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Understanding Co-Employment and Outsourcing


Businessman in office working on the computer
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When you outsource, individuals providing your services are no longer "employees". This obvious change takes time to adopt to. When outsourced staff remains onsite, former staff and current managers can struggle with the new structure. Other employees of your firm, such as customers of the service, may have even greater difficulty adjusting.

No single method guarantees that your culture will move from internal ownership to effective external management. This requires a belief by management that this an important transition and will follow a consistent process until the change is achieved. If management responsibilities are not successfully transferred, you may continue to be the legal employer of transferred workers. Confusion over who is the employer may even make you the "employer" for workers you never hired, making them eligible for your firm's benefits. You may be legally liable for wrongful dismissal and other decision made by your vendor. How do you ensure that you are not liable for these workers?

Plan: Ensure that your HR department is fully involved in developing the employee transfer process. Be sure that HR reviews and agrees with your plan. Follow up on any processes that confuse issues of management.

Educate: Make sure that changes in escalation and management are fully documented. Plan for training for ongoing staff, mangers, outsourced staff, and internal customers.

Communicate: Make sure that all parties receive the necessary training. Make sure on site signs say, "This is the (Vendor name) service." Instructions in brochures, website and document repositories must be updated to reflect the new structure.

Escalate: Processes are easier to manage when everything is going well. When problems hit services are more difficult to operate. A powerful customer will not be interested in your escalation process when they have a problem. Instead they will want to speak directly to anyone who will get their work done. You need to put considerable thought into how you will deal with these situations, because they will arise.

Evaluate: When you managed the staff, your mangers evaluated staff. You no longer have that power. The vendor may have processes you never used (monthly reviews, different training processes, certification for competency, etc.). You will retain indirect influence through metrics and contract clauses. The vendor wants you to be happy. Vendors don't want to staff individuals on your account that make mistakes or degrade their metrics. Work within the controls you have, but ensure that you have the right controls and the contract allows you to adjust them as you learn more about your outsourced services.

Promote: It is very difficult to lose control over promotions. If you have (as you should) regular governance meetings with your vendors, the discussion of promotions can be a regular point of discussion. This can even be a point in your outsourcing contract. However, you should speak with your HR department about how to ensure that your role remains one of influence and not management.

Discipline: Mistakes can be made by the entire outsourcing group, or one individual. Different mistakes are of different levels of importance. Serious editing mistakes (ex.: repeatedly misspelling a client’s name) is different from a security breach (leaving the building with confidential documents). Consider which issues will cause automatic dismissal, and put into your contract. BUT only require removal of personnel from your account; do NOT require termination from the vendor's firm, that's your vendors problem. To ensure that individuals are not returned at a later date, have a contract clause about notification when anyone joins your team (in a monthly report).

Evolve: Your service will evolve. You can add new services, remove under-performing or obsolete services, or simply need to modify how a service works. Staff will move from one position to another. You may or may not agree, but you need to be cautious about managing at this level. Focus on performance metrics. Are issues not covered by a metric because it cannot be measured (“can do attitude”, lack of customer service skills, etc.)? It probably can, bit it may be costly to regularly track and measure. You need to trade off the cost of metrics against the insight it provides.

It’s always difficult to lose direct control over staff management. Nonetheless, a well-designed outsourcing program will provide the metrics and the meeting structure to feed your input into the management process. You do lose some immediacy in control when you outsource, but if you have a consistent process you can provide feedback and while you protect your firm from co-employment issues. In the middle of a crisis, it’s easy to forget the rules and just try to get everything fixed. Your new role as the manger of an outsourced service, though, requires new way of looking at work. You don’t need to just get things done, you need to think about business risks. Create and follow a good management process and you can save your firm from a lot of wasted money and management time!

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