Considering Outsourcing Casual Labor: Is It the Right Move for Our HR Needs?

Respected All,

I am working as Manager-HR in a Modular Furniture Manufacturing industry in West Bengal. We have a total of around 240 employees, out of which approximately 160 are permanent employees with a proper breakdown of their salary and PF/ESI benefits (if applicable). The remaining 80 personnel work as casual labor, and we do not have a structured salary system for them as they are paid a consolidated amount on a monthly/hourly basis. I intend to include them in the PF and ESI schemes with a structured salary breakdown. Therefore, I have decided to outsource them through a third party who will assume full responsibility for these 80 personnel, including structuring their salaries according to minimum wage requirements and managing disbursements. I am supposed to submit a proposal to the management regarding this. I would appreciate your suggestions on whether outsourcing would be a good idea in this scenario, along with the potential advantages and disadvantages.

Rgds.. DG

Hello DG,

Outsourcing your current staff has both merits and demerits. Some of the basic merits are:
- They are covered by basic statutories - in case of any unforeseen circumstances, this cover would definitely help the employees.
- You need not take care of the statutory formalities for these employees. This could, in turn, reduce your manpower (HR required to carry out these tasks).

Demerits:
- Increases the cost - you need to pay the consultant/a vendor a certain percentage every month as a service charge.
- This might also result in some attrition - the employees may feel that this is a passive move taken by the organization to slowly remove them from the system.
- If your vendor is not a reputed one, you might face problems if he doesn't register your outsourced employees for PF or ESI, as it is always the primary employer who will face the music if something goes wrong.

Hope this helps.

Regards,
Lakshmi