I love outsourcing. In my previous company in the UK I had over twenty employees and every month the company needed to make a minimum of $120,000 just to cover the overheads before I earned a single penny.
As an employer you then have to pay five weeks holiday pay, which means obviously that 10% of the year people are completely non-productive. Add to that bank holidays, Paternity leave for new fathers, and lots of other wonderful new allowances that are great for employees but not for the old capitalist employer, employing people is expensive and the legal implications are far reaching.
On top of that you have to pay social security payments. In the UK I used to pay 11%, on top of each employees salary to the government. In Spain the figure is nearer 25% so the cost savings from outsourcing are not necessarily in the pure labour cost of the individual but its all the additional costs. Once your business reaches a reasonable size you then need a Human Resources person (non profitable) to make sure you are complying with all the latest labour laws.
Employing personnel also creates mountains of paperwork for both your admin staff and accountant, which is a further drain on profits. If you have a lot of employees you need premises to house them all. Even just employing a few will entail renting or buying office space, equipment, insurance, maintenance, property tax, utility bills, etc.
My Current & Future Full Time Employees? ZERO
Please don’t let my cynicism on the subject of employing people put you off. If you are enthusiastically looking to start a business which will employ lots of people and you are happy with that then just go for it. However the beauty for me with my current businesses is that they are way more profitable and yet my basic overheads excluding outsourced labour is around $1000, thats a $119.000 a MONTH saving!
If I decide to go on holiday next week or next month. I simply say to the contractors who work for me “look guys next month I’m going to be away, I may need a little bit of work doing but in general I will be out of the equation. ” I can go on holiday and I have virtually zero costs and zero responsibility and of course zero hassle. With my previous, offline company when I went on holiday my wife used to go mad with me because the mobile phone would be constantly ringing due to some query or problem at work. So for me outsourcing is utopia. It is capitalism in its purest form. The savings are phenomenal, and I only pay for work when I need it.
The other huge benefit is the lack of hassle and reduced stress. Employing people in many western economies can be a nightmare. We live in a world where everyone wants to sue you and if you make a mistake in the procedures for dismissing people you can be fined large amounts and be dragged before the courts. The final straw for me was I knew one of the employees was stealing large quantities of alcohol from us. I arranged for the police to watch him and sure enough they caught him stealing pallets of beer. He admitted he had stolen over $30.000 in the previous 6 months. We then received a solicitors letter from him claiming wrongful dismissal. We should have suspended him on full pay for two weeks whilst we conducted an investigation. We sacked him whilst he was sat in a jail cell!!
Apart from the huge financial savings and the absence of labour laws I now no longer get bogged down with the hassle
- of other peoples problems
- people being permanently late,
- people who have problems at home,
- people who are ill,
- people who are work shy
- time consuming and ridiculous labour laws
- health and safety issues – this is another high cost non profitable industry that has sprung up in recent years. Yes of course you need to create safe environments for people to work in but as ever things are taken to an extreme.
None of the above exists anymore because the situation with a freelancer is simply this, if someone is not performing as they are expected to then you simply move onto the next one. This sounds cruel, this sounds harsh and some of you may say from a moralistic point of view you don’t want to look to outsource because you think you should protect jobs in your own country, as I said earlier I am not employing Third World labour in general terms I am employing quality labour from different countries and at the end of the day we are talking here about looking after ourselves.
We are talking about creating wealth. I have no wish to pay $100.000′s a year in social security payments to governments who will only waste it anyway. If you struggle with the morality of this then you can become very rich, then you will pay more tax in your own country and therefore perhaps the cycle is complete.
A further beauty of outsourcing is that you can create a company without quitting your existing job. Maybe you want to get the ball rolling before telling the boss to stick it where the sun don’t shine! With no permanent fixed staff, you have extremely low, easily cancelled fixed overheads.
I know a gentleman who has a business that turns over millions a year and he is highly profitable and yet he does not have one single member of staff. We are not talking about wanting to go off and hire the cheapest $3 dollar an hour worker from the Philippines. We are simply talking about using the Internet to find freelancers who will work for you, as & when you need them. Once you find someone you are particularly happy with then there is nothing to stop the arrangement becoming more permanent, for example I have rolling monthly agreements with some of my best freelancers.
In the article “How to Choose a Contractor” you will find a video explaining how to vet potential contractors, how to word your job description and how to find the most suitable candidates. The big concern most people have when they are new to hiring freelancers is payment. Elance have processed payments of over $700 Million at the time of writing All explained in the next articles. Here is a link to more information on how the system works
Author: Marc Walton