How to cut payroll outsourcing costs
Outsourcing companies to sell their services to people who are out of work, like those in the healthcare and retail sectors, can save companies hundreds of millions of dollars in payroll costs, according to a report by a Washington-based think tank.
The report, titled Outsourcing in the Age of Global Warming, found that outsourcing firms have become increasingly adept at making payments for services to individuals whose work is already done, and that these payments can result in savings for companies in the billions of dollars.
In the United States alone, companies are making payments of $5.7 billion a year to employees who are still looking for work, or about one-fifth of the $8.5 billion a company saves in payroll taxes annually, according a 2015 study by the nonpartisan Tax Policy Center.
Outsourcing firms have made a number of moves to reduce the cost of outsourcing, including reducing the amount of work they must pay employees, increasing their compensation packages, and offering lower wages and benefits.
In a separate report, the International Federation of Independent Contractors, which represents some of the world’s largest outsourcing companies such as ECLIPSE, also found that workers who work for outsourced companies are paid less than those who work directly for them, according the Center for Economic and Policy Research.
The International Federation said that a large number of outsourced workers, including in retail, have been laid off due to rising energy prices and a lack of demand for their services.
The union also said that the number of people working in retail is down by 40 percent in the past five years.
The International Federation’s report also found a lack in demand for retail jobs, which are largely concentrated in rural areas.
“The growing outsourcing of retail is a huge problem,” said David B. Boulton, a senior economist at the Center.
“If there’s no demand, and you don’t know what to do, what do you do?”
Boulton noted that some of those retail workers have to go back to work, and many are in low-paying, insecure jobs that require little education.
The government estimates that there are more than 300,000 retail workers in the United State.
The biggest problem is that the workforce of retail workers has been shrinking for years, he said.
“There’s been this massive job loss of workers who’ve been unemployed for a long time, and they’ve been unable to find employment,” Boulson said.
The IFCI’s report said that some retailers and other employers are shifting their sales to workers who are already in the workforce, and outsourcing companies are looking for a way to offset the cost.
In some cases, outsourcing companies will pay their employees less than the company paying them, or pay workers less than they would have paid their employees, Boulthton said.
“When they see a retail job that’s available, they can go out and sign up a worker and get them,” he said, referring to the outsourcing companies.
“But when they see somebody who’s not available, there’s a higher barrier for them to be able to get in.”