Why Dedicated Offshore Staff Works Better Than Local Hiring
A New York Times report published the story of Jeffrey Herold, owner of West Coast Trends in Huntington Beach, California. In the report, dated 20th February, 2013, “his company, which makes golf bags, luggage and related accessories, and averages $10 million to $15 million in annual sales, has faced three employee lawsuits alleging wrongful termination since Mr. Herold founded it in 1990.” While Herold decided to take the bull by its horns by the time he faced the third lawsuit, most small and medium enterprises wouldn’t have the pluck to go to trial, preferring to settle quietly out of court. And while settling seems, conservatively, the correct approach, settlements do not come cheap. As mentioned in the NYT report, “Mr. Herold estimated that he paid between $80,000 and $115,000 per case, out of pocket, to defend previous matters.” In fact statistics cited by CNA Insurance, show that an employer is more susceptible to a workplace discrimination lawsuit than claims or lawsuits regarding general liability or property loss. Numbers further show that “almost 75% of all litigation against corporations today involve employment disputes,” including workplace discrimination lawsuits. However, here is the kicker. Over 40 percent of these lawsuits are filed against SME’s- small and medium enterprises (15 – 100 employees). And while large corporations keep an army of lawyers around, SME’s mostly don’t and are most at risk of being legally blindsided. This has resulted in small and medium enterprises to hire outsourced staff.
Operating locally, there are a few challenges employers face on a daily basis.
1. Work expectations need to be fined from the word go. Or else one leaves the door ajar for wrongful termination suits. When you hire locally, you have to be very precise in the wording of the employment contract, so that the employee knows exactly what to is expected and on what grounds termination based on performance can occur. This means employing the services of legal experts who can draft such contracts. How many small enterprises can afford to do so?
2. Termination needs solid grounds and often even that is not enough. Companies must almost always cough up good severance packages to pacify frayed tempers amongst employees who have been shown the door. Now imagine a scenario where you are scaling down not by choice, but due to incurring loses. Hefty severance packages could prove ruinous for the business.
3. Liability insurance is an absolute must in today’s scenario. However the premiums are not cheap by any stretch of the imagination. Most small businesses, especially new ones are in no way in any position to pay such premiums from the initial years, when they are anyways struggling to achieve fiscal and operative efficiency.
Scaling down in such a scenario can prove to be a financial nightmare and scaling up, at best, a double edged sword. While federal laws are there to protect the rights of employees(and the emphasis being on the words “protect” and “rights”), the laws are often misused by disgruntled former employees looking to make a quick buck or put his/her former employer in the spot. And due to the protectionist nature of such tough laws, they will be skewed in favor of the employees. With outsourcing however, these problems disappear altogether. How?
· Well for starters, your dedicated offshore staff do not fall under the purview of federal laws. They are employed in a different geographical location and fall under the local laws in place there. Most outsourcing hubs have business friendly laws with sympathetic governments. The work culture of such places also tends to be very different from what you may find locally, as cultures and aspirations are very different.
· Secondly, with the emergence of staffing organizations, the HR, payroll and legal aspects of hiring are looked after by the offshore outsourcing company that you have hired. You are basically hiring a service from them and paying for the same. And while the resource will have complete independence to work with your team and report to you directly, you would not need to worry about the resource’s employment related issues.
· When you hire outsourced staff, scaling up or down is extremely easy. Most offshore outsourcing companies have extremely flexible policies under which you can downsize your services by giving as little as a 5 day notice. And since such companies work with multiple clients globally, the resource you used wouldn’t be left in the lurch either. So you can scale down without remorse or guilt of any kind. It’s just like plug and play.
And thanks to the emergence of staffing organizations, you will be able to work with dedicated offshore staff, whom you will have a chance to recruit too. Hence there would be no compromise to make on the qualitative aspect either. And studies have shown that due to the larger talent base available in countries like India, the offshore staff is generally a couple of notches higher in terms of talent and efficiency that local hires.