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Outsourcing allows employers to cut costs – Oyawoye

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May 22, 2015 : Comfort Oseghale

Managing Director and Chief Executive Officer, Resource Intermediaries Limited, Mr. Olusoji Oyawoye
Managing Director and Chief Executive Officer, Resource Intermediaries Limited, Mr. Olusoji Oyawoye
The Managing Director and Chief Executive Officer, Resource Intermediaries Limited, Mr. Olusoji Oyawoye, spoke with COMFORT OSEGHALE on the importance of outsourcing in reducing overhead and generating employment.
What functions do companies outsource?
You outsource functions that are not core to your operations. It is an admission of the fact that the client is not at its best in this area. And there must be somebody else who is an expert in that area.
There are three ways to determine what will be a core function of an organisation. Is it a function that you expect future executives of your business to come from? Second, when your competitors are recruiting for those functions, do they come to poach your workers? Third, if you were starting your business today, would you employ those people for core functions or take them under an outsourced arrangement? If the answer to all the three questions is no, then you should really outsource such functions.
So, if I run a hospital, for instance, my core function is to provide medical care. I need to have doctors and nurses. The radiographer is required in the laboratory. For laboratory tests, you can do them outside the hospital and bring the results. My front desk officer can be outsourced because that is not the main thing I do. Some management employees are outsourced if that management function is not core to your operation. The key thing is the significance of the function to your business.
Will a company not incur more cost through outsourcing?
The best way to answer this question is that if someone has a disease, the fellow has the option of going to a chemist to buy drugs. Why do we then go to a doctor and pay for consultancy, which is more expensive? It is because we need someone with the right expertise to take care of the disease. But I must say there are quacks out there who claim to be providers of specialised services. They are the ones, creating this confusion in the minds of the users that they are paying more.
On the issue of paying more, the cost is relative to the value. You only look at cost when you are not seeing the value. Let us assume I provide front desk officers which you pay N50,000 per month. So in your head, your cost is N600,000 a year. Let us assume that the employee is a woman and goes on maternity for three months, you are still paying her salary and she is not working. When it is an outsourced function, we can send a replacement at no extra cost. Your service has no down time. The person on maternity will still get paid by the outsourcing company because I have a pool of them including those I am paying that have not been deployed; the backup employees. So, I am able to use them to relieve those kinds of positions at no extra cost to you.
I have a client in manufacturing that I provide about 148 employees. During the crisis in the North, production was low because the bulk of their products are sold there. Sales dropped significantly so they did not need so many workers. They returned the 148 employees to me. Now that business has picked up again, they have been calling those employees back. If those workers were not outsourced, it would have created problems for them during their low period. If you want to exit outsource workers, you give them 30 days’ notice. So what I do is to pull them back and deploy them to other factories.
The idea of outsourcing is for the employer to face his business and let somebody else worry about that section. When you look at the cost in its entirety, you will see that it is cheaper. But those that are providing contract jobs and calling it outsourcing, cannot demonstrate any value. It then looks like the client is paying more.
How do you ensure that the work period is commensurate with the pay?
Every employment situation is a contract with the employee, where the terms are stated in black and white from day one. Prospective employees are at liberty to accept or reject those terms. What we do as professionals is that we don’t take any employee to be paid less than N22,500. The minimum wage at the federal level is even N18,500. That is for the labour certified minimum hours of work.
Our work hours are basically 8am to 5pm. Any work beyond 6pm is due for overtime. Our payment for overtime varies from N150 to N250 per hour. With some clients, when the work requires a lot of overtime, we exercise our discretion in deciding the maximum amount payable.
What are the challenges of running an outsourcing company in Nigeria?
Some of them are challenges common to every business operating in Nigeria. One of them is lack of sanctity of contracts, where clients sometimes don’t abide by the terms. There are a lot of integrity issues too, where some providers do not remit the pension and tax deducted from employees’ pay. These issues create problems for the few of us that try to do things the right way because it is assumed that we are all doing the same thing.
Then there are issues relating to payment. Some clients don’t follow through with the contract. When this happens, the next option you have is a court action, which can take another three years. Sometimes the clients just tell you what they are willing to pay and they expect all the benefits. More often than not, the outsourcing companies accept because if you make too much noise, there are competitors waiting to take over. Where there are liability claims as in the case of theft or fraud, the contract requires the client to allow you to investigate before asking you to pay damages. In most cases, the clients just want you to pay without investigation. And in a lot of those cases, employees of the client must have actually contributed to the fraud. This is common because there is currently no legislation backing outsourcing practice in Nigeria.
Do you think outsourcing has improved in Nigeria over the years?
Yes, things are changing. They are much different from when we started nine years ago. The IRL is a member of the Outsourcing Professionals of Nigeria and I currently sit on the board of the organisation. I am also a certified outsource professional; an associate certified outsource professional of the International Outsourcing Professionals. It is a United States-based certification.
What we do is to try and entrench outsourcing as a professional management practice in Nigeria as it is worldwide. Those who use outsourcing services would also be able to attest that over the years, services have improved.
Another thing that is gradually changing is the perception of outsourcing as some sort of career job by job seekers. Although outsourcing provides employment for numerous people, it is not a career job. It is a place where you build up your skills and then move on to something else which is usually entrepreneurial. That is what happens worldwide but in Nigeria people look at it as a career job and that is why there is frustration.
What structures do you think the government can put in place to help the outsourcing profession?
Tax is one factor. If government recognises that it has a major problem with employment, it can give some incentives to outsource companies that provide employment. For example, we pay corporate tax, premises tax, radio tax and all kinds of taxes, which unprofessional providers try to run away from. The problem of infrastructure is not peculiar to us; the cost of doing business generally is high.
The major factor is legislation because it would guide the users on who to deal with. I cannot say I am a chartered accountant today if I don’t have the qualification. The same applies to medicine because there are laws to protect it. But people wake up, go to the Federal Ministry of Labour and get a recruiter’s licence; that is the only requirement to start an outsourcing company. Meanwhile, recruitment is not outsourcing; there is no such guide on the legislation.
There is a bill in the legislative house for outsourcing; it has been there since the time of former President Olusegun Obasanjo. You need lobbyists to get the legislature to consider it important to pass. Unfortunately, the outsourcing providers are not that organised at the moment. We are trying to strengthen ourselves now. Hopefully, with time, we can get that done.
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Friday 22 May 2015

