According to The Wall Street Journal, the next wave of remote work is outsourcing jobs overseas. The COVID pandemic and the rise of remote collaboration tools such as Zoom and Google Workspace made companies rethink their hiring strategies as they learned that employees and contractors could be productive from afar.
Moreover, filling positions abroad allows tech companies to respond to U.S. labor shortages, add talented workers, and cut labor costs, easing inflation pressure.
For its part, international tech talent increasingly values flexibility which can prevent burnout and seeks ways to remain culturally relevant by adopting foreign employers’ values and business ethics.
Companies use flexible solutions, such as staff augmentation and hiring independent contractors, because they don’t have to pay for health insurance, bonuses, and other expenses for contract engineers as they do for in-house employees. We will review and compare these two hiring models and offer guidance on where to find international engineering talent or post a contract job.
What is Staff Augmentation?
Staff augmentation is a business strategy where a company hires external professionals or resources to supplement its staff for a specific project or period.
This means that companies manage the programmers and communicate with them directly, unlike assigning or handing over an entire project to an outsourcing agency.
Staff augmentation is a flexible and cost-effective approach to address temporary skill gaps, meet increased demand, or access specialized expertise without committing to long-term employment or substantial hiring processes.
In staff augmentation, the external professionals, often referred to as “augmented staff” or “contractors,” work alongside the company’s core team temporarily. These professionals are typically contracted through an agency or consulting firm that provides skilled personnel for various industries.
Key Features of Staff Augmentation
The staff augmentation model offers many benefits, such as:
- Temporary support: Staff augmentation is a short-term solution to fulfil specific project requirements or cover absent team members due to vacations, leaves, or other reasons. The augmented staff members are brought in for a defined duration, which could range from a few weeks to several months.
- Scalability and flexibility: Staff augmentation allows companies to quickly scale up or down their workforce according to the changing demands of the project or business. It offers flexibility in adjusting the number of augmented staff members as needed.
- Specific expertise: Augmented staff members are typically hired to bring specialized skills or knowledge to a project. They may possess expertise in software development, data analysis, marketing, design, project management, or any other field relevant to the project requirements.
- Integration with the existing team: Augmented staff members are expected to collaborate with the company’s internal team members to achieve project goals. They should seamlessly integrate into existing workflows, communicate effectively, and contribute to the project’s success.
- Reduced administrative burden: Since the augmented staff members are employed through an agency or consulting firm, the company outsourcing the talent is relieved of administrative tasks such as recruitment, onboarding, payroll management, and benefits provision. The agency takes care of these responsibilities.
Hiring engineering contractors from outsourcing agencies typically involves:
- Defining technical requirements.
- Researching an agency that has experience in the required domain.
- Discussing developer rates.
- Conducting interviews with candidates.
- Signing a contract.
Read more: Benefits of Hiring an Offshore Software Development Team
Disadvantages of Staff Augmentation
If the agency lacks available talent, finding and hiring developers may take several weeks. Companies may also turn to a staff augmentation marketplace that collaborates with various outsourcing organizations to access a larger talent pool with speedier hiring procedures.
Furthermore, contractors employed through staff augmentation may be less familiar with the corporate culture. Because contractors may communicate and share less expertise with different departments within the organization, managers must define clear objectives and goals for contractors and a precise project description.
Read more: How to Hire Remote Developers in 2023? In-Depth Guide
Hiring Independent Contractors
According to Investopedia, an independent contractor is a self-employed person contracted to provide services for a company as a non-employee. As a result, independent contractors do not have taxes withheld from their paychecks. Instead, they must track their income and pay income taxes through estimated quarterly payments.
Key Benefits of Hiring Independent Contractors
Hiring independent contractors is suitable for projects with a limited planning horizon. However, companies can also hire independent contractors through freelance platforms for short-term tasks.
Companies pay international contractors from their U.S. business accounts using payment methods like digital wallets or money transfer platforms like PayPal and Payoneer. They can also use global employment services providers to simplify paying independent contractors.
Hiring independent contractors requires a contract that complies with local regulations in the state where the foreign contractor is located. The contract must include the following items:
- Description of services provided
- The terms and duration of the project
- Payment details
- Non-disclosure and dispute resolution clauses
According to the Internal Revenue Service, a U.S. company should not withhold or report taxes if a foreign independent contractor meets the following conditions: - The contractor does not reside in the U.S. for more than 90 days during the tax year;
- The total payment does not exceed $3,000;
- Payment for labour or services is made to a nonresident individual or foreign corporation that is not engaged in trade or business in the United States.
