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Outsourcing Models – How To Know What’s Right For You

Posted on April 16, 2021 by admin

When a business cannot deal with the workload in house, a candidate or party outside of the business is often hired to assist in performing those services. This is called outsourcing, and it’s a practice that companies sometimes use to cut costs – especially if it’s easier to do this than to train up another employee.

The best model of outsourcing is one that meets the needs of the business. Clearly identifying those needs is a strategic step to take to ensure that the model chosen is the right one. There are four types of models when it comes to outsourcing. 

Freelance

The freelance model of outsourcing assigns work to a freelance worker, which can be long-term, short-term, part-time or full-time. Jobs can be posted to freelance sites, freelancers can bid on them and you can select who you would like to work with. This model is a quick and easy way to get one-off projects completed that require special skills, or obtain a little extra help during the busy season.

Pros: Cost-effective, quick and the skills needed for the job can be sourced

Cons: Overselling skills, difficult to brief, and jobs can be further outsourced by freelancers.

Project-Style Work

This model focuses on project-based work, and involves outsourcing entire projects to a specialised outsourcing centre. Essentially all you have to do is provide the centre with the project requirements, and they will carry out the development work, project management and quality control through to the project’s completion. 

Pros: Less work to be done by you, cost-effective in money and time, new staff aren’t needed and there is a fixed cost for the project.

Cons: May lack local knowledge if located overseas, time zone and language barriers can be difficult to overcome

Business Process Outsourcing

With the business process outsourcing model, a service provider sets up and operates an offshore office for you that they hand over when it is ready. Essentially, it’s contracting a business or organisation hires another company to perform a process task required by the hirer for the business’ operational success.The provider has the facilities, setup, office environment and management required for global team members to work. 

Pros: offers improved productivity, increased capacity, no need to worry about other sectors, inexpensive and an easy way to grow your team.

Cons: Large-scale BPOs can be more expensive to run and can be difficult to communicate needs and wants if the BPO doesn’t understand your industry or business.

Build-Operate-Transfer Model

This model is the model you want to employ if you’d like to build a separate office outside of your home country with more than 25 staff. To begin with, and much like a BPO, a provider ensures that there is workspace and office equipment, and hires the employees. Rather than have the provider run the business for you, they then transfer the operation back to you. 

Pros: Create work culture and environment among global team members, costs are less expensive than a BPO if there are more than 15 employees.

Cons: Can be expensive to set up, operating under foreign work ethics and work cultures can impact team management, and requires time and effort to invest in the business in person. 

Always consider what is best suited for your business, and confer with professional advisors before implementing a strategy regarding outsourcing

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How Super For Contractors Can Work

Posted on May 5, 2021 by admin

Contractors who run their own business and sell their services to others have different obligations to their super than what employees in a business may usually have.

A contractor (also known as an independent contractor, a subcontractor, or a subbie) who is paid wholly or principally for their labour is considered to be an employee for super purposes, and may be entitled to super guarantee contributions under the same rules as other employees.

A contract may be considered ‘wholly or principally for labour’ if:

If hiring a contractor to perform solely their labor for a fee, the employer may also have to pay super contributions on their behalf.

In this sense, if you are a contractor who is being contracted to an outside business than your own to perform your usual work or labour, your employer must contribute to your super the same way they would any other employee.

This could be seen in an example of an electrician who runs their own small business, or is employed by a small business who has been hired by another business to supplement their workforce and perform a specific role that they can fit to.

Say the electrician who runs their own business has been subcontracted by the larger business.

They are performing labour but also providing materials (ie, themselves plus a toolbox plus a van full of powerpoints and wiring etc), they would be seen as a contractor and not an employee for super purposes. They must pay themselves super, in this case.

However if they are sub-contracted to perform labour only then the company that has sub contracted them may be liable to pay super on the amount that they pay to their contractor.  This would be the case where the electrician just turns up with their tool box and everything else is provided by the “employer”.

If they are in an employment-like relationship with the person that they entered their contract into, they may need to have their super paid to them by their contract employer. In order for super to be applied from what you earn, the contract must be directly between you and your employer. It cannot be through another person or through a company, trust or partnership.

It is important that both parties in the process are aware of their super obligations during the contracted period. There can be significant penalties for employers who use contractors if they fail to correctly pay super. Each case regarding contractors and super needs to be assessed independently to ensure that you are doing the right thing. There is no definitive black and white line between a contractor and a contactor in an employment-like relationship that can be obviously seen after all.

If you’re unsure about whether or not you’re meeting your obligations as an employer, or are a contractor looking to make sure their super is being correctly paid into, speak with us.

 

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