Outsourcing of services – how to ensure it is safe

The growth of a business often entails the need to increase the company’s workforce to support certain processes. Due to a number of formal and legal obligations related to the employment of employees, entrepreneurs are looking for alternative forms of expanding their team or delegating some activities to a third party. One of the most frequently considered forms of increasing the company’s staff is to use the services of so-called outsourcing, which encourages entrepreneurs by reducing formal and legal obligations. Is such a solution safe for entrepreneurs? We invite you to read the article, which will give you a hint on how to properly apply outsourcing of services in your daily business.

What is the outsourcing of services?

The outsourcing of services is a form of business optimization in which a certain separate process in the organizational structure of an enterprise is outsourced to a third party. The services covered by such a contract are performed by specialized personnel provided by the service provider, so that the entrepreneur does not need to directly employ employees dedicated to the process.

Thus, cooperation under outsourcing of services consists in extracting a certain range of activities from an organization (e.g., accounting, human resources and payroll, IT, translations, machine repair, etc.) and outsourcing their performance to a specialized entity whose responsibilities include the provision of personnel facilities. Under such cooperation, the parties usually conclude service contracts, under which the subject matter of the activity specifies in detail the process to be outsourced.

The outsourcing of services and cooperation with a temporary employment agency

A characteristic feature of outsourcing of services is the lack of subordination of the people actually performing these services (third-party personnel) to the contracting entrepreneur. By choosing to outsource a particular process to a third-party entity, the entrepreneur, on the one hand, does not have the obligations of hiring employees, but at the same time also does not have the authority to control or give orders to those performing these activities. With this design, the entrepreneur reduces the level of direct employment in the company while ensuring that a professional entity performs the activities in question.

The decision on how to optimize employment, i.e. the choice between outsourcing services and hiring temporary workers, should be preceded by a detailed analysis of the entrepreneur’s actual needs and expectations. This is because the safe introduction and use of outsourcing of services requires the actual separation of a given process from the entrepreneur’s organizational structure and transferring it to a third party for implementation. This means, therefore, that the entrepreneur’s main goal is not to increase the number of personnel under his management and performing assignments on an equal footing with the entrepreneur’s employees or associates, but to exclude a certain process from the organization.

However, if the primary goal for the entrepreneur is to provide additional support for existing personnel, the appropriate solution will be to hire temporary workers. Such a situation will occur, among other things, when, as a result of obtaining an additional order, the entrepreneur needs to provide more personnel on the production line. The additional people will perform activities that are the same or similar to those performed by the entrepreneur’s existing staff and will report to the entrepreneur’s management and organizational structure. Therefore, if the entrepreneur does not want to transfer all accounting to an external entity, but only seeks temporary support for his accounting department for the period of finalizing a large project, the right solution will be to use the services of a temporary employment agency. If, on the other hand, machine repair services are separated and outsourced to an external entity, it is possible to use an outsourcing structure.

Control of the correctness of the use of outsourcing of services

The outsourcing of services regularly comes under the control of authorized bodies. In particular, the State Labor Inspectorate, the Border Guard and the Tax Office conduct inspections in this regard. The basic element to be analyzed is, of course, the contract linking the parties. The subject of the contract should specify in detail exactly what area of activity has been separated and transferred to a third party. It is therefore inappropriate to formulate the contract in general terms, for example, by indicating that the service provider will perform production or technical support activities, as this suggests that the parties are circumventing the provisions on the employment of temporary workers.

Due to the high percentage of entrepreneurs using outsourcing of services when it should be appropriate to employ temporary workers, controls are carried out not only at the level of contracts entered into by the parties, but also at the level of real activities undertaken. Very often entrepreneurs use outsourcing of services for production activities carried out on the premises of one workplace, such as area division (e.g., one production line is handled separately by external personnel) or task division (e.g., the entire warehousing process is carried out by external personnel). In such a situation, the entrepreneur should take extra care to make visible during the inspection the separation of the areas for which services are performed by third-party personnel from the scope of activities performed by the entrepreneur’s personnel.

The entrepreneur should meticulously ensure that his employees do not perform the same activities as the third party’s personnel. The entrepreneur should also ensure that third-party personnel are equipped with work clothes that clearly and at a single glance make it possible to indicate which people on the premises are employed by the third-party entity. Already such basic measures, which are a natural consequence of the actual performance of services by the third party, will allow the entrepreneur to demonstrate the correctness of his action in the course of a possible inspection.

To conclude, cooperation with third parties in the outsourcing of services is a solution that is beneficial for companies in many respects, however, it requires taking care that the actual implementation of services in such a mode does not constitute a way to circumvent the regulations on the employment of temporary workers.

If you are considering starting an outsourcing relationship with a new contractor, please feel free to contact us. Our lawyers will make an individual analysis of your situation and present the safest solutions for your company.