Outsourcing is a word quite commonly used in the business world owing to its importance. Every employee working in a private or public limited company is familiar with this term. Outsourcing basically means to contract out. Outsourcing has become a widespread practice where companies transfer some part of their work to outside companies that are more competent and specialize in various fields. This practice not only reduces cost but also saves time by having the work completed from a firm that provides specialized services. For example hiring a full time accountant can be expensive whereas outsourcing the work to accounting firm can be cost effective as well as efficient. Similarly many a times manufacturing companies outsource the production of various units to outside suppliers to avoid the production cost. Because building a setup for manufacture of delicate and sensitive components internally can be a tough task. Hiring of employees having specialized degree in certain field, setting up infrastructure, labor cost, and other expenses cumulatively have a great impact on the production cost.
As outsourcing is really common in businesses, so it is vital to be familiar with the legal term relating to outsourcing. Outsourcing services agreement is a document having legal validity which bounds all the parties to strictly follow its clauses. This not only reduces the risk of fraudulent activities but also ensures timely disposal of the work. Whereas verbal agreements are only valid between very close parties having great trust among themselves and often involve in business contracts. But it is always wise to have a written agreement to avoid ambiguities and quarrels later on. Such disturbed environment can also have a bad impact on the employee’s morale.
Here is preview of a Free Printable Outsourcing Services Contract Template created using MS Word,
Now outsourcing agreement and its various clauses depend upon the requirements of both parties that are going to enter into a contract. Requirements like the time within which the client wants to have its work done by the service provider, the fees that outsourcing firm will charge, the quality of the service being provided by the outsourcer etc have to be considered while drafting an outsourcing services agreement. This task of drafting the agreement can either be taken up by the board of directors or a lawyer can be hired for this task to carefully scrutinize all the clauses. This minimizes the risk of legal complications that can be raised afterwards. So it is always considered wise to have it proof read by a specialist, that has command over drafting of various contracts of sensitive nature.
All of these precautionary measures are considered essential for companies to follow because both parties/companies are equally responsible. Client can deny the payment if work isn’t done according to his standards and similarly outsourcer can delay the completion of work or manufactures substandard products. So negligence can be done on part of both companies. But it is very rightly remarked by someone that “risk can be minimized but cannot be eliminated.” This remark is applied almost everywhere. So a proper well-written agreement having all the necessary terms and conditions does reduce the risk of fraud and ensures its timely disposal.