- US enterprises who need help with hiring can choose onshore staffing, which is the process of hiring people within the same country, or offshore staffing, the process of hiring people from another country.
- The pros of onshore staffing are easier communication, better cultural compatibility, and less regulatory alignments, while the pros of offshore staffing are significant cost savings, access to global talent, and scalability and flexibility.
- Sysgen RPO is a leading recruitment firm that offers tailored offshore staffing services to companies in the US for various business needs.
Companies in the US face unique challenges when it comes to growing their workforce. These include prolonged hiring cycles, increased costs, and unfortunately, up to 63% of employers still getting unqualified applicants.
This is why many of them turn to staffing agencies to help them address their hiring needs. However, one of the major decisions they also need to make is whether to go for onshore or offshore staffing.
In this article, we’ll explain the pros and cons of onshore and offshore staffing. By knowing them, you can better decide which option works best for your needs.
Onshore Vs Offshore Staffing: What’s the Difference?
Simply put, onshore staffing refers to hiring people from the same country that the company operates in. For example, a telecom company based in Los Angeles may outsource its software development to an onshore firm in San Francisco.
Meanwhile, offshore staffing is the process of hiring people from another country. For instance, a Texas-based bag company may outsource its manufacturing processes to Vietnam. Both options have their pros and cons.
Related Reading: How RPO Can Help Overcome Operational Hiring Issues
The Benefits of Onshore Staffing
Companies that source people from the same country will usually have a more “frictionless” hiring process. This means that the hiring process is much easier for candidates, often through simplifying or reducing the steps needed to screen their eligibility.
And because of their close proximity to the company, it’s easier to set in-person meetings to get a “feel” for how compatible they are for the job.
The other major benefits of onshore staffing also include:
1. Better Cultural Alignment
Onshore staffing providers often share plenty of cultural similarities with the companies that hire them. They also understand cultural nuances, which allow them to seek out candidates that don’t just fit on paper, but have the personality and soft skills needed for the job.
This is useful in client-facing positions (such as customer service representatives, tech support, and accounts management) as language barriers or cultural misunderstandings are far less likely to happen between locals.
Related Reading: Building a Great Company Culture to Fuel Your Recruitment Needs
2. Easier Collaboration and Feedback
Naturally, working with people in the same location and timezone makes for easier collaboration. This setup allows managers to directly contact their teams, ensuring immediate feedback. It’s also easier to build and maintain employee morale when teams can frequently see and interact with each other. Research proves this: team morale is better when everyone works in the same physical space.
3. Simpler Regulatory Compliance
Onshore staffing firms are quite familiar with local laws and regulations. This ensures fewer legal hurdles to navigate, which is important in countries with strict data privacy laws like the United States, Australia, China, Canada, and New Zealand, to name a few. By keeping their operations onshore, sensitive client data never leaves their country.
The Downsides of Onshore Staffing
The benefits of onshore staffing are attractive. However, they also have their major drawbacks. Some of them are:
1. Higher Overhead Costs
The cost of labor and other operational expenses in the US can be quite steep, especially for companies in a mass hiring scenario. When you factor in the costs of rent, utilities, and office equipment such as chairs, computers, desks, meeting rooms, etc., it becomes exponentially more expensive to hire a large onshore staff.
And this doesn’t even cover the costs of training and onboarding, as well as the regular maintenance and upgrading of office workstations.
Related Reading: 10 Ways to Create a Value-For-Money Recruitment Strategy
2. Smaller Talent Pool
Many US industries are experiencing talent shortages. So even companies that are willing to hire people from the same country may not find enough qualified candidates to fill their urgent vacancies.
And since this shortage creates more opportunities for job-seekers, companies may have to pay above market rate for qualified local talent to lure them away from competitors. This results in even higher labor costs.
3. Productivity Limitations
Since onshore staffing is more expensive, productivity is often limited to their home country’s work hours. While this is not an issue for companies that only operate locally, larger enterprises with global operations will see this limitation as a missed opportunity.
Yes, an onshore team may provide a higher quality of service. But they can only do so within their local time zones. Once they log off for the day, their work stops immediately–unless you’re willing to pay for overtime.
The Benefits of Offshore Staffing
Now that we’ve covered the pros and cons of onshore staffing, let’s discuss offshore staffing. It’s become popular among US companies, thanks to several advantages like:
1. Significant Cost Savings
In competitive industries, every dollar saved contributes to company growth and improved services. Offshore staffing has become essential for US companies due to the substantial savings it offers (up to 60-80%)—not just in salaries and benefits, but also in overhead costs like office rent, taxes, utilities, and recruitment fees. As a result, many US companies are leveraging offshore staffing to save costs.
2. Scalability and Flexibility
Another key benefit unlocked by the vastly lowered cost of offshore staffing is scalability. Because offshoring is such a mature industry in countries like India and the Philippines, it is easy to scale offshore operations according to current market demands.
This makes offshore staffing a great option for tasks that are repetitive or formulaic. You can also opt for a flexible hybrid model, where the more data-sensitive tasks are kept onshore, while the more high-volume administrative tasks are outsourced to offshore teams.
Related Reading: Talents From Across the Globe: How Offshore Staffing Transforms US-Based Companies
3. Ease of Set-Up Through an EoR (Employer of Record)
An EoR, or Employer of Record, is a third party tasked with managing people on behalf of a client company. This is a great option for organizations looking to quickly start their operations in a new country. Through an EoR, US enterprises can create their offshore teams without the time, capital, liabilities and risks that come with setting up their corporation abroad.
Think of the EoR as an intermediary that carries out the regulatory and legal requirements of employing offshore staff for you. However, an EoR only serves as your corporation’s “hands” in another country.
