Sponsored By 
Here are 17 arguments for offshore labour-hire.
Arguments for Offshore Labour Hire
Why should you hire through an offshore labour-hire agency like TOA and NOT hire directly? Let’s go through 17 arguments for offshore labour hire.
If you haven’t yet, please listen to episodes 358 and 360 where we cover offshore labour hire and then episodes 359 and 363 Part I and Part II about offshore direct hire.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Offshore Labour Hire v Direct Hire
Direct hire or labour hire? Agency staff or your own staff? What are the pros and cons? Which one is best for you? Let’s look at 17 arguments for offshore labour hire here and then in the next article/episode we will present 17 arguments for offshore direct hire.
Labour Hire v Direct Hire
Labour v direct hire is not an ‘either – or’ decision, you could do both. You could have some staff as direct hires and other staff through an agency.
Charitha Wasala for example in episode 359 – in the practice he previously worked in – they had agency staff in Taiwan and then also direct hires in the Philippines. So you could do both if you wanted to. But most people tend to do either-or, either all offshore staff through a labour-hire or all offshore staff as a direct hire.
Outsourcing of course is to the side of that and separate.
Common Points
Before we look at the pros and cons of labour-hire v direct hire, let’s look at what they share. Let’s begin with twelve common points that apply to both – offshore labour hire and offshore direct hire. Twelve things that are relevant for both:
# 1 – Competition
You always face competition for your staff, no matter how you hire them. The labour hire agencies are in regional hubs with lots of other agencies and companies around who need staff with a very similar skill set to the one you are giving your staff. And for direct-hires your competition comes from freelancer platforms on the internet.
So you face competition either way – just in a different way.
# 2 – Moonlighting
No matter whether you do labour hire or direct hire, you always face the risk that your remote staff overseas will work for other clients when not working for you. Even if it happens outside of regular working hours, it still affects you since it increases the risk of burnout and fatigue in your staff.
Take the speaker in ep 360 as an example. She worked for a labour-hire agency for 9 hours a day plus travel time and then another 4 to 5 hours a day for other clients she found online. That easily makes a 16 hour day and after a year she got sick, burned out and left. So all the training her client had put into her, the client lost. So moonlighting is a risk for you and you face this risk, no matter how you hire your overseas staff.
# 3 – Staff Retention
What your offshore staff learn from you are skills that are highly sought after. So the more you train your people, the more highly sought after they are on freelancer platforms, and so that affects your staff retention or the wages you pay, no matter how you hire them.
# 4 – Different Culture
No matter whether your staff work in an agency or from home, your offshore staff is not Australian. Even if they worked for Australian clients for many years, they and you live in different countries with different cultures. So there will always be some things lost in translation.
# 5 – Less feedback
By working remotely you lose feedback loops, and that is whether you work through an agency or directly. When somebody works right next to you, you see how they work, how focused they are. You see a straight back and eyes glued to the screen or you see a body almost horizontal on a chair, wandering eyes, yawning. You get those feedback loops when you work in the same office.
But you lose them when working remotely, and that applies to both labour hire and direct hire. You lose feedback in any remote working setup.
# 6 – Not a Stand-Alone Decision
Labour v direct hire is not a stand-alone decision. Your setup in Australia will influence your set-up overseas. If you have all your Australian staff working in your office, then it makes sense to have all your offshore staff working in a central office as well. Whereas if you and your Australian staff all work from home, then you will probably be less wary of your offshore staff working from home as well.
So whatever your setup is in Australia, it will probably influence your attitude towards the options you have overseas.
# 7 – No Technical Support
No matter how you hire, when it comes to your technical set-up, you are alone in both scenarios. You have to set up email addresses, access to the ATO portal and software access. You are alone when it comes to technical issues. All a labour-hire agency does is give you a person with a chair, desk, computer and internet connection. The rest is up to you. And when you hire directly, it is just you anyway.
So whichever way you go, you are on your own with technical issues.
# 8 – Australian School Holidays
All four BAS due dates have Australian school holidays right bang in the middle of the time leading up to them. So when you need your staff the most, your Australian staff tends to disappear, at least the ones with school-aged children and so you are left holding the baby.
When you work with staff overseas, you don’t have that problem. They have different school holidays and a different attitude to all this anyway. And that is true for both solutions.
# 9 – Processes and Technology
Your staff can only be as efficient as your processes and technology stack allows them to be. If your processes are inconsistent and your tech stack outdated, your staff will produce less output – no matter how you hire them.
# 10 – Cloud
To work with a remote team, you really need everything in the cloud. If you still work with a server in the office, offshoring gets tricky. Yes, in theory, you could give your overseas staff access to that office server, but not ideal. You really should be in the cloud with either solution.
# 11 – Cost Effective
No matter which solution you go for, you will still pay a lot less than what you would pay for similar expertise in Australia. So whether you go for an agency or direct hire, you still save.
# 12 – Bigger Talent Pool
And no matter which solution you go for, you will have a much bigger talent pool to choose from than if you just advertised in your local area around you.
So these are twelve common points that apply to both labour hire and direct hires. But now let’s look at specific arguments for offshore labour hire.
Arguments for Offshore Labour Hire
Our arguments for labour-hire are based on the assumption that labour-hire means working in the agency’s office. That is a central point, so much is connected to working in the office. If they don’t work in the agency’s office but work from home, then a lot of the arguments for labour-hire fly through the window. Our thinking is that if your staff member works from home, you might as well hire them directly. Questionable how much an agency contributes to justify AUD 700 a month in management fees when the person works from home.
So we are assuming in the following that the agency staff work in the agency office. But that assumption is wobbly since a lot of TOA staff for example are pushing to work from home. But for now, let’s assume that agency staff means working in a central office.
