Staff Rental (Outstaffing / Personnel Outsourcing/ EOR)

Hiring staff is becoming an increasingly popular tool in modern business. Companies seek to optimize their processes and reduce costs in a rapidly changing market. Outstaffing, staff outsourcing, and the Employer of Record (EOR) model offer flexible solutions that allow organizations to focus on their critical tasks. These approaches allow not only to reduce personnel risks but also to gain access to highly qualified specialists, which is especially important in the context of a shortage of personnel. This article will look at the main benefits of hiring staff and how these models can help your business adapt to new challenges and opportunities.

What is the essence of “rental” hiring models?

For companies that use the services of hired personnel, it is essential to understand the difference between the models used to build relationships with the party that provides personnel. Let’s pay attention to the features of each of the models: outstaffing, personnel outsourcing, and EOR.

Staff outstaffing

Personnel outstaffing is a business model in which a company transfers hiring and management functions partially or entirely to an external provider while controlling employees’ work and directly managing projects. An outstaffing contract is concluded with an external provider, under which an external provider – outstaffer forms out the staff, pays the salary, and conducts labor relations with the staff. The company that employs the staff can handle payroll, payroll taxes, vacations, and working time accounting. 

Unlike outsourcing, where the company outsources certain business processes or services (for example, accounting or IT support), outstaffing involves receiving temporary or permanent staff to perform specific tasks.

Main features of outstaffing:
1. Flexibility
Companies can quickly increase or decrease their staff based on current business needs, which is especially useful in an environment of unstable demand.
2. Save time and resources
An external provider takes over employees’ recruitment and registration processes, allowing the company to focus on the main business tasks.
3. Access to specialists
Outstaffing allows hiring qualified specialists without having to use all the company’s internal resources.
4. Simplify administration
The outstaffing provider takes over labor legislation, personnel records management, and other administrative functions, freeing the company from these concerns.
5. Reducing employee registration risks
Outstaffing allows your company to reduce the risks associated with labor laws and data privacy since the provider takes care of all issues related to the legality of registration.
Usage examples:
Outstaffing is often used in areas such as IT, where companies can hire programmers, designers, or analysts to complete specific projects, thereby gaining access to an expertise resource that is not available internally.
Thus, outstaffing is an effective tool that helps businesses adapt to changing market conditions, increasing their competitiveness and allowing them to focus on their growth strategy.

Outsourcing services

Outsourcing is the process of transferring a company’s function or service to an external contractor or specialized provider. Unlike outstaffing, where employees remain under the company’s control, the organization completely transfers control of specific processes and the associated responsibilities when outsourcing. When outsourcing, the company agrees with the outsourcer to transfer certain functions for a fee.

The main signs of outsourcing:
1. Transfer of responsibility
When outsourcing, the company not only transfers the execution of tasks but also their management. The outsourcer becomes responsible for performing specific functions.
2. Transfer of functions that require expert knowledge
Many companies outsource to perform tasks in which the outsourcer has more experience and expertise than they do. For example, this may include accounting, IT support, marketing, and other specialized services.
3. Lower costs
Outsourcing can often be more cost-effective than maintaining a specialized department within a company, as it reduces the cost of wages, taxes, training and staff development.
4. Focus on core tasks
By outsourcing non-core functions, companies can focus on their core business processes and strategic goals, which increases operational efficiency.
5. Flexibility and scalability
Outsourcing makes it easy to increase or decrease the volume of required services depending on the business’s needs and adapting to market changes.
Usage examples:
Companies often outsource IT services, accounting, logistics, call centres, and marketing. For example, a company may use the services of an external accounting firm to focus on its production activities.
Personnel outsourcing is an effective tool for managing capital and resources, allowing companies to increase their competitiveness and adapt to dynamically changing market conditions.

EOR

EOR (Employer of Record) is an employment relationship management model that assumes that a third party, i.e. a service provider, becomes a legal employer for employees working for another company. This allows companies to hire employees without dealing with labor relations, taxes, and other legal issues.
Critical features of EOR:
1. Legal liability
EOR assumes legal responsibility for employees, including taxation, salary payments, compliance with labor laws, and human resources management.
2. Flexibility in hiring
Companies can hire employees in different countries without establishing a legal presence there. This is especially useful for companies that want to expand their presence in international markets.
3. Simplify processes
EOR simplifies all processes related to personnel management, including additional documentation, contributions to pension funds, medical insurance, and so on.
4. Focus on business
With EOR taking over administrative tasks, companies can focus on their core business processes and strategy.
5. Compliance with the law
An EOR provider is usually well-versed in local legislation, which helps avoid legal risks and errors related to labour law.
Examples of using EOR:
1. International hiring: 
A company from one country can use EOR to hire employees in another country without a registered company.
2. Difficult personnel situations:
EOR can help you hire temporary employees or freelancers, making it easier to manage their employment contracts.
3. Integration into teams: 
Companies can use EOR to integrate new employees into their teams without dealing with local hiring requirements in advance.
EOR is a convenient solution for companies looking to optimize their recruitment and personnel management processes, especially in the context of globalization and a rapidly changing labor market.

When outsourcing, certain company functions and business processes are transferred to external performers. The outsourcer company determines the personnel who perform these functions.

Differences between outsourcing, outstaffing, and EOR

EOR (Employer of Record) and outstaffing are two human resource management models companies often use to hire employees. In each of these models, personnel are issued by provider companies. However, there are essential differences between them, which relate to the legal status of employees, responsibility and management. Here are the main differences:

EOR (Employer of Record) and outstaffing

1. Accounting of working hours and payments:
The EOR is responsible for all legal obligations related to employees, including tax deductions, salary payments, and compliance with labor laws. 
When outstaffing, the company that uses the staff’s services often assumes the functions of recording working hours, paying staff, and calculating payroll taxes. This is because outstaffers often provide staff for jobs that do not require high qualifications or physical strength and are paid based on the time worked (cleaning, merchandisers, administrators).
2. HR Department:
EOR manages all aspects of HR administration, including hiring, paperwork, insurance, labor law compliance, and employee development. 
When outstaffing, these functions can be shared between the outstaffer and the company. In outstaffing, the client company usually has more control over employee workflows and tasks than in EOR. This means that companies can dig deeper into managing their workforce.
3. Working for the client:
Employees working through EOR exist on paper as EOR employees but work for the client company. In this way, companies can use EOR for flexible hiring without creating a legal entity in another country. 
You can use the outstaffing model locally. This is especially important when employees need to perform their tasks offline, not remotely.
Each model has advantages and disadvantages, and the choice between them depends on the business’s needs and the specifics of the work.

What are the business benefits of using outstaffing, HR outsourcing, and EOR?

1. Lower costs
Companies can significantly reduce staff costs by avoiding taxes, insurance, and other benefits.
2. Focus on business processes
The business can focus on its main tasks and strategic development by transferring support functions to external specialists.
3. Access to specialized skills
Outsourcing and outstaffing allow you to attract highly qualified experts, which improves the quality of tasks performed.
4. Flexibility and scalability
Companies can quickly increase or decrease staff depending on their needs, which is especially important in a changing economy.
5. Risk reduction
Outsourcing can minimize the risks associated with hiring and managing personnel since external providers are responsible for their employment and contracts.
6. Access to new markets
Using EOR (Employer of Record), companies can enter foreign markets without opening legal entities there, simplifying international expansion.
By outsourcing and outstaffing, businesses can reduce costs, increase efficiency, and quickly adapt to market changes.