In the face of intense competition, globalization of the processes and country’s commitment to the Eurointegraton, external factors have significant economic influence on peculiarities and conditions of the activities of the contemporary Ukrainian enterprise. Dynamic change of external and internal medium determines quick reaction of the enterprise to corresponding market phenomena and processes. Currently there are different models for optimization of the enterprises’ activities, aimed at increase in their efficiency and performance as well as promotion of their development. One of the most popular and successful modern business models is outstaffing. Though the outstaffing service appeared on the Ukrainian market long ago, demand for it has increased only during the last several years. Such type of activity is not regulated by the law, relative novelty and irregularity of these forms of provision of personnel restrained the Ukrainian market.
The outstaffing means dismissal of the personnel by the client with further employment by the contractor, meanwhile the latter undertakes all legal and financial responsibilities for the personnel. Attraction of the personnel on the outstaffing basis allows reducing salary, minimizing risks connected with labor relations, reducing expenditures connected with accounting and administrative support of the personnel, and reducing the document flow. Let’s have a closer look at the needs of the current market and understand what modern outstaffing means.
Usually provision of the outstaffing services includes: preparation and execution of the labor agreement (contract) with the employee and employment by the outstaffing company of an individual employee or groups of the employees; management of the staff document flow according to the current Ukrainian legislation; accounting of salaries and deductions; payment of taxes, mandatory duties, payroll taxes; calculation of temporary disability benefits, holiday compensation, and other bonuses and incentives.
Modern outstaffing model differs significantly and requires inclusion of a much broader list of services relating to provision of the personnel. When the company decides to use the outstaffing model, the Client also wants to transfer all other expenditures relating to provision of the personnel.
It is not uncommon when at the beginning of the business development, perspectives are not clearly defined, and the entrepreneurs are afraid to invest in establishment of fully-fledged representative office. In such cases the foreign client addresses the outstaffing company. The foreign company looks for a provider of complex service relating to maintenance of the office on the new territory. The content of the service can be different: rent of the office, office equipment, communication equipment, vehicles, maintenance of computer networks, logistics, search and choice of personnel, human capital consulting, staff records management and payroll management. Legally the services relating to staff management are described as provision of the outstaffing services. The client expects full assistance and help, but majority of the Ukrainian service providers are not ready and do not have resources to ensure such type of support because of absence of clear legal regulations. For sure flexibility relating to provision of the employees to the business is one of the latest trends on the modern labor market, and Ukraine is no exception in this case.
Usage of the outstaffing model globally is regulated by the Private Employment Agencies Convention No 181, approved on 19 June 1997. This Convention was not ratified by Ukraine and the term “outstaffing” is not enshrined in the law, though the norm, set forth in Article 39 of the Law of Ukraine on Employment of Population of 5 July 2012 covers legal relations, arising as a result of business operations of the economic entities, which employ the workers with a view to making them available to other employer in Ukraine. Such economic entities are defined taking into account the articles of association of the economic entities and according to the types of economic activities. The law does not prohibit performing such operations, but currently it does not duly regulate them. So the market creates a demand for the services, relating to the outstaffing and requires to include not only employment but also organization of the work place, logistics, life insurance, etc. At the same time the current legislation goes behind the demand and has no clear solution and understanding how to regulate these additional needs.
Taking into account summary of court rulings concerning the outstaffing services, in order to avoid claims of the fiscal bodies about illegal formation of expenditures and tax credit relating to personnel provision, non-recognition of the primary documents because of lack of identification and confirmation of provided outstaffing services, it is important to indicate in the Provided Services Acceptance Certificate not only number of people and period, for which the services are provided, but also to identify the personnel (indicate first and last name), or specify volume of works, performed by these people, their positions, and time worked. Absence of identification of the persons, who provided the services, absence of information about their positions and qualification do not allow to recognize these documents as primary documents. That is why correct legal formalization of the relations connected with the outstaffing services (agreements, primary documents etc.), list of detailed conditions in the agreements can help to avoid disputes between the client and contractor; and careful preparation of the documents about the attracted employees (for example rights and obligations, work procedures, list of employees, etc.) can help to avoid possible misunderstanding with the State Labor Service and Tax Service.