# 1 – Easier Candidate Selection
With labour hire, the agency goes through the applications, meets with candidates face to face (at least I assume it is face-to-face) and then just presents you with the final one or two. Whereas for a direct hire you have to do this all by yourself. You are the one going through all the applications and then interviewing prospects.
# 2 – Lower Risk of a Bad Hire
With an agency it is harder to hide a poor track record – online it is much easier – and hence hiring through an agency lowers your risk of a bad hire. Let’s say a staff member in Cebu performs badly at TOA. There are not that many other opportunities on the ground for the staff member after that – word of mouth gets around and there are only a limited number of agencies and companies in Cebu.
But online that accountant just sets up a new profile does a few fake hires and reviews and – even if you know what to look for – it might take you a while to work out that you hired a lemon.
# 3 – Lower Risk of an Interim Solution
Staff retention is always an issue. The retention of good staff is an issue. When you hire online for a working-from-home position, you run a higher risk that – unbeknown to you – your new staff member is only after an interim solution to cover a lockdown, a temporary employment gap, a temporary financial emergency and you might not realise that this is the case.
With an agency who meets with the candidates and is local, the risk that the candidate is really just after an interim solution is lower.
# 4 – Jurisdiction
With a labour-hire, your contract is in Australia. With an Australian entity. If you have a contractual issue, you are talking to an Australian. With a direct hire, you have a contract or no contract with an individual somewhere in the Philippines who you have most likely never met.
# 5 – Payment
With a labour-hire you pay in Australian dollars into an Australian bank account, so you don’t even incur international transaction fees. With a direct-hire, you have to work out how you get money from Australia to your staff overseas.
# 6 – Line Between Private and Work
With a labour-hire your staff clock in and clock out at the agency’s office, so there is accountability whether somebody is at work or not. With direct hires, the line between work and private is a lot more fluid. It is not always clear at work or not at work, but instead, there is probably a fair bit of multi-tasking going on.
# 7 – Proper Workspace
In a labour hire agency’s office, your staff have enough space, a chair, a desk and two screens to work with. In a direct hire working from home, this is not a given. Living arrangements can be very cramped and your new team member might be working on an ancient laptop sitting on her bed since there is no table and there is not even space for a table.
# 8 – Professional Working Conditions
In a central office your staff work in a professional environment, in an office. That is a really important point and not to be underestimated. With a direct-hire, you don’t really know what the working conditions are like for your staff member. When you ask, the answers you get and what you see on your Zoom calls might not be the full story. There might be five babies in the house. Half the family might be living in the room your staff member is working in. You just don’t know.
# 9 – Children
When staff work in the agency’s office, you know that there are no children around. Bookkeeping staff working from home are often – of course not always – but are often working mothers with children.
And when you ask about childcare arrangements, you usually get a satisfactory answer about a mother or sister taking care of the kids, but to what extent that is always true, you just don’t know and in a central office of course you would know because there are no children.
# 10 – Supervision
Working in the agency’s office, there is some supervision – there are CCTV cameras, there are other staff members, and you can ban your staff from bringing phones into the production area. Whereas working from home you have a lot less control, all you have is chats, video calls, screen recording and of course seeing what gets done. If your staff member is getting things done, then of course all is probably fine, but you have less control over remote staff.
# 11 – Peer support
With a labour hire, even if you have just one staff member, that staff member is surrounded by others who are of similar age and do similar work. So they have peer support around the water cooler. They can make friends. It is a lot more social. With a direct hire working from home, your staff is alone and you are all they got.
# 12 – Career Progression
Working in an office for a known labour hire agency is viewed by many as better career progression than working from home, definitely at the start of their career. Working from home does not feel like a flying career start to young adults, just a few years out of uni.
# 13 – Moonlighting
Working from the agency’s office it is less likely that your staff will work for other clients while on the clock with you. They might answer messages or take calls from other clients, but it is unlikely that they can do actual work for somebody else.
Working from home you have a lot less control over this. When people work from home, it is easier for them to work for two clients at the same time. To have the clock ticking on one screen and to work on another laptop for somebody else. There are ways to detect this, but the risk is definitely higher when people work from home.
# 14 – More Privacy
In an agency’s office each staff member has their own computer and nobody else uses that computer. Working from home, you don’t know who has access to that computer. Yes, there are passwords and authenticator apps but privacy protection is lower.
# 15 – Councillor and Referee
The agency will try to be on your side as much as they can. You pay their bills. You are their client. So it is in their interest to keep you happy. If you have an issue with one of your staff members, you can discuss it with them. And they will try to help. They will meet with your staff member and discuss the issue, be it a performance issue or whatever it is. And if your staff member doesn’t work out and it isn’t your fault, then they will find you a replacement.
Whereas if a direct hire doesn’t work out or there are misunderstandings or similar, you don’t have a referee in the middle.
# 16 – Better Teamwork
If you have several offshore team members, then in an agency office, you can have them all working together. They can sit together in one area, help each other and you can have the production manager on-site giving on-site supervision and support. Which is a lot more effective than supervision and support via Zoom.
With a direct-hire, all team members just communicate as you communicate with them, and that is never as effective as face-to-face.
# 17 – Efficiency
There is a higher chance for efficiency in an agency office. Working in an office the work output will probably be higher for all the reasons listed. Not in every case, but on average. So if money is no issue, and efficiency is all you care about, then go for labour hire or set up your own office.
So these were 17 arguments for offshore labour hire, assuming the agency staff works in the agency’s office. In the next article/episode we will look at 17 arguments for an offshore direct hire.
MORE
Find Offshore Staff
Insights from an Offshore Accountant
Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 31 October 2022