Finally, companies can turn to freelance websites such as Upwork for short or occasional tasks to hire contractors and manage their payments.
Disadvantages of Hiring Independent Contractors
Independent contractors like freelancers have no job security as their income is unpredictable. Therefore, many of them turn to multiple freelance platforms to ensure a steady flow of projects. However, such developers are less inclined to delve into the nuances of the work. Hence, clients must think through a more detailed and clear project description to get a quality outcome.
Another way to get an effective result from hiring independent contractors is to build and maintain a pool of experienced developers who have already proven themselves.
In addition, independent contractors, like contractors hired through staff augmentation, are less engaged in the company’s culture.
Staff Augmentation vs. Independent Contractors: Key Differences
While contractors who work for software agencies are employed by their software agencies, independent contractors are self-employed. Therefore, independent contractors are not eligible for employee benefits — they must provide for their own health insurance, vacation, and retirement.
In addition, independent contractors do not earn regular salaries. So, when business is slow, they earn less. As a result, their incomes can be unpredictable and more affected by the market’s available work. Finally, the hiring process of staff augmentation requires fewer resources because developers are already vetted and contracts are locally compliant.
There are also some nuances to guarantees. For example, you cannot guarantee that an independent contractor will not find a better offer and leave your project halfway through. A contractor hired through staff augmentation can also leave the project, but as a last resort, the agency or marketplace will provide a replacement. In addition to replacements, staff augmentation offers trial periods, developer onboarding, and customer success services.
While some differences exist, staff augmentation and hiring independent contractors offer similar benefits. Both models offer an extensive talent pool and full control over the development process because contractors work directly with the in-house team. It is also much easier to replace a contractor if the developer is not a good fit or wants to leave, compared to replacing in-house developers and paying them compensation.
The downside of augmenting staff and hiring independent contractors is that remote contractors don’t come into the office and are less connected to the company culture. Some companies require all their workers to come into the office as needed, even if they work remotely, because working on-site increases knowledge transfer and allows for quick solutions to urgent problems. Finally, each new project is a chance to upskill the in-house team.
Read more: How To Set Up An Offshore Development Center In Vietnam?
Where To Hire A Software Developer As An Independent Contractor
Organizations often use the same techniques to find an independent contractor as they find full-time employees. Companies can contact staffing agencies and explain their needs or post a job on an employment website. For example, Indeed allows you to select job types such as part-time, contract, or temporary when you create a job posting. Here are some examples of where you can find independent contractors or post a contract job:
- Hire headhunters or recruiting agencies that screen talent and earn a percentage of what companies pay contractors in the first year.
- Professional networking websites such as LinkedIn
- Talent acquisition platforms like Hired and Dice
- Global employment websites, such as Indeed
- Local job boards popular with job seekers in a particular country, such as Work.ua in Ukraine and Pracuj.pl in Poland
- Freelance platforms, such as Upwork and TopTal
You can also post a contract job on your company’s website and promote it through social media or contextual targeting.
Where To Hire A Software Developer Via Staff Augmentation
You can hire an outsourcing agency offering staff augmentation services or find a talent marketplace with contractors from various outsourcing companies in different countries.
Relia Software is a company that offers staff augmentation services to help businesses augment their workforce with skilled professionals for various projects and technological needs. With their software development and IT services expertise, Relia Software provides companies with access to a pool of talented professionals who can seamlessly integrate into existing teams and contribute to project success.
Relia Software’s staff augmentation services are designed to address temporary skill gaps, meet increased demand, and provide specialized expertise in web development, mobile app development, cloud computing, data analytics, UI/UX design, quality assurance, project management, and more. By leveraging its network of experienced professionals, Relia Software assists businesses in finding the right talent for their specific requirements.
Contact us to hire the best software developer for your team.
Final Thoughts
Both contracting models discussed in this article involve software engineers temporarily joining the development team led by the employer’s project manager. Companies manage programmers and communicate with them directly, unlike assigning or handing over an entire project to an outsourcing agency. In addition, it is much easier to replace the contractor if the engineer is not a good fit or wants to leave compared to replacing in-house developers, who typically need to assimilate into the company culture and receive a steady flow of tasks to keep them engaged for a long period of time.
Companies hire independent remote contractors when they have established international payment procedures and work with global staffing and sourcing agencies to manage local tax obligations and working conditions. In contrast, staff augmentation typically offers a complete package of services, including the matching process, sourc
THE AUTHOR
StuartWhite Matthew
Software Developer
- offshore outsourcing software
