Obstacles and limitations for companies to outsource in the new normal
The current economic crisis derived from the pandemic caused by COVID-19 means that companies have been forced to reduce their costs to guarantee their viability and solvency . Many of them have opted for the so-called Temporary Employment Regulatory File, better known by its acronym ERTE, through its modality of reducing working hours or the salary of its employees.
According to the National Institute of Statistics (INE), in the report related to the impact of COVID-19 corresponding to the second half of 2020, “ about 40% of companies have adopted a Temporary Employment Regulation File (ERTE ) for all or part of its workers. In the Transport and Hospitality branches, the percentage exceeds 50% ”.
However, in this situation, an option that could increase hiring has been limited by current regulations in force: we are referring to outsourcing in hiring through the modality called ” Labor Subcontracting ” or Outsourcing , which implies the possibility of optimizing its resources and concentrating all its efforts on the development of its main activity through the contracting of third-party companies. A dynamic that is expected to continue with greater boom during the post-COVID-19 period.
Causes that motivate outsourcing
Traditionally, employers repeatedly resort to outsourcing in different ways, largely in order to avoid job responsibilities vis-à-vis their staff.
This is due, among other factors:
1) To the rigidity of labor and social legislation (establishing minimum standards of protection that cannot be waived -minimum wages, fixed vacation period, limits of working hours, etc.-, which block agreements and negotiations between the parties; formal obligations before the labor authorities -registration of forms, forms and contracts; submission of inspectors; administrative personnel assigned for such purposes; etc .; limitations on the termination of contracts);
2) To the imposition of economic burdens (employment contracts oblige the person who provides the services to pay certain benefits (bonus, Christmas salary, vacations, overtime, night shift, work accident policy, social security) that are absent in commercial contracting which is usually the form of materialization of subcontracting;
3) The rise of new technologies ;
4) To business competition ;
5) To an increasingly less important position of the unions .
How is outsourcing regulated?
In the Spanish legal system, article 42 of the Workers’ Statute (ET) constitutes the basic norm on which the entire construction of the normative system that regulates this matter is based.
Said provision guarantees the right of entrepreneurs to manage their productive activity by subcontracting works and services. Although it is important to point out that said rule, from a legal point of view, does not adequately protect the necessary protection in favor of workers , because the corporate responsibility regime established in it to protect the rights of workers only It applies to a particular type of subcontracting: we are referring to the one that corresponds to the activity of the companies.
In line with the legality in the use of subcontracting, our jurisprudence has also been in favor of it and has repeatedly declared it, as it is referred to in this way;
” The legal system does not contain any general prohibition that prevents the employer from resorting to outsourcing to integrate into their productive activity and, as recognized by article 42.1 of the ET, which means that, in general, the so-called productive decentralization is lawful, regardless of the legal and interpretative precautions necessary to prevent workers’ rights from being violated in this way ”(Supreme Court Judgment, STS October 27, 1994, rec. 3724/1993 and STS, October 20, 2014 rec. 3291 / 2013) . ”
All of the above is complemented, then at the level of comparative law, in countries such as Germany, Belgium, France, Greece, Italy, Portugal, United Kingdom, Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru, Dominican Republic, Uruguay and Canada, outsourcing is also a legal form of organization of production.
Advantages and disadvantages in its use
When this practice is implemented in accordance with the law, it has the potential to improve the competitiveness of the companies and countries in which it is implemented .
The proper adoption of subcontracting or outsourcing represents benefits and / or advantages that range from the reduction of administrative costs of companies linked to the recruitment, selection and training of personnel and payroll management, to access to specialized personnel and allow companies focus on its main lines of business, improving business ratios related to efficiency.
In short, well-implemented outsourcing , far from making jobs more precarious, promotes the development of the formal economy, companies and the well-being of workers and their families.
However, not all are advantages: outsourcing generates an extra cost for each person’s rate , which must be offset by other factors such as knowledge or flexibility.
In addition, there is the extra cost that outsourcing requires because you have to dedicate resources to the management of external personnel. Depending on the volume of people outsourced, management can be important enough to consume a good amount of internal resources from the outsourcing company.
Leaving the responsibility for things to work in the hands of third parties may not be the best strategy. In the long term, outsourcing certain tasks indefinitely can lead to significant knowledge loss for the organization.
Regulations approved during the validity of an ERTE, limits to subcontracting and layoffs during the health crisis
Notwithstanding the foregoing, currently, and derived from the health crisis, among the regulations issued to protect workers is Royal Decree-Law 24/2020, of June 26 , on social measures for the reactivation of employment and protection of the autonomous work and competitiveness in the industrial sector, which states that the substitution of workers affected by an ERTE is expressly prohibited until September 30.
In principle, the aforementioned Royal Decree prevents companies with workers in this type of ERTE from hiring or subcontracting new employees. It is a matter of prioritizing the incorporation of employees with suspension of the employment contract . However, it introduces certain nuances that make it possible for these businesses to continue recruiting new workers, either indirectly or directly.
On the one hand, those who, for objective reasons such as education, training, it is not feasible to disengage workers from ERTE to carry out these functions. This is an exception established in articles 1 and 2 of the Royal Decree, the literal wording of which includes: ” overtime may not be performed, new outsourcing of the activity may be established, or new hiring, be it direct or indirect, may be arranged during the application of the records of employment regulation ”.
On the other hand, the aforementioned prohibition does not apply to those companies that had contracts prior to the entry into force of said regulation , all despite the fact that the explanatory memorandum of said regulation itself does allude to avoiding the resumption of previous outsourcing , which was not finally included in the final text of the standard.
Likewise, this regulation joins the one already approved at the beginning of the COVID-19 health crisis, we refer to the collection in Royal Decree Law 9/2020, of March 27 , which details what layoffs can be made or not the companies during the period of confinement, which limited and made the possibility of firing workers during this period more expensive.
In this regulatory area that we have described, unless companies or public administrations are in the cases of exception included in the current regulations, it is certainly an obstacle and a limitation for them to carry out outsourcing with our outsourcing In the opposite case, they would find themselves in a legally unfavorable scenario with certainly significant penalties.