In simple words, outsourcing is the practice of hiring a third-party company or individual to perform a task or process for a specified period. These outsourced workers usually work in remote offices and factories in other countries like China, India, and the Philippines, although outsourcing can also be done domestically.
Originally, outsourcing is a strategy that businesses use to cut down on costs.
To do more with less.
That has been the primary objective when outsourcing and offshoring—achieve a higher return through less capital commitment. Rather than hiring full-time employees to perform specific tasks, outsourcing proved to be much cheaper and faster. It has also allowed businesses and organisations to focus on their core tasks while sending non-core functions to contractors.
Outsourcing has evolved over the years. At present, it is used by some firms who are looking to gain competitive advantage and leverage industry expertise of these outsourcing companies. Today, it is no longer only ancillary services which are outsourced, but also functions that are more or less intertwined with the company's core activities, such as software development.
Outsourcing has become a smarter, more strategic, and more beneficial means to tackle a company's hiring needs, and businesses have become increasingly reliant on this practice to fill their jobs and deliver their products and services.
However, as smart and as advantageous as outsourcing could sound, this process has often resulted in lower wages and dangerous working conditions for outsourced workers from different parts of the world. There have been several reports probing the working conditions of these outsourced workers.
The "sweatshop" problem
Outsourcing is commonly associated with ‘sweatshops'—a derogatory term for “a workplace in which workers are employed at low wages and under unhealthy or oppressive conditions” as described by Britannica.
According to the 2014 report Who's the Boss: Restoring Accountability for Labor Standards in Outsourced Work by the National Employment Law Project, outsourcing was one of the central factors driving down wages and working conditions in the post-recession economy. Employers used outsourcing to evade labour laws, payroll taxes, and their responsibilities to provide primary benefits.
When businesses outsource merely to cut costs, the ones paying the price for these companies' cost-cutting often end up to be the outsourced workers.
Compared to their non-contracted counterparts, outsourced workers' wages suffered. Figures from the NELP show that the outsourced workers' wages sustained a 7% dip in janitorial salaries, up to 30% in port trucking, and up to 40% in agriculture. For food service workers, their wages fell by $6 an hour when compared with direct hires.
Sarah Leberstein, staff attorney with the NELP and co-author of the report, says:
“Outsourcing is becoming an integral part of the way businesses operate in America, and many workers are paying the price. We need to build accountability into these new structures to ensure that workers have recourse for violations of core labor standards, for example, if they are denied wages or forced to work in unsafe conditions.”
In the UK, there are approximately 3.3 million outsourced workers according to the Trades Union Congress (TUC). A large proportion of these outsourced workers are discovered to be in insecure and low paid work. Outsourced workers don't receive the same benefits that full-time and in-house employees do.
Outsourced workers in the garment industry
Women in the garment industry are often subject to low wages, sexual harassment, and poor working conditions. In apparel factories in Bangladesh, women workers receive a monthly salary of $37. Some are forced to work 100 hours a week, while getting punched and slapped by their supervisors throughout their shift. Women in Cambodia and Indonesia have slightly better conditions and better wages, with wages ranging from $75 to $80 monthly.
Manufacture of Apple products and components
Stories about the condition of Apple's manufacturing plants have been trending topics now and then for the past years. One particular story that broke out was about how Apple outsources the manufacture of its products and components and how the company reportedly didn't care about how their outsourced workers were treated. Workers were expected to work and clock in up to 200 hours every month, were denied breaks, and were made to work with machinery and chemicals which aren't particularly safe.
Suicide rates were particularly high among these factory workers (workers were said to jump from the windows during their shift). However, Apple was said to address this problem by having ‘anti-jumping nets' installed—nets that would catch these jumpers and send them back to the production line.
Working condition of Facebook moderators
Recently this year, Facebook has gotten heat for subcontracting out an emotionally challenging task: moderating Facebook content. Service provider Cognizant has its workers moderate some of Facebook's most graphic and controversial contents.
Casey Newton of The Verge found that these moderators at Cognizant worked in a chaotic environment. They were also put through severe trauma from looking at hate speech and violent media all day long.
Moreover, these contractors have to deal with strictly managed breaks. When they feel traumatised from watching particularly violent or graphic videos, they are given just nine minutes of ‘wellness time' to step away from their screens. Reports also show that these contractors often have post-traumatic stress disorder as a result, with some even adopting the fringe and conspiratorial beliefs of the posts they moderated.
Outsourcing isn't a means to evade responsibilities
“Just like in the case of Facebook moderators, yes, it is Cognizant who's primarily at fault, but Facebook, being the client, is equally responsible,” comments Cloud Employee CEO Nick Hargreaves.
“It's cases like these that we should talk about and shed light on because it's just not right. It's not healthy. Businesses who outsource must start to treat their outsourced teams right—as they would their in-house team. And when they do, I think that's when these businesses will not only succeed but also contribute something significant to whatever industry they're in.”
At the end of the day, continuing to use outsourcing as a means to dodge responsibilities and cut down on labour costs is a recipe for disaster. Responsible and sensible companies will use outsourcing to collaborate with specialised labour from different parts of the world to gain a competitive advantage.
Work with skilled offshore tech talents without the massive fees and risks of traditional outsourcing. From helping you find the right developer to taking care of them at our modern offices, Cloud Employee assists you in every step of the way. Learn how Cloud Employee works, see our Pricing Guide, or talk to us. You can also hire dedicated offshore developers with us across many technologies.