples of typical cases include implementing and modernizing ERPs, opening new factories, initiating a new business for the company, among others. With this in mind, being able to rely on third parties who have already gone through these experiences at other companies, industries and scenarios can represent a major differential for the project.

To sum up, our recommendation based on current trends is quite simple: outsource what is transactional, have companies in your plans that can help you out during difficult times, rely on the experience of those who have gone through similar situations and keep strategic knowledge within your staff.