Title: OUTSTAFFING:
1OUTSTAFFING a panacea for HR departments OR a
wastage of resources?
Alexey V. Mironov BD Manager Coleman Services Inc.
2In today's complex business world specialization
is the key!
They say ...
- If you need something to grow your business that
you don't have expertise in, you look outside to
develop a strategic alliance with a company that
does!
- What better way is there to manage your exposure
than making it someone elses problem!
- Outstaffing specializes in supporting your
business, leaving you to specialize in growing
your business!
3AGENDA
- What is it?
- Wording
- Some history
- History in RF
- Current situation
- How is it used?
- Types of services
- Key schemes
- Legal matters
- When is it used?
- Reasons for using
- Why is it used?
- Pros Cons
- Who uses it?
- Demand in the market
- Main customers
- Where to buy it?
- Key providers
- Legislation issues
- How much?
- Ways of calculating
- Cost scheme
- Tax matters
- What next?
- Predictions for the future
4What is it? (WORDING)
- Staff leasing - selection and further secondment
of Company-provider staffers to the Client
company, with the possibility of future transfer
to the Clients stafflist - Staff outsourcing - transfer of personnel from
the Clients stafflist to Company-providers
payroll, with following secondment of this
personnel back to the Client - Temporary staffing - secondment of
Company-providers employees to the Client for an
established short-term period - Outstaffing - secondment of the Clients
employees to Company-providers stafflist, in
other words a way to regulate the workforce
without increasing actual headcount
5What is it? World History
- 1960s physicians discovered a leasing scheme as
a good tax-shelter - 1970s IRS questioned the legality of employee
leasing, which led to numerous disputes in court
and providers bankruptcies - 1980s popularization of Professional Employer
Organizations (PEOs), treatment of PEOs as a
benefit to companys overall business - 1994 - National Association of Professional
Employer Organizations (NAPEO) started to promote
the PEO concept - Currently in the USA there are
- more than 3000 PEOs
- more than 4 mln. payrolled employees
- Market revenues - 6.5 bln. in 1993, 45.4 bln.
in 2002 - Annual market growth 25-30 PEOs is the
fastest growing segment of the staffing industry - Widely consumed by Fortune 500 companies across
the world - Is currently used in strategic ways to obtain
fluidity and meet fluctuating business needs
6Demand for outstaffing in the west
7What is it? History in RF
- outstaffing is in fact quite new for the Russian
market - boisterous development starting from 1998
- economic crisis forced companies to partially
reduce the head-count, so they preferred
outstaffing to redistribute HR-expenses - growing demand lead to gradual development of
outstaffing practices - many recruitment services providers have
introduced outstaffing as an additional services
to key customers - Russian companies have started to actively
consider outstaffing and temping as a highly
beneficial service - TODAY a working group within the State Duma,
having developed a concept of outstaffing
legislation, is working hard on a Federal Law on
Protection of rights of employees, employed by
private staffing agencies to be further seconded
to third parties!
8Current situationDemand for leasing
outsourcing services
- According to providers data demand for
outstaffing services increased by 45-50 in 2003
in comparison with 2002 - Demand for outstaffing services from Russian
companies grew thrice during 2003 - Demand for temporary personnel during 2003
increased by 55 in comparison with 2002 - In 2003 leading agencies provided their Clients
with 1000-2000 temporary employees in average
9Current Situation
types of services offered
temporary staffing
outstaffing
10How is it used?Outstaffing scheme, regulated by
staff outsourcing and labor agreements
Physical work
Client
Services cost (salary, taxes, administrative
expenses)
Employee
Civil-law relations, (outsourcing agreement)
Labor relations
Reporting, observing the rules of labor contract
Legal responsibility, taxation, reporting to tax
and other authorities
Payroll, HR filing and document workflow
Provider
State
11How is it used?Typical Provider-Company
interaction structure under an outstaffing
agreement
Legal responsibility for the employees , staff
hiring dismissal etc.
Company
Payroll calculation, salary payment, bonuses,
compensations taxation, reporting to taxother
state authorities
provider
HR filing handling personal labor record
books, tracking orders, sick and regular leaves.
