Many companies outsource work to freelancers for a variety of reasons. Some may be looking for fresh talent. Others want the freedom to find someone with the skills they need even if they are not in their area at the time. And some hire freelancers because it is less expensive than hiring an employee full-time.
Whatever your reason may be, there are many benefits that come from outsourcing such as: increased productivity, better quality work, and more flexibility. Below you will see seven different reasons why companies choose to outsource work instead of hiring in-house.
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Reasons Why Companies Outsource
1. High Employee Turnover
A high turnover rate can lead to a drain in the company’s resources and bottom line. The costs associated with hiring, training, lost productivity, and replacement are often higher for the company than outsourcing.
2. Need to Fill a Niche
When companies are looking to fill a niche, but don’t have the available workforce in-house, they often turn to outsourcing work. Outsourcing is an opportunity to take advantage of freelancers and their skills when they may not be readily found locally. It's also important because the more you narrow the skills and responsibilities, the smaller the talent pool becomes.
3. Fresh Perspective
Freelancers can offer skills that are not available in-house or may provide a new perspective on the work because they have different backgrounds and experiences than the company’s current employees. This also provides for fresh thinking and innovation. Outsourcing allows an employer to tap into these outside niche resources without having to hire full time employees who would take away from their core workforce.
4. Seasonal Workload
Companies often resort to outsourcing when faced with seasonal workloads and limited resources. This includes scenarios where skilled labor or equipment cannot meet demand levels. Outsourcing provides additional capacity at peak times without having to employ full-time employees who would only work during those few periods throughout the year anyway. In addition, decreased manpower requirements allows companies to maintain lower staffing ratios than they could otherwise afford while still meeting customer demand.
5. Budgetary Constraints
When budget constraints limit your ability to grow at an acceptable rate, outsourcing becomes a great solution. While hiring in-house staff takes a lot of dollars out of your pocket initially, freelancing offers something very different: flexibility. Hourly and fixed payment arrangements with freelancers provides companies with a way to overcome budgetary constraints more easily.
6. Lessen Financial Risk
Outsourcing provides an opportunity for companies to lessen their financial risk without sacrificing service. This can all be achieved without incurring any long-term expenses. In turn, companies are provided with greater visibility into what skillset gaps really need filling. This also buys companies more time before taking on larger commitments such as permanent, full-time hires.
7. Cost Savings
Outsourcing is often more cost effective than hiring full time employees (no benefits, no vacation, etc). One of the big benefits of hiring freelancers is that they are classified as independent contractors. This means that they are 1099 employees, so they are responsible for paying all of their own taxes. This is a big cost savings in the long-run and many companies have found it to be beneficial because freelancers can be more flexible with how much work they take on from week to week.
What is Outsourcing?
Outsourcing is the practice of hiring freelance workers to complete tasks that are not part of a company’s core competency. This can include anything from writing blog posts and articles, graphic design services, web development, and even marketing and sales support. The benefits associated with outsourcing are numerous including increased productivity, better quality work, and more flexibility.
Outsourcing vs Offshoring – What are the Differences?
There are a lot of misconceptions about what outsourcing and offshoring mean. These two terms may be used interchangeably, but they actually have different meanings. Offshoring is simply the practice of hiring workers outside your country who work remotely to complete tasks that would otherwise need to be completed locally. Outsourcing means contracting an external company or individual for services that would otherwise be completed internally.
Example of Outsourcing
There are countless ways in which companies outsource work. This includes freelancers writing blog posts for marketing purposes, graphic design and web development projects that would normally need to be completed internally by company employees, or even outsourcing customer support tasks such as answering phone calls from customers with questions about the product they purchased.