In the era of globalization and increasingly fierce business competition, companies must always look for ways to improve efficiency, focus and service quality. One approach that has crossed conventional boundaries is “ outsourcing ”. This phenomenon, which seems to come with a breath of fresh air but also brings its own challenges, is changing the business landscape in profound ways.
Understanding Outsourcing
Outsourcing is a business practice in which a company entrusts some of its operational tasks and functions to outside parties, usually companies that specialize in certain fields.
Initially, outsourcing companies focused on jobs that were not directly related to the company's core business and rarely offered career advancement, such as telephone operator duties, call centers, security guards, and cleaning services. However, the use of outsourcing has now expanded to various corporate sectors.
By utilizing outsourced labor , the company does not need to provide facilities, benefits or health insurance, because the responsibility lies with the outsourcing company .
Although profitable for the company, this system has a negative impact on outsourced employees . They have no career development opportunities, and sometimes their salaries are cut by the parent company. This salary cut can reach 30 percent as payment to the outsourcing company .
What's more worrying is that not all outsourcing employees know the size of the cut the outsourcing company takes for their services.
History of Outsourcing
Outsourcing has been known since Greek and Roman times, where they hired foreign soldiers and building experts for war and development purposes.
This concept also emerged in 1776 through the thoughts of Adam Smith who stated that companies could be more efficient by handing over some production to other specialists.
This idea was developed by Coase in 1973, arguing that production needs to be organized by companies if the costs are lower than market prices.
The industrial revolution encouraged companies to focus on product quality at low costs. In the 1970s and 1980s, global competition led companies to seek new solutions. The emergence of outsourcing thinking helps companies concentrate on the core business, while identifying critical processes that can be outsourced .
In Indonesia, the contract and outsourcing work system was adopted through Law No. 13 of 2003 . This is due to the need for entrepreneurs to share workloads and respond to intense business competition. Even though it was "eliminated" in the Job Creation Law, this term is back in Perppu no. 2/2022 .
Outsourcing Employee Work System
The outsourcing employee recruitment system is actually similar to regular employee recruitment. The difference is, outsourcing employees are recruited by labor service providers, not by companies that need labor. After that, the energy provider will place employees in client companies that need them.
In this system, the energy service provider will pay the employees first, then charge the fee to the client company. Outsourced employees generally work under contracts with energy service providers, not with client companies.
Benefits of Outsourcing Services
Outsourcing has become an important strategy in the modern business world, bringing benefits and challenges to both workers and companies. Let's take a deeper look at the benefits associated with this work system.
Benefits of Outsourcing Services for Workers
The outsourcing work system has various impacts on the workers involved in it. Here's the complete review!
- More Job Opportunities: The outsourcing system provides opportunities for workers to get involved in various projects and companies. This can pave the way for broader skills development and increased work experience.
- Job Flexibility: Outsourced employees have the freedom to choose jobs or projects that suit their interests and skills. This can provide a sense of satisfaction and ownership of the work they do.
- Skills Development: Through a variety of different tasks, agency workers have the opportunity to develop diverse skills. They can become experts in various fields, which can increase their market value in the future.
Benefits of Outsourcing Services for Companies
In a competitive business environment, companies have various reasons for adopting outsourcing work systems . The reason is, there are positive aspects that can be found from a company perspective.
- Cost and Management Efficiency: Outsourcing allows companies to reduce operational costs, such as fixed wages and human resource management. It also relieves companies of direct responsibility towards employees, reducing administrative and legal costs.
- Focus on the Core Business: By outsourcing non-core tasks to service providers, companies can focus on activities that drive growth and innovation. This can improve efficiency and quality in the business areas that are the main focus.
- Access To Specific Skills: Outsourcing allows companies to leverage specific skills and expertise that the in-house team may not have. This can help in completing certain projects faster and more effectively.
Disadvantages of Outsourcing Services for Workers
Although there are benefits obtained by workers in the outsourcing system , there are also several disadvantages that need to be considered. Let's delve further into its negative impact on workers.
Disadvantages of Outsourcing Work Systems for Workers
The outsourcing work system has a dark side that can affect workers significantly. Here's the complete review!
- Uncertainty of Long-Term Employment: Agency workers often face uncertainty in terms of long-term employment. Short or project-by-project contracts make them more vulnerable to market fluctuations or company decisions.
- No Guarantee of Benefits and Protection: Outsourced employees may not get benefits such as allowances, health insurance, and retirement guarantees from the parent company. This can provide financial uncertainty and lack of protection in the event of health risks or work accidents.
Disadvantages of Outsourcing Work Systems for Companies
Not only are workers affected, companies also face challenges in implementing outsourcing work systems .
- Less Control over Employees: Outsourcing companies have more limited control over the employees working for them. This can affect the quality and consistency of the work produced.
- Potential Quality and Coordination Issues: Separation of duties may result in challenges in terms of coordination and communication between internal teams and outsourced employees . This can affect the quality of work and the sustainability of business processes.
Latest Outsourcing Law Regulations in the Job Creation Law
Law No.11 of 2020 concerning Job Creation revised a number of articles in Law No.13 of 2003 concerning Employment, one of which relates to outsourcing principles .
Previously, in the Manpower Law, outsourcing was defined as handing over part of the work to another company. This handover process can be through a work contracting agreement or the provision of worker/labor services.
However, the Job Creation Law changes the concept of outsourcing by eliminating Article 64 and Article 65 and changing Article 66 in the Manpower Law. Within the framework of the Job Creation Law, the term " outsourcing " is used as a substitute for the term outsourcing .
This change is also stated in Government Regulation No.35 of 2021 concerning Specific Time Work Agreements, Outsourcing, Working Time and Rest Time, and Termination of Employment Relations (PP PKWT-PHK), which explains that outsourcing companies are legal entities that meet the requirements to carry out certain work based on an agreement with the employing company.
Previously, in the context of the Employment Law, there were restrictions regarding the types of work that could be outsourced by outsourced workers. Outsourced workers are prohibited from carrying out core tasks or those directly related to the production process; they may only carry out supporting tasks that are not directly related to the production process.
However, the Job Creation Law removes these restrictions, providing greater flexibility in outsourcing practices. Thus, all aspects can be included in the realm of outsourcing .
Outsourcing is a business strategy that has advantages and disadvantages. Even though it provides flexibility and efficiency, it is important to remember that implementing outsourcing must be done wisely and considering the impact on workers and the company. With proper regulation, outsourcing practices can provide significant benefits for all parties involved.
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