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To Hire or Outsource?

Assessing which choice is best for you.

At the height of the pandemic, about 114 million people lost their jobs. Maybe you were one of the many employers that had to make the difficult decision to let people go. The priority of business owners was originally focused on staying open, but now the focus has shifted from surviving to thriving. With the economy showing positive signs of recovery, employers will need to decide whether to bring back all the employees who were laid off or whether to outsource certain positions. It’s not an easy decision; every situation is different. Here are a few considerations to help you evaluate what’s best.

Rehiring Furloughed Employees

There are lots of upsides to rehiring former employees: there’s no learning curve, little to no training or on-boarding, an established relationship and rapport, and a boost to company morale and culture.

Top performers, employees with specialized and hard-to-find skill sets, those who have a positive impact on the team and employees who left on good terms are all excellent candidates to bring back.

In an ideal world, employers would bring back every employee who was laid off and business operations would be the same as or better than they were before. It’s more likely that the reality is somewhere in between. In any case, provide former employees with formal written offers and/or notices of recall. A phone call or text message won’t cut it.

Many employers opted to furlough employees but kept them on payroll to maintain their health insurance. In these cases, returning the employee to active employment will probably impact employee benefit plan administration, too – and in some cases, executive compensation agreements.

One of the risks of rehiring a portion of a furloughed workforce is employment discrimination. Make sure to have clear, non-biased reasons for prioritizing who is brought back. Factors like seniority, operational needs and past employee performance are valid reasons to help evaluate who is rehired. Document everything ahead of time. Employers will need to determine beforehand what to do about rehired employees’ paid time off and sick pay as well.

Whoever is rehired, bear in mind that some employee paperwork probably needs to be completed again or at least reviewed. Items like the I-9, bank account information for direct deposit, Form W-4 and other types of employment contracts and agreements might need to be revisited. Compensation might change if an employee’s schedule or role will be different; remember that any business that accepted a Paycheck Protection Program (PPP) loan must meet certain obligations regarding employee pay. For example, rehired employees cannot be offered wages less than 25% of what they made before.

Benefits of Outsourcing

Outsourcing comes into play in a few different ways. Furloughed employees may have already found other work and are unwilling to leave their new job; some may have left the industry altogether. And some employers may find that their needs are different from a year ago. When there are vacancies to fill, there’s also flexibility.

Some of the benefits of outsourcing include:

  • Focusing on what the business does best and working with outside contractors for ancillary or time-consuming tasks

  • Accessing industry best practices and specialists

  • Increasing efficiency, speed and scale

  • Adapting quickly as needs change

Sometimes, rehiring furloughed or laid off employees isn’t possible and the cost of hiring a brand-new employee is too high – if the employer is even able to fill the role. Most small businesses plan to outsource at least some business functions this year for one or more of the reasons laid out above. The top five business functions that companies are most likely to outsource are:

  • IT services

  • Finance and accounting

  • Legal

  • Digital marketing

  • Development

The following are four ways that outsourcing can save time and provide added benefits for companies that aren’t sure if it’s better to hire someone in-house or work with a consultant.

Growth. When business growth is a priority, having consultants on board can help to quickly scale a company up. Trying to do everything yourself or with a limited team can really hamper large-scale growth.

Support. If certain business functions need targeted help to meet deadlines faster, produce a higher output or better quality of work, consultants give the team an added boost to get the job done.

Seasonal Needs. Just as many retailers hire temporary workers to get them through the holiday rush, small businesses can utilize outsourced talent to supplement a big project or busy time of year.

Expertise. Consultants are an excellent way to save time, money and added stress when the company needs specific expertise on something.

A Different Perspective

Although we would like to bring back every employee who lost their job during the pandemic, it doesn’t always work out that way. A number of factors can influence that decision, and the employer can only influence a few of them. Outsourcing may have never been a consideration for you in the past. Yet, the world has changed so much since March of 2020. Today, outsourcing can be a great way to balance the deck and help you remain competitive and focused on growth.

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