Remote staffing is a business model or strategy that employs remote professionals, usually situated in developing countries such as the Philippines and India, through a third-party vendor. This third-party vendor, often referred to as a remote staffing agency [1] or provider, bears responsibility for the recruitment, payroll, benefits, and other human resource related tasks for the remote employee, often referred to as a remote resource. The employee, however, works as a fully integrated member of the client company's workforce and is directly managed by the client. [2]
This model supposedly benefits businesses [3] that want to maintain a flexible workforce in a low-cost environment without the apparent legal and financial complexities involved in establishing a local entity in another country. Despite having evolved from business process outsourcing (BPO), remote staffing is distinct from conventional business process outsourcing in that it does not delegate an entire business function and its overall management to a third-party vendor. [4]
The origins of the term remote staffing can be traced to offshoring or outsourcing that gained popularity in the late 20th century. [5] Initially, companies moved entire departments, such as manufacturing, IT support, and call centers, to countries with lower labor costs. This was primarily a cost-saving measure focused on functions rather than individual roles. The term itself is an offshoot of the term cloud staffing, coined by Lloyd Ernst, CEO of Cloudstaff. [6]
It is widely believed that the main catalyst for the shift towards remote staffing is the availability of high-speed internet, also referred to as broadband internet, in developing economies [7] and the development of powerful cloud-based collaboration tools in the 2000s and 2010s. [8] Technologies like Slack, Zoom, Asana, and cloud computing platforms made it possible for individual knowledge workers to integrate with teams located anywhere in the world.
This technological evolution allowed the model to shift from offshoring a department to hiring a person. Small and medium-sized enterprises (SMEs), which lacked the resources to set up full-fledged foreign subsidiaries, were early adopters. They began hiring individual, full-time professionals in fields like software development, graphic design, and virtual assistance from various remote staffing agencies. The COVID-19 pandemic, beginning in 2020, served as a significant catalyst. It propagated a global normalization of remote work, leading companies of all sizes to adopt distributed team models and view remote staffing as an important strategy for talent acquisition and operational resilience. [9]
The remote staffing model operates on a tripartite relationship between three entities: the client company, the staffing provider, and the remote employee.
This is the business that needs to fill a role. The client is responsible for defining the job requirements, interviewing and selecting the final candidate, assigning daily tasks, managing workflow and performance, and integrating the remote employee into the company's overall culture and projects.
The staffing provider or remote staffing agency acts as the official Employer of Record (EOR). [10] Its responsibilities include sourcing and vetting candidates to fill job roles requisitioned by the client, managing the legal employment contract, processing payroll and local taxes, administering statutory benefits (like health insurance and social security), ensuring compliance with local labor laws, and often providing the physical infrastructure needed for the remote employee to function in full capacity, such as office space and IT equipment, in the employee's location.
While legally employed by the staffing provider, the employee works exclusively for and is dedicated to the client company. They participate in the client’s operational processes and function like an in-house team member, [11] but from a different geographical location.
Versus freelancing: Freelancers are independent contractors hired for specific projects with defined, often limited, scopes and end dates. They do not function as in-house team members for all practical purposes and aren't expected to work long-term. On the contrary, remote employees, employed via remote staffing agencies or otherwise, are hired for long-term roles and are integrated into the client's team structure. [12]
Versus business process outsourcing (BPO): In a BPO model, the client outsources an entire function (e.g., customer support). The BPO provider manages the team, workflow, and outcomes. In remote staffing, the client directly manages the individual employee hired through a remote staffing agency. The remote employee functions as an integral part of a process owned and operated in its entirety by the client and is treated as an in-house employee strictly in terms of duties and deliverables. [13]
Versus direct remote hiring: A company can hire a remote employee directly, but this often requires setting up a legal entity in the employee's country to handle payroll and compliance. Remote staffing bypasses this requirement by using the provider or remote staffing agency as the Employer of record (EOR).
The remote staffing industry, being a direct evolution of conventional business process outsourcing (BPO) (also referred to as offshoring), operates on a global scale and is shaped by the same geographical patterns of supply and demand as seen in the case of BPO. Hence, remote staffing is subject to the same economic factors, historical trade relationships, educational systems, and technological evolutions that affect BPO. [14] This dynamic can be broadly understood by examining the demand-side nations that consume these services and the supply-side nations that provide the resources capable of rendering those services. In the context of the North–South model in international economics, many demand-side nations are located in the "Global North", characterized by high-income, service-consuming economies with advanced infrastructure and higher labor costs, while most supply-side nations are concentrated in the "Global South", characterized by lower labor costs, favorable trade linkages, and growing educational and technological capabilities that enable them to serve as major providers in the global services value chain. [15]
Nations in the African continent, such as Nigeria, Kenya, and Egypt, are in the race to become major remote staffing hubs with the increasing penetration of high-speed internet connectivity across the continent. [16]
Remote staffing is applicable to most roles that can be performed on a computer and do not require a physical presence. Common examples include:
The remote staffing model is subject to several operational, cultural, and socio-economic challenges and criticisms noted by business analysts and scholars. [17] Operationally, the management of teams across significant geographical and temporal distances creates coordination costs that can affect the efficiency of both synchronous and asynchronous communication. [18] The integration of personnel from diverse cultural backgrounds poses a challenge to maintaining a cohesive organizational identity, with risks including misunderstandings rooted in different workplace norms and the formation of in-group/out-group dynamics between local and remote staff. [19] Furthermore, the model's distributed nature increases complexities related to information security governance and the protection of intellectual property across varied legal jurisdictions. On a broader socio-economic level, the model faces ethical critiques, primarily regarding the practice of labor arbitrage , which some analysts argue perpetuates global wage inequalities, and concerns within demand-side nations about the potential for domestic job displacement. [20]