Why Do Companies Outsource Jobs - Practical Advice

Why do companies outsource jobs? So the question is, why do companies outsource jobs? And why do American companies outsource jobs? And I think this question is often misguided. So let me give you six reasons why people outsource jobs. And, and I'm going to give you a different perspective on it too. So number one, it's cheaper. I mean, if you take the cost of living in another country, specifically like the Philippines, someone can live well at the same level as someone in the US but their cost to live that well is much, much lower. I'll tell you an example. I haven't been to the Philippines since 2010, but in 2010, when I was there, you could buy a meal for 70 cents, like rice and chicken, it was 70 cents. And so that's very different than in the U.S. and that cost has gone up today, but it's not like it hasn't gone up 10 times. It's cheap to hire someone to work overseas when they're pretty comparable on the skill level as the person locally would be. So reason number two then to why companies outsource jobs is because you get a really big labor pool. So imagine if you're living in a city with 2 million people and you're looking to hire someone locally. Well, there's only 2 million people that you could hire from. Whereas if you go overseas, if you outsource to The Philippines, there's 100 million people there. And so your, your labor pool is much, much bigger. You're much more likely to find the person you're looking for. So reason number three, why companies outsource jobs is that there's low commitment. Like you can, you can hire someone overseas. It doesn't require you to bring in all kinds of equipment. You don't have to buy their computer. You don't have to have a bunch of other stuff for them, an office and, and whatever. So there's a lot less commitment to hire someone overseas if they, if they don't work out, it's much easier to let them go. You don't have to have severance pay. You don't. There's a bunch of different things that require less commitment when you outsource. So reason number four for why people outsource their jobs to the Philippines is because there's no overhead. So you don't have to pay benefits, you don't have to pay insurance, you don't have office costs, or you don't have utilities, which usually companies will calculate their overhead costs at like 1.6 times the person's salary. So you're adding 60% of cost just based on benefits. So when you're outsourcing, you don't have to pay benefits. So reason number five, why companies outsource jobs is there's no government red tape. So in the US when you hire someone, you have to be prepared to give them a W2 and some and three different kinds of insurance or whatever it is, or you have to deal with lawsuits or compliance or all of these different laws that are put in place in the U.S. well, when you hire someone overseas, that doesn't apply to you anymore. None of those laws, they're not going to sue you for sexual harassment. You don't have to make sure that the working conditions in your office aren't, you know, whatever it is, because they're not in your office. They're in their own home or they're in their own office or whatever it is, they're providing that space for themselves. Usually when people hire a contract worker here in the US you send them a 1099 at the end of the year. Well, when you're outsourcing overseas, you don't even have to send them a 1099. Like there's no government anything, and yet you still get the same tax breaks for it because it's still a normal business expense. So reason number six why companies outsource jobs is this isn't necessarily always about sending jobs overseas. It's not always about like, oh, we're going to get rid of these people here and we're going to hire those people over there. What I often find is people outsource overseas because they can't afford to do it locally. Like you can't afford to hire someone at $18 an hour because your business isn't making that much money. But you can pay someone $4 an hour overseas until you are making that money that you then can hire someone locally. Which this was the case with me. So in the beginning I tried hiring people locally and the commitment level was high and the cost was high. And if they weren't being very productive and if they weren't making me money, then I was failing and it just didn't work. And when I figured out I could hire someone overseas who was much, much more affordable and then they could do this work and all of that extra burden that I just talked about came off of me. And they were then helping me to grow my business and I was able to help grow my business. And after a couple times of doing that, I was profitable enough that now I could afford to hire someone locally to do some specialized things for me. And so what you'll often find is it's not just about, oh, they're shipping all these jobs overseas. Often it's about, hey, let us grow our business appropriately until we can afford to bring in local people. And then you've actually not shipped jobs overseas. You've created local jobs. Whereas someone otherwise may not have succeeded in their business or they may not have grown their business. Now they've gotten the help they needed by outsourcing overseas. Outsourcing jobs. Outsourcing jobs. And now they've grown the business to the point where now they're creating jobs and I see this over and over and over again, where people will hire overseas, grow the business, and then they need more specialized local help. And then they now have created jobs because of the outsourcing. My name is John Jonas and I've been doing this since 2005. I've seen all kinds of different situations. Outsourcing. Most of the time where I see people succeed, the best is outsourcing to full time workers in the Philippines. I have a full book that I wrote about outsourcing to the Philippines. It's called the outsourcing lever. It's all about leveraging other people, leveraging the full system of the Philippines for getting labor done in your business. And in this, I will walk you through the process. It's available, actually it's free. I'm giving it away for free at the outsourcing@outroundinglever.com it's called the outsourcing lever. And if you just pay shipping, I bought a whole bunch of different copies, actually I got a whole bunch of copies here of this book that we're shipping out when people buy them. So go get your copy@outrigourcinglever.com and I will ship this to you so that you can get started hiring the right people in your business the right way. Sam.