Outsourcing allows employers to cut costs – Oyawoye

May 22, 2015 : Comfort Oseghale

Managing Director and Chief Executive Officer, Resource Intermediaries Limited, Mr. Olusoji Oyawoye
Managing Director and Chief Executive Officer, Resource Intermediaries Limited, Mr. Olusoji Oyawoye
The Managing Director and Chief Executive Officer, Resource Intermediaries Limited, Mr. Olusoji Oyawoye, spoke with COMFORT OSEGHALE on the importance of outsourcing in reducing overhead and generating employment.
What functions do companies outsource?
You outsource functions that are not core to your operations. It is an admission of the fact that the client is not at its best in this area. And there must be somebody else who is an expert in that area.
There are three ways to determine what will be a core function of an organisation. Is it a function that you expect future executives of your business to come from? Second, when your competitors are recruiting for those functions, do they come to poach your workers? Third, if you were starting your business today, would you employ those people for core functions or take them under an outsourced arrangement? If the answer to all the three questions is no, then you should really outsource such functions.
So, if I run a hospital, for instance, my core function is to provide medical care. I need to have doctors and nurses. The radiographer is required in the laboratory. For laboratory tests, you can do them outside the hospital and bring the results. My front desk officer can be outsourced because that is not the main thing I do. Some management employees are outsourced if that management function is not core to your operation. The key thing is the significance of the function to your business.
Will a company not incur more cost through outsourcing?
The best way to answer this question is that if someone has a disease, the fellow has the option of going to a chemist to buy drugs. Why do we then go to a doctor and pay for consultancy, which is more expensive? It is because we need someone with the right expertise to take care of the disease. But I must say there are quacks out there who claim to be providers of specialised services. They are the ones, creating this confusion in the minds of the users that they are paying more.
On the issue of paying more, the cost is relative to the value. You only look at cost when you are not seeing the value. Let us assume I provide front desk officers which you pay N50,000 per month. So in your head, your cost is N600,000 a year. Let us assume that the employee is a woman and goes on maternity for three months, you are still paying her salary and she is not working. When it is an outsourced function, we can send a replacement at no extra cost. Your service has no down time. The person on maternity will still get paid by the outsourcing company because I have a pool of them including those I am paying that have not been deployed; the backup employees. So, I am able to use them to relieve those kinds of positions at no extra cost to you.
I have a client in manufacturing that I provide about 148 employees. During the crisis in the North, production was low because the bulk of their products are sold there. Sales dropped significantly so they did not need so many workers. They returned the 148 employees to me. Now that business has picked up again, they have been calling those employees back. If those workers were not outsourced, it would have created problems for them during their low period. If you want to exit outsource workers, you give them 30 days’ notice. So what I do is to pull them back and deploy them to other factories.
The idea of outsourcing is for the employer to face his business and let somebody else worry about that section. When you look at the cost in its entirety, you will see that it is cheaper. But those that are providing contract jobs and calling it outsourcing, cannot demonstrate any value. It then looks like the client is paying more.
How do you ensure that the work period is commensurate with the pay?
Every employment situation is a contract with the employee, where the terms are stated in black and white from day one. Prospective employees are at liberty to accept or reject those terms. What we do as professionals is that we don’t take any employee to be paid less than N22,500. The minimum wage at the federal level is even N18,500. That is for the labour certified minimum hours of work.
