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4 Ways Outsourcing Helps Startups Avoid High Attrition

Updated: Jun 28, 2021

Technology companies are often placed on the pedestal of innovation, tasked with carrying us through the next recession or bringing us the newest tools. However, the turnover rate at startup organizations is a challenge that needs to be dealt with. The average startup employee works for any given organization for two years. In 2018, the tech software sector saw a 13 percent attrition rate.

Tech startups need to find ways to mitigate this pain point. One strategy would be to leverage outsourcing and staff augmentation to save the company time and money. Let’s take a look at how using an outsourcing model can benefit startup organizations in the long and short term:

1/ Outsourcing is budget-friendly

No matter how you slice it, replacing employees is expensive. One study from 2012 determined that it costs 20 percent of a full year’s salary to replace a highly skilled employee and around 16 percent of the salary for an unskilled worker. When contracting with an outsourcing organization, you don’t have to spend that money on training, effectively negating that high percentage of replacement cost. You also don’t have to spend enormous amounts of money on recruitment campaigns to find the best talent — online job boards do the heavy lifting for you.

On a high level, the wages you pay contractors and freelancers are generally less than you would a full-time employee. This leads to benefits in the long term, including in areas like income tax and benefits enrollment. Since contractors don’t technically work for your business, you aren’t obligated by law to provide employee benefits.

2/ Hire highly skilled workers

Freelance and project-based work sites like Upwork can be cost-effective and efficient ways to improve your workforce and get the right people in the right jobs. Depending on the project, you can find skilled workers to fill the gaps. Such job boards make it easy to find highly trained people in any particular role — and then release them without grief once the projects requiring their skillset are complete. However, before doing so, you need to make sure you understand how to pay freelancers and how they differ from regular employees.

3/ Market creates mastery

Because the current job market is so competitive, many workers with profiles on job boards will be familiar with cutting-edge technologies and tools. They may even have certifications in competencies you require. Where you would need to spend money and time training a full-time employee, outsourcers often come already fully trained and experienced, so you can temporarily fill a specialized role without being obliged to fill that role on a permanent basis.

4/ Improve efficiency

Sometimes, tech startups begin with one employee and grow from there. This can lead to the owner being the one doing all the work — in tasks that you aren’t effectively trained in (such as taxes, web design, or marketing). Skilled workers with specific capabilities will no doubt get the job done faster than you would, creating efficiencies and allowing you to focus on more important tasks, such as growing your bottom line.

The global market now also offers you an opportunity to augment staff members from various parts of the world — meaning your business can work around the clock. If you contract with someone in a different time zone, you can have eyes and ears on your systems in time to respond to customer queries or finish projects more quickly, for example. You may need to invest in task management and team collaboration software such as Infolio to help your team stay on the right track.

These are only a few of the ways that outsourcing and staff augmentation can benefit your startup organization and improve your bottom line. Just make sure this option works for you and your business before you decide to outsource any work.

Guest post by Elena Stewart from

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