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Confessions of an Outsourceaholic

Yes, I have employees. But I'm addicted to contract workers. And I see no cure. Here's why you can embrace your cravings to outsource too.
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Hello.  My name is Gene Marks.  And I am an outsourceaholic.

In this political environment it's embarrassing to admit my habit.  I frequently hang out with other outsourcers.  I know according to some these people are a bad influence on me and America.  But many outsourceaholics like me binge on outsourcing.  It's an unspoken epidemic in this country.  For many of us, outsourcing is a quick high and a way to be...oh, I don't know...cool as well as (dare I say it) profitable.   I do a lot of outsourcing at nights and on weekends because the people who I outsource to (particularly in my industry) work this way.  I selfishly hoard my best outsourcers from my friends so I can have them all to myself.  I frequently pass out from the excitement of making money from outsourcing.   Yes, I have employees.  But in my heart I'm an outsourceaholic.  It's an addiction.  And I see no cure.  Why would I want to be cured of this anyway?  It's just too appealing.

Since I outsource I owe less money in taxes.

I'm not subject to certain employer-related taxes (because I outsource certain tasks rather than employ people to handle them).  The most significant of these is the matching FICA and Medicare taxes on employee earnings.  For 2012, the FICA tax is 4.2% (scheduled to return to 6.2% next year) on an employee's earnings up to $110,00.  And the Medicare Tax is 1.45% (also going up next year).  As you can imagine, the authorities aren't crazy about my ability to avoid this, so I've got to be very careful about where and how often I outsource.  So I follow these very strict guidelines from the IRS.

I don't have to pay other employee benefits either. 

Not paying taxes is one thing.  Not paying other benefits really makes me want to keep the party going.  Subcontractors don't need health care, vacation, sick days, jury duty, 401(k) matches, disability insurance, membership to health clubs, or car allowances.   They don't require life insurance, child care subsidies, bonuses, adoption assistance, or healthy snacks in the lunch room.  They don't require a lunch room, frankly.  These lower financial and operational demands fuel my outsourcing addiction.

I eliminate tedious paperwork.

And my addiction costs even less because I don't have to include subcontractors on any tax filings or track year-to-date wages, taxes, or other withholdings.  I don't have to get my payroll service company involved.  My bookkeeper doesn't have to keep separate paperwork on subcontractor benefits, taxes, or child support payments.  We don't need to track vacation or sick days.  And we certainly don't have to liaise with any unions.  Our subcontractors send us an invoice and, if it's approved, we pay it as part of our normal weekly check runs.  No habit is clean.  But the outsourcing habit is.

I avoid unnecessary overhead too. 

I'm lucky enough to be in the technology business where I can feed my habit from my home office.  My company is completely virtual.  Therefore I have very low utilities, phone and Internet costs.  I don't have to worry as much about insurance, auto expenses, continuing education, office supplies, office equipment, repairs, maintenance, trash removal and the inevitable downtimes that occur over the summer and Christmas holidays.

I get access to specialized skills.

As an outsourceaholic I can enjoy just about any type of outsourcing I can get.  And I can be picky if I want to be.  This means that when I need a developer who specializes in mobile applications for the iPad I hire that person to do the job.  When I need help with telemarketing I hire a person with that skill set.  I don't have to resort to synthetic or copycat solutions.  By outsourcing I get the real deal.

These days, I can easily find contractors.   

While in the past I had to make much more of an effort because all I could do was take out an ad in a local newspaper to find contract workers, today, I can find that specific expert where he or she lives by going online at great sites designed for that purpose.  I realize it's a two-way street.  "If you want to find someone great, you must be a great client too," says Fabio Rosati, CEO of Elance, an online platform that connects independent professionals and businesses.  "Recognize that talent is at least as selective as you are and that people who read your job post are asking themselves, 'Would this be a good client to work with?'"

I can effortlessly connect people to my office. 

There are countless ways to feed my indulgence.  Using subcontractors in 2012 is way easier than it was years ago.  That's because I can hire anyone, anywhere as long as they have an internet connection.  And then I can use very inexpensive technology tools to get them connected to my office.   Rather than list those tools, check out this article.  Geography is no longer a limiting factor.

As an outsourceaholic, I promote (and teach) entrepreneurship. 

Some people look down their noses at us outsourceaholics.  But contrary to what they may think, my subcontractors like outsourcing with me.  They are not employees because they don't want to be employees.  They are themselves entrepreneurs.  They work from home or with very small organizations and have a niche expertise.  Sometimes I work with budding entrepreneurs--people that are out of work and never want to go back to being employed again.   I help them with the process of starting a business: how to invoice, bookkeep, manage time, among other duties.  I explain to them what I've learned as a business owner.  For many of my subcontractors, I feel as if I'm helping them become better entrepreneurs.

Outsourceaholics promote freedom and flexibility.   

A great majority of contractors I work with are happier than employees I encounter working for clients.  That's because they have a different lifestyle.  They make their own hours.  They work from whatever location suits them.  They can hire and fire their clients.  Don't get me wrong; there are plenty of downsides too.  The most significant is not having a paycheck during slower times.  But I'm hands off with my contractors.  I'm not concerned about when they work and how they get the job done as long as they get it done on time and they do what they say they're going to do.  That's a different experience than you'll have with most employers.  For some, it's a great change.

I have fewer rules and regulations to follow.

As an outsourceaholic, I don't have to explain what I do, and especially why I hire or fire.  I don't have to watch what I say.  I can ask about a person's family because it's fun to talk about his kids.  I can learn about a person's religion because it's interesting to me.  For the most part, I don't have to fear being slapped with a discrimination lawsuit.  When I end a relationship with a contractor, I don't need to conduct an exit interview, have her sign a waiver of all liability, pay severance, or fear the same kind of recriminations I have with an employee.  If a contractor doesn't follow through on what he says, I can just stop working with him in the future.  It's as simple as that.

I can try people out. 

Hiring an employee is a huge commitment.  Sometimes it works, and sometimes it doesn't.  Untangling oneself from this relationship can be painful and complicated.  Not so with a subcontractor.  If things are working, that's great.  We'll keep working together.  If it's not working, then 'Oh well...best of luck elsewhere'.

My name is Gene Marks and I am an outsourceaholic.  Don't even try to intervene.

Last updated: Aug 8, 2012

GENE MARKS | Columnist | Owner, Marks Group

Gene Marks is a columnist, author, and small-business owner. He oversees the Marks Group, a 10-person technology consultancy to small and medium-size businesses. A certified public accountant, Marks has also worked in the entrepreneurial services arm of KPMG. He writes for The New York Times, Forbes, and The Huffington Post.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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