2014: the year of outsourced employment?

What is outsourced employment?

Essentially, it involves partnering with a third-party employment services provider, which then manages members of your contingent workforce such as temps, contractors and freelancers. These workers become employees of the third-party provider.

How does it work?

The provider issues each worker with a full contract of employment, entitling them to guaranteed hours of work, sick pay, holiday entitlement and access to a workplace pension. In a nutshell, the worker enjoys all of the rights and benefits associated with being a ‘traditional’ employee. The provider will also handle any HR problems that arise and process payment of wages, making all relevant statutory deductions such as PAYE tax and National Insurance contributions (NICs).

In which sectors / industries is outsourced employment most prevalent?

Historically, it has been popular amongst recruitment agencies and recruitment process outsourcing (RPO) firms, which naturally handle and place a high volume of contingent workers. However, HR departments at a growing number of ‘end users’ – ie firms that benefit directly from the skills and services of the contingent worker – are realising the advantages. In summer 2013, for example, judicial services group Marston appointed us to provide outsourced employment services to its trainee enforcement agents.

What are the benefits for businesses?

Businesses that embrace outsourced employment enjoy several advantages, including:

Risk mitigation – Outsourcing frees companies from the numerous risks associated with employing someone. In the event of a legal or contractual dispute with a contractor or temporary worker, it is the external provider that is in the line of fire and must resolve the dispute. 

Time savings – Because any HR issues are resolved by the employment provider’s own team of experts, the client is left free to focus on running and growing its business.

Access to expertise – The most compliant and professional outsourced employment providers keep abreast of new legislation such as pensions auto-enrolment and Real Time Information (RTI). By benefiting from the provider’s knowledge, clients are often able to stay ahead of the game when it comes to legislative changes.

Why will 2014 be a big year?

Proposed legislative changes to tackle ‘false self-employment’, as laid out by chancellor George Osborne in his Autumn Statement, are likely to make the outsourced employment model an increasingly attractive proposition for many businesses in 2014. Opting for a solution whereby contingent workers are genuinely employed by a third party gives business owners peace of mind that they will not fall foul of the new rules.

Derek Kelly is managing director at contingent workforce management specialist Parasol.

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