Outstaffing, also known as employee outsourcing, employee leasing, personnel leasing, staff leasing, and other terms, refers to the service of outsourcing employees to third-party agencies and/or leasing employees from staffing agencies without adding them to the requested company's headcount.

The terminology distinguishes who the original employees belong to; in one approach, the staffing agency keeps an exact number of employees to serve customers' requests; in another approach, customer-selected employees are "given" to the staffing agency. In this article, we will go over the outstaffing strategy that is commonly used in Azerbaijan. Many of the terms are used in the articles, but according to our research, employee outsourcing is the most appropriate and common in global terminology.

Another interesting fact is that when the personnel is chosen by the customer, the service providers are mostly staffing agencies; however, when the employees are leased, the service provider is not always a staffing agency, as this service may be offered as an additional service.

It is a fact that as your company grows, so will your challenges. As a result, businesses want to focus on their core competencies while receiving administrative relief and reduced liabilities. This is how outsourcing logic manifests itself. The most common application of this approach is in functional outsourcing, such as IT outsourcing, accounting outsourcing, HR outsourcing, and so on. But as a niche direction of the outsourcing service, outstaffing or employee outsourcing service is widely used throughout the world.

This service is used in specific cases in Azerbaijan because the Labor Code of the Republic of Azerbaijan does not have a separate clause for this methodology. Outstaffing services can be beneficial as a solution, especially when a company's options are limited. The simple mechanism is as follows: the customer pays the service fee, and the staffing company pays the employee's salary, taxes, and other costs. The following are the uses of outstaffing services in Azerbaijan:

1. An international company may have a regional office in Azerbaijan but does not have a legal entity or wishes to expand its business in Azerbaijan without establishing a legal entity before the exact turnover. In that case, the company will most likely want to hire locals to coordinate their services without incurring additional office costs.

2. Another excellent example of outstaffing is adding non-local employee(s) to the headcount in Azerbaijan, which may benefit the customer in terms of taxation and cost of living. Because the tax obligations are not higher than in developed countries and the cost of living is significantly relevant, the company will require a staffing agency to outsource their employee on the agency's headcount. It is also true that in that case, a work permit must be obtained from the migration service, but in any case, this is one of the uses of the outstaffing service in Azerbaijan.

3. Although it is uncommon, another use of an outstaffing service is to pay higher wages than the rest of the company's employees. Corporate organizations have their own grading system and compensation structure in place for all employees. When a company wants to hire an employee with a higher salary than the other employees, but the salary is irrelevant to their structure and/or may demotivate employees, an outstaffing service may be a viable option.

4. Saving money is another reason to use this service, similar to the situation described above. In that case, the compensation package of the outsourced employees is kept lower than their internal pay structure. This scheme allows the company to focus on its core business while outsourcing non-core employees. It is understandable for an energy company, for example, to outsource accounting department employees rather than pay the same high compensation package as engineering department employees.

5. Aside from cost savings, it is critical that outsourcing philosophy brings with it less obligation, and that outstaffing service also reduces risks. The company delegates its non-core and high-error-probability obligations to a professionalized in-house agency with a full team of specialists. As a result, the company reduces its risks in functions where it lacks deep expertise.

Sabina Ahmadova

Talent Management Senior Specialist

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