While they can handle legal and regulatory requirements like payroll and hiring, the client is still responsible for all managerial decisions. These include actual day-to-day tasks, setting objectives, determining job responsibilities, compensation, promotions and terminations.
It’s important to note that the scope of an EoR’s responsibilities varies according to the provider. However, many of them allow their clients to customize their tasks according to their specific needs.
The Drawbacks of Offshore Staffing
Based on these many advantages, it’s clear that the benefits of offshore staffing are too attractive to ignore. However, this option also has disadvantages. Some of them include:
1. Miscommunication and Cultural Differences
Selecting the right offshore location is crucial to avoiding miscommunication caused by language barriers and cultural differences. That’s because each country has varying levels of familiarity with mainstream US culture.
For example, the Philippines is a popular offshore option for American companies because of its strong cultural affinity for the USA and compatibility with Western work culture. Compare that to India or China which produce candidates with strong technical skills, but have vastly lower levels of familiarity with American culture and sensibilities.
This is why offshore staffing in locations like India or China may make it more difficult for your customers to achieve a feeling of cultural alignment, especially for customer service-related tasks.
Additionally, Filipino employees are known to not just be adaptable to foreign cultures, but also hardworking and diligent.
2. Legal Complexities
Setting up operations abroad involves dealing with the laws of that country. Because of the differences in employment laws, tax regulations, and data privacy requirements, the complexity of setting up your corporation in new areas can become a tedious, costly process.
However, this is a disadvantage that many US enterprises find to be worth the trouble, as the various benefits of offshore staffing far outweigh the initial setup inconveniences. Alternatively, companies can work around these complexities by partnering with an EoR.
Which Option Is Right for You?
Onshore staffing’s benefits include better cultural alignment, easier collaboration, and fewer legal considerations. However, these benefits come at a premium cost. Additionally, getting the best people for the job is not a guarantee, especially in in-demand industries.
Meanwhile, offshore staffing’s many benefits include significant cost savings, access to global talent, scalability and flexibility, enhanced productivity, and ease of setting up through an EoR.
Its major drawbacks are cultural differences and language barriers. However, both are less likely to be a factor when you go with an established offshore location. Additionally, the legalities of offshore staffing, while complex and costly, are often worth the trouble given the huge potential savings and increased efficiency.
Whichever option you choose, it’s important to select an established staffing solution provider to minimize the risks involved with each route.
Related Reading: Talent Acquisition 101: Your Guide to Offshore Staffing
Enjoy the Benefits of Offshore Staffing with Sysgen RPO
If you are interested in exploring offshore staffing solutions for your US company, Sysgen RPO would be happy to help. We are a pioneer in this industry with over 30 years of experience recruiting high-caliber talent across various industries.
Our suite of recruitment solutions is specifically designed to address the current industry challenges faced by US enterprises. Whether you’re an established global conglomerate or a rapidly expanding challenger brand, we’ll find the right talent for your specific needs.
If you would like to know more about Sysgen RPO’s offshore staffing services and how we can help you find the best talent for your team, contact us here.
References:
Bika, N. (2023, Sept) The Most Common Recruiting Challenges and How to Overcome Them, Resources.Workable.com. https://resources.workable.com/stories-and-insights/common-recruiting-challenges
Roa, J. (2024, Sept 10) Going Offshore to Streamline: How Offshore BPO Eases Business Recruitment Burdens. Sysgen RPO. https://sysgen-rpo.com/how-offshore-rpo-eases-business-recruitment-burdens/
Mutikani, L. (2024, May 1) Growth in US Labor Costs Accelerate in First Quarter. https://www.reuters.com/markets/us/us-labor-costs-increase-more-than-expected-first-quarter-2024-04-30
11 Reasons Why Teamwork at the Office is Important. Sling. Retrieved Sept 24, 2024 from https://getsling.com/blog/importance-of-teamwork/
Bower, T. (2024, Feb 12) Yes, The Talent Shortage is Real. What You Must Know to Attract and Retain. Forbes. https://www.forbes.com/sites/tracybrower/2024/02/12/yes-the-talent-shortage-is-real-what-you-must-know-to-attract-and-retain
T. K. (2024, July 11) How Much Do Companies Save By Offshoring? Second Talent. https://www.secondtalent.com/blog/how-much-do-companies-save-by-offshoring
KDCI Outsourcing. (2023, March 28) How Much Can You Save By Offshoring Staff to the Philippines? https://www.kdci.co/outsourcing-blog/post/how-much-do-companies-save-by-offshoring-to-the-philippines
Employer of Record (EoR) Services in the Philippines. Sysgen RPO. Retrieved September 25, 2024, from https://sysgen-rpo.com/employer-of-record-services-eor-philippines/#:~:text=Our%20Comprehensive%20EOR%20Services%20in,%2C%20PhilHealth%2C%20Pag%2DIBIG)
Bridge to the Best Talents in the World. Sysgen RPO. Retrieved Sept 24, 2024, from https://sysgen-rpo.com/about-us/
Roa, J. (2024, Sep 3) Talents From Across the Globe: How Offshore Staffing Transforms US-Based Companies. Sysgen RPO. https://sysgen-rpo.com/offshore-staffing-transforms-us-companies/
Leading the Way in Offshore Recruitment Process Outsourcing. Sysgen RPO. Retrieved Sept 24, 2024 from https://sysgen-rpo.com/offshore-recruiting-services/
Are You Interested in Working with Sysgen RPO? Sysgen RPO. Retrieved Sept 24, 2024, from https://sysgen-rpo.com/contact-us/