Administrative work social package (medical
life insurance, cell phone expenses), business
trips
12When is it used? a few Reasons
- willingness to concentrate on core business
- headcount restrictions, limitations on hiring
permanent staff - hiring in regions without opening an office
- working on special short-term projects (e.g.
construction) - regular and sick leaves of permanent staff
members - participating in exhibitions, advertising
campaigns - willingness to extend probation period
- seasonality of manufacturing and sales activities
13Why is it used PROS CONS
- Outstaffing affords to
- re-allocate budget items (salary - services)
- pass a major part of legal responsibility towards
Provider - eliminate or diminish costs for staff reduction
- diminish costs for trainings and social benefits
- reduce costs incurred on HR filing and document
workflow - eliminate costs for staff recruitment (leasing)
- cut accounting/taxation and administrative
workload - manage employees without having labor liabilities
- evaluate new personnel during trial period
without employment - prevent stoppages in work
- maintain company's image by outsourcing people,
working on civil-law contracts - increase actual amount of employees, preserving
the status of "small enterprise"
14Why is it used PROS CONS
- Unclear legislation
- Seeming expensiveness in comparison with direct
employment - Moral aspects of staff outsourcing
- Possible decrease in employees loyalty to the
Company
15 16Demand for Outstaffing by Industry and companies
origin - 2004
17Demand for outstaffing by specialists categories
18Demand for Temporary Personnel by Staff
Categories administrative staff
19Demand for Temporary Personnel by Staff
Categories commercial staff
20Demand for Temporary Personnel by Staff
Categories financial specialities
21Legislation on Leasing
- Obstacles on RF Labor Code
- Article 15 - Labor relations
- Based on the employer employee agreement
- Agreement stipulates
- Personal performing of labor functions (not
definite work or services) - Employee following the rules of internal labor
regulations, established by the employer - Employer providing with work conditions
according to labor legislation, collective
agreement, labor agreement - Labor function work on definite specialties,
qualification or position
22Legislation on Leasing
- Obstacles on RF Labor Code
- Article 16 Labor relations arise as a result of
employees allowance to start working for the
employer upon its request or with its consent - Article 61 Labor agreement comes into force from
the employees factual working start date in
full accordance with employers request or with
its consent - Article 67 Labor agreement, not arranged in a
proper way, is considered to be executed, if the
employee starts working for the employer upon its
request or with its consent
23Legislation on Leasing
- Legal risks in light of RF Labor Code
- Leased employee can be de jure recognized an
employee of the Company-user - Consequences
- Employee lodges a complaint to the State Labor
Inspection, Office of Public Prosecutor - Employee goes to Court
- Regular checking by State Labor Inspection or Tax
Authorities
24Legislation on Leasing
- Some conclusions
- Employees secondment to the Client-company from
the company-provider within RF Labor Code
(article 166) can be treated as a business trip - While outstaffing services have been existing on
the Russian market for more than 6 years there is
no appropriate Labor Legislation on it - Factual Employers, employees Companies
services providers have to use their own
documents, regulating these relationships
therefore to endure definite risks, interacting
on these agreements
25Where to buy it?
26How much does it cost?Ways of calculating
- Prices for these services include the following
parts - Direct payment to the employee (total payroll and
incurred taxes) - Providers administrative expenses. Normally, it
can be a fixed amount or a fixed but negotiable
percentage of total payroll. - VAT
27Structure of Outstaffing Costs
VAT
18 of
monthly cost
Total
monthly services cost
Providers
Administrative
Fee
of total payroll
(including vacation leaves)
Monthly cost
Unified
Social
Tax
35, 8 of gross
salary
Total payroll
SALARY INCOME Net TAX
(direct monthly 13
payment to the employee)
Gross salary
28What next?Predictions for the future
- Changing labour market conditions lead to the
expansion of outstaffing and hiring temporary
personnel. - Global competition has forced large businesses to
keep their core workforce at a minimum. - As a result many companies are turning to
alternative solutions such a contingent staffing
to meet their short- and long-term staffing
needs. - A few years ago the temporary personnel service
was just knocking at the door of the marketplace.
- Today, companies have discovered new
opportunities and new ways of doing business more
profitably and more efficiently. Outstaffing is
expected to play an important role in today
business.
29Its your choice
30Thank you!
ALEXEY V. MIRONOV Business Development Manager
?oleman Services Inc. mironov_at_coleman.ru