Our work hours are basically 8am to 5pm. Any work beyond 6pm is due for overtime. Our payment for overtime varies from N150 to N250 per hour. With some clients, when the work requires a lot of overtime, we exercise our discretion in deciding the maximum amount payable.
What are the challenges of running an outsourcing company in Nigeria?
Some of them are challenges common to every business operating in Nigeria. One of them is lack of sanctity of contracts, where clients sometimes don’t abide by the terms. There are a lot of integrity issues too, where some providers do not remit the pension and tax deducted from employees’ pay. These issues create problems for the few of us that try to do things the right way because it is assumed that we are all doing the same thing.
Then there are issues relating to payment. Some clients don’t follow through with the contract. When this happens, the next option you have is a court action, which can take another three years. Sometimes the clients just tell you what they are willing to pay and they expect all the benefits. More often than not, the outsourcing companies accept because if you make too much noise, there are competitors waiting to take over. Where there are liability claims as in the case of theft or fraud, the contract requires the client to allow you to investigate before asking you to pay damages. In most cases, the clients just want you to pay without investigation. And in a lot of those cases, employees of the client must have actually contributed to the fraud. This is common because there is currently no legislation backing outsourcing practice in Nigeria.
Do you think outsourcing has improved in Nigeria over the years?
Yes, things are changing. They are much different from when we started nine years ago. The IRL is a member of the Outsourcing Professionals of Nigeria and I currently sit on the board of the organisation. I am also a certified outsource professional; an associate certified outsource professional of the International Outsourcing Professionals. It is a United States-based certification.
What we do is to try and entrench outsourcing as a professional management practice in Nigeria as it is worldwide. Those who use outsourcing services would also be able to attest that over the years, services have improved.
Another thing that is gradually changing is the perception of outsourcing as some sort of career job by job seekers. Although outsourcing provides employment for numerous people, it is not a career job. It is a place where you build up your skills and then move on to something else which is usually entrepreneurial. That is what happens worldwide but in Nigeria people look at it as a career job and that is why there is frustration.
What structures do you think the government can put in place to help the outsourcing profession?
Tax is one factor. If government recognises that it has a major problem with employment, it can give some incentives to outsource companies that provide employment. For example, we pay corporate tax, premises tax, radio tax and all kinds of taxes, which unprofessional providers try to run away from. The problem of infrastructure is not peculiar to us; the cost of doing business generally is high.
The major factor is legislation because it would guide the users on who to deal with. I cannot say I am a chartered accountant today if I don’t have the qualification. The same applies to medicine because there are laws to protect it. But people wake up, go to the Federal Ministry of Labour and get a recruiter’s licence; that is the only requirement to start an outsourcing company. Meanwhile, recruitment is not outsourcing; there is no such guide on the legislation.
There is a bill in the legislative house for outsourcing; it has been there since the time of former President Olusegun Obasanjo. You need lobbyists to get the legislature to consider it important to pass. Unfortunately, the outsourcing providers are not that organised at the moment. We are trying to strengthen ourselves now. Hopefully, with time, we can get that done.
Copyright PUNCH.
All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from PUNCH.
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