Why Do Companies Choose To Outsource Work & How To Do It Right
Business Management

Why Do Companies Choose To Outsource Work & How To Do It Right

Irene Kalesi
Irene Kalesi

For decades, businesses were used to hiring permanent employees to staff their workforces. In recent years and with the unfortunate extent of events around COVID-19, remote contract labor has become the new business norm. A study commissioned by Upwork and Freelancers Union back in 2017 foresaw that the majority of the U.S. workforce would be freelancing by 2027.

This growing tendency among professionals to leave behind their 9 am-5 pm positions changes the business landscape for everyone. Small, big, and corporate business entities opt to collaborate with on-demand workers instead of hiring full-time employees. The higher the number of available freelancers is, the more companies will favor contract labor. The variety of services offered and the range of professionals, from specialists to new freelance blood, can cover every business need.

So, the big question behind this is, “Why do companies choose to outsource work?” Why is the idea of hiring professionals per project more attractive to companies than it was before? In the article, we will be going through the different reasons that lead companies to widen their business horizons and what they gain out of it. Moreover, we will also explore some aspects that need your attendance before using contract labor.

Why do companies choose to outsource work?

They find the required skillset and experience per project.

In the past, hiring freelancers was not viewed favorably. The myth around them was that they lack knowledge, experience, and integrity. All three things mentioned have been disproved. Just take a look at the current talent profiles in the business market. The abundance of specialized contractors and business gurus that go freelance will please even the most demanding businesspeople. These professionals have left their permanent positions to achieve freedom through owning their work and source of revenue.

Freelance designers, developers, consultants, writers, and many other professions have a strong presence in the freelancing world. Since more and more companies have been working on a project basis, the need for diverse skills is essential. Finding those skills within the existing workforce may not always be possible. For example, let's say that you have a creative agency, and a project requires a designer. Would you hire someone permanently?

If you think that a professional is needed, then yes. However, if you require their services only for very few projects, then the answer is to work on this project with a freelancer. Thus, businesses should reconcile with the realization that projects demand different skills but not the same ones or at all times.

They outsource to remain economically viable.

Hiring full or part-time employees comes accompanied by a variety of costs, including social security, taxes, paid vacation, and health insurance. Companies must assume responsibility for all the necessary employee costs to ensure smooth working operations and abide by the law.  So, hiring new employees should always come after careful consideration and financial planning. Managers need to know if the candidate fits exactly their preset profile for the position and how much they will cost to the company.

Additionally, the cliché “time is money” is real. Getting a new hire may imply the necessity for an onboarding and training period to the ways, regulations, and processes of the respective company. All this hard work can go to waste if a professional is not needed but just hired in case some projects may need their contribution.

When it comes to contract labor, businesses do not have the same responsibilities toward on-demand workers. After all, they are not part of their workforce. Employers do not pay any of the benefits, which is quite profitable for them. As you can imagine, this poses the main advantage to businesses and the primary reason that they choose to embrace the freelancing movement. They can hire a professional for a specific project, assign them tasks, and then go their separate ways when the project finishes. On the other hand, freelancers are not tied down by permanent contracts and can pick the projects they want without pressure.

They may get the chance to work with superstar pros.

Departing from the fact that money is of the essence, in every sector, some professionals are the crème de la crème. They require a lot of money for their services, either as employees or independent contractors. In the case that they choose to freelance, they are open to working with companies on projects.

This is a contracting opportunity for businesses that may not be financially able to work with those experts on a full-time basis. Still, even a project with a top writer, designer, or social media influencer will improve your name in the market. Subsequently, it will help you reach wider audiences and provide much-improved deliverables to demanding projects.

They reduce the workload and increase focus on their field of expertise.

Getting a freelancer onboard your team for a challenging project will lead to better workload management. The tasks that they will assume will help the standard team concentrate their efforts on perfecting the things that they have experienced. Some businesses may be reluctant to hire external collaborators. However, a limited workforce may not be enough to fulfill a project.

So, companies that choose to outsource work see further than the costs of a project. They understand that big projects need working minds to succeed, and they do not only focus on the cost of contract labor. On the contrary, they aim towards improving revenue and keeping the existing workforce healthy and productive. Of course, teams and contractors alike will still work under project management principles and practice time tracking as usual to monitor a project’s development.

How can companies outsource work successfully?

Check client reviews on freelancer profiles

Searching for the ideal candidate on one of the trustworthy freelancing platforms is a usual tactic for companies. In this process also lies the key to success. A freelancer’s profile is also filled with reviews so that their performance is showcased online to attract clientele. As an employer, assessing the reviews of your candidates will provide a lot of valuable information.  You will learn more about a freelancer’s efficiency, integrity, and overall performance on the projects they have worked on.

Take a good look at their portfolios

On websites like Upwork, professionals showcase their portfolios on their profiles. They basically have an online record of their body of work. So, employers have the chance to assess projects, collaborations, and skills. This way, companies can evaluate a freelancer’s work before hiring them. If their working experience and talent are satisfying enough for the employer, they will be shortlisted.

Screen candidates in advance

Employers can also come across capable professionals outside freelancing platforms like LinkedIn or Instagram. In this case, the evaluation of the candidates’ CVs is important. Moreover, coming in contact with these freelancers and asking for a sample of their work is also fundamental. It is important to assess a professional for a project in the same way you would if you intended to hire them full-time. Of course, interview tests and tasks are equally helpful in understanding if a candidate’s skills match the project requirements.

Avoid decisions based on prices

Companies focus on costs and expenses since they affect their financial state. Thus, when an independent contractor knocks on their door with low prices, it is truly attractive to work with them. Highly or low-paid freelancers are not necessarily the best and worst choices, respectively. In fact, businesses should avoid working with either of them. Employees should not make up their minds based on rates. They should reach a decision after assessing if a professional can provide successful projects of great quality, paired with fitting corresponding rates.

Put everything in written form

Employees and freelancers should always start by signing a contract agreement. This document will keep business relations intact as well as concretize the overall project scope, its results, and the terms and conditions for both sides. If unexpected changes occur, they will be up for discussion. Still, the agreement will function as the basis to depart from throughout a project’s duration. Added fees, extra work, and new tasks may be needed, but having a record of newer adjustments will work in everyone’s favor.

To sum up…

Why do companies choose to outsource work? The answer is that contract labor needs a variety of factors to be successful. Basically, the right professional, under the proper circumstances, can be a great asset to a project. Employees should always take into consideration the experience, skills, and suitability of an independent contractor before working with them. On the whole, outsourcing is not a risky practice. It is just another way to collaborate with professionals, and it helps the modern business world bring down the working myths of the past.

Table of Contents

Try Elorus for FREE
All-inclusive business software for project-driven teams