Outstaffing

What is outstaffing?

Outstaffing is a model in which a specialist works for your company and under your management, but is legally employed by a provider. The provider signs the contract with the person, runs payroll, pays taxes and handles HR paperwork, while the client company sets the tasks, manages the work and pays the provider a fee. It is close to what is often called staff augmentation.

Outstaffing is often confused with outsourcing. The difference is that with outsourcing you buy a result, while with outstaffing you get people in your team and manage their work yourself.

How outstaffing works

1. Request. The company describes the role, skills, workload and duration.
2. Selection. The provider proposes candidates from its pool or sources new ones; the company interviews and chooses.
3. Contracting. The provider employs the specialist and covers salary, taxes, holidays and sick leave.
4. Work. The specialist works in the client's team, using its processes and tools.
5. Payment. The company pays the provider a monthly or hourly rate that includes the specialist's pay and the provider's margin.

Outstaffing vs outsourcing vs in-house

Pros and risks of outstaffing

Pros:

• fast team growth without your own hiring and contracting;
• less admin for HR and finance;
• access to talent in other cities and countries;
• flexibility to scale the team up or down by project.

Risks:

• the provider's margin makes a specialist more expensive than an employee over the long term;
• lower loyalty, since the person formally works for another company;
• trade secrets and IP rights must be protected separately through an NDA and the provider contract;
• dependence on the provider's reliability.

Outstaffing and employer of record

A specific form of outstaffing is the employer of record (EOR): the provider becomes the official employer in another country, so a company can hire abroad without setting up its own entity. The EOR handles the employment contract, payroll, taxes and compliance with local employment law.

Outstaffing and agency work in the UK

In the UK, outstaffed people supplied by an agency are usually agency workers. Under the Agency Workers Regulations 2010, after 12 weeks in the same role they are entitled to the same basic pay and working conditions as comparable direct employees. Companies using outstaffing should also check employment status rules, including IR35 for contractors who work through their own limited company.

In PeopleForce Core HR, outstaffed specialists can sit in the same employee directory with their own employment type, go through onboarding and have their absences tracked, so you see the whole team even though some people are legally employed by another company.