Why are outstaffing agencies out of fashion?

Posted on  

July 23, 2021

Published by: Codemonk

There are plenty of outstaffing agencies out there, and they typically act as an intermediary (PEO or EoR) for Employers wanting to build remote teams. Effectively, they act as an admin team acting on behalf of the employers to hire and manage their remote teams. The primary need of the employer is to have their own permanent team but without the hassle of running subsidiaries in a different country and risk compliance.

The typical services provided by outstaffing companies could range from below:

1. Provide private or shared office to the employees

2. Provide hardware and IT support to the employees

3. Manage the sourcing and hiring process from the local market as per local employment regulations

4. Run monthly payroll on behalf of the employer in local currency

5. Pay all the payroll taxes

In order to provide all the above, they will charge the employer a mix of fixed and variable fees on a monthly basis — depending on the number of individuals hired through them.

Besides the charges you incur depending on the number of individuals hired through outstaffing agencies, there may be a challenge on cultural fit. These agencies do not fully advertise your brand, sometimes inaccurately spreading second-hand information. In the long run, you miss crucial talent that would have proved a perfect fit for your firm.

Additionally, these outstaffing agencies are mostly about quantity and not quality. They mainly focus on making money and typically send you outdated CVs rejected by other employers.

We strongly believe that these outstaffing agencies have been phased out by time and are no longer viable for your team setup requirements. The following is a detailed discussion of why outstaffing agencies no longer much your needs.

· Additional expenses to your recruitment needs

As briefly mentioned above, outstaffing agencies unnecessarily contribute to the overall costs incurred by your organization. To begin with, these agencies act as middle persons and need compensation for the service delivered. Unfortunately, many of them charge exorbitant costs and force you to sign long-term contracts. They make you feel as though you can only run your staff through them, motivating you to cough out more money.

Besides charging you, these agencies charge employees that get work through them. Thus, you end up with a team that is unsure whether to pledge its loyalty to you or the agency. They are also demotivated as they incur double charges in the overall compensation received for the work done.

· Unfit candidates

Most outstaffing agencies focus on getting good candidates and pawn them off to your organizations. Their initial focus is normally on the “goodness” of a candidate instead of the suitability of these candidates for your organization. In the long run, you may end up with a team that was labelled as being good but does not actually match your functionality. Thus, they cannot deliver the excellent results that you may have wanted.

· Outdated recruitment process

Many outstaffing agencies use outdated processes to get the candidates expected to deliver your business solutions. In worse-case scenarios, they may even rely on outdated candidate CVs during the recruitment process. Modern recruitment processes call for a skills-based approach to staffing. Typically, you may need a candidate that is good at a particular skill and whose operations would be complemented by other team members. That is something that the outstaffing model is unable to deliver.

· Long-term contracts

When you decide to source for team members through outstaffing agencies, you must be ready to commit to long-term contracts. The issue with this approach is that you do not need the agencies for each job handled. Thus, you are forced to continue servicing the contract, even when you do not necessarily need them. In other words, you are stuck with the agency.

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