Article

The St. Petersburg Times, 24 Октября 2006

Outsourcing — Hows and Whys

By Yelena Andreyeva Special to The St. Petersburg Times

Is it a question of companies not knowing what they're missing? Or does the very idea imply a degradation of workers' rights?

Over the last few years outsourcing has become a trendy word in Russia. In the West, business segments typically outsourced include information technology, human resources, facilities and real estate management, accounting, customer support and call center functions, manufacturing and engineering. While most of these areas involve the outsourcing of business functions, in human resources it is of course people who are the outsourced object.

How to hire a professional

An outsourcing company will find the worker who meets your requirements. You do not even need to employ that person — the specialist would be hired by the outsourcing provider and effectively leased to your company to carry out some defined task, for instance as a replacement to a secretary, accountant or IT specialist.

HR outsourcing includes staff leasing and outstaffing. Outstaffing means that the provider officially recruits some of the new employees for the client company. This might be done so that the new staff can be checked during a trial period, because they are only needed for temporary projects, or because the company has a limited head count. Unlike leasing, when the provider searches for the personnel, outstaffing lets companies find the appropriate staff themselves while still employing them through the provider.

If you are going to outsource personnel it is important to remember that the provider is only responsible for the professional characteristics of the personnel, while it is the client company that controls a worker's performance.

However, the same outsourcing terms can often have different meanings.

For example, at Kelly Services, staff leasing means outstaffing or payroll outsourcing, temporary outsourcing means the outsourcing of temporary workers on hourly pay for projects with a marked deadline, while outstaffing means finding staff when employee numbers have been temporarily reduced.

«Some companies do not like the name «outstaffing» and prefer to say «outsourcing» or «staff leasing.» As providers we often speak in our own language with the clients,» said Olga Kapralova, PR and Marketing Executive at Intercomp.

What are the advantages of HR outsourcing?

Companies that outsource their personnel do not need to provide them with HR administration or include them on the payroll, they do not provide insurance but instead focus on what they want to achieve.

It seems to be any employer's dream fulfilled — to have professional personnel and get rid of all the problems related to human resources. However, even in a dream you need to face the reality.
Outsourcing problems

One of the main problems with the outsourcing business in Russia is that it does not have a special legal framework that regulates the rights and duties of the client company, outsourcing provider and the outsourced personnel. Trade unions complain that outsourced personnel have limited rights.

What kinds of companies outsource personnel?

The biggest users of outsourcing in Russia remain foreign companies.

«Most global companies have outsourced some business functions in the countries in which they work and Russia is not an exception. Also some companies that have just entered the local market outsource personnel during the legal registration process that, for foreign firms, tends to take a long time,» said Tatiana Modeeva, head of Intercomp Branch in St. Petersburg.

However, according to analysts, over the last few years more and more Russian companies have started to use outsourcing, mostly hiring blue collar staff.

«Not many Russian companies realize the benefits of outsourcing. At first glance, it seems to be more expensive to have temporary personnel but, as soon as the company understands the costs it can avoid it immediately makes use of outsourcing,» said Alexei Zelentsov, regional director of Kelly Services recruiting agency in the Russian Northwest Russia.

Opinions vary as to whether companies economize through outsourcing or not.

«For foreign companies with a limited head count outstaffing helps to improve their financial indicators, while in any case staff leasing is profitable for client companies,» said Maria Margulis, director of a Leasing company at ANCOR holding in St. Petersburg.

What personnel can be outsourced?

On average, companies have preferred to outstaff managers and leased blue collars such as workers in retail, as well as warehouse packers and loaders and others. «Now the outsourcing of white collars in finance, engineering and IT is also in demand,» Zelentsov said.
As for Margulis, among the main reasons for the popularity of HR outsourcing is the lack of personnel on the market. «Foreign companies entering the market have simply little chance of finding qualified staff. That is why they use the recruiters' services,» she said.

How many providers of HR outsourcing are there now in Russia?

Most recruiting agencies that provide HR outsourcing services that comply with the Labor Code are international companies.

Analysts hope that a new law will help the legal development of outsourcing in Russia, doing away with schemes whereby people are recruited by small and false companies and get paid under the table.