Ethical Considerations When Outsourcing to the Global Market

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The emergence of outsourcing has altered the way companies conduct business with their customers. As businesses expand, they look for ways to meet the rising demand that comes with it. However, while business process outsourcing (BPO) continues to be an evolving trend, detractors nonetheless point out the ethical issues in outsourcing as the main reason to forego the solution entirely.

As a business practice, outsourcing involves a company hiring another entity or organization to execute services, tasks, and operations that have been handled by the company’s people. The primary delivery strategy for this service is remote outsourcing, wherein individuals from a country come to work for a company from another country. As a result, the advantages are outsourced abroad and employees from other countries are involved. 

In this article, we’ll put the ethical issues in outsourcing front and center, and how businesses can make sure they only hire a service provider that values ethics and professionalism.

Ethical Issues in Outsourcing to the Global Market

Ethical considerations have become vital in global outsourcing, since social media allows people to be more informed and in real time. Companies are exposed to significant risk as a result of the international flow of information, whether favorable or negative. As the practice of offshoring grows, there is an increasing desire for solutions to issues with the ethics of outsourcing.

employees discussing ethical issues in outsourcing

Is Outsourcing an Ethical Practice?

Outsourcing has been the topic of an industry-wide debate, with stakeholders divided on the merits of employing workers globally. On one side, critics have pointed to unethical tendencies and alleged abuse of offshore workers. However, these problems can be avoided if proper outsourcing ethics are created and followed.

On the other hand, advocates of outsourcing have noted enhanced efficiency, scalability, access to skilled workers, and other benefits. While the latter argument appears to be more favorable to businesses, it is critical to ask necessary questions about employees in order to learn about their views on offshoring.

To answer this question, let’s consider the ethical issues in outsourcing in two countries that frequently figure in this business solution: the United States and the Philippines.

Ethical Issues in Outsourcing: United States

Outsourcing remains a somewhat dirty word in the United States. Some politicians have promised to put an end to it, while businessmen try to minimize their involvement. Despite the widespread outrage about the rise in outsourcing, some experts claim that it may not be all that bad. After all, companies must occasionally cut costs in order to stay in business, especially during a recession.

Ethical Issues in Outsourcing: Philippines

In the Philippines, as in any other country, ethical outsourcing is determined by the individual conditions and practices involved. Overall, outsourcing can be ethical if it results in fair wages and acceptable working conditions for employees, and if it does not exploit workers or harm the local community.

Case in point:  is still thriving and expanding. Human resources, logistics management, medical transcription, payroll administration and maintenance, customer service, telemarketing, legal database management, and maintenance are some of the procedures catered to by the BPO industry in the Philippines.

Unethical Outsourcing Examples

1. Not Providing Fair Wages and Benefits

Since the cost of living in developing countries is frequently lower than in wealthy countries, outsourcing is usually inexpensive. A major concern in the outsourced manufacturing industry is how people are underpaid and overworked.

2. Poor Working Conditions

Many outsourcing companies, mainly those in their early stages, have terrible working conditions. Many people consider this unethical because the employees have no choice but to accept the unpleasant working conditions.

3. Working in Graveyard Shifts

BPO employees who work for foreign clients are in the same time zones as their clients. As a result, nearly all outsourcing personnel work the graveyard or night shift. Because of the potential health effects for the employees, some consider this among the ethical issues in outsourcing.

4. Unfair Competition

Jobs that could have been given to locals are being outsourced to other places including abroad, thus resulting to limited job opportunities for locals.

5. Inferior Service Quality

Even with the right service-level contracts in place, the absence of monitoring is enough to keep a company from outsourcing its operations to another entity. Unethical businesses don’t care if the quality of their deliverables falls short of their clients’ expectations because all they care about is the money.

6. Compromised Data and Information Security

Some countries that provide outsourcing services have little to no rules protecting intellectual property theft. With IP theft on the rise, it pays to thoroughly vet any possible outsourcing partner and their business practices. Privacy policies are vital, and ethical businesses take them seriously.

Here’s a short video that further discusses the ethical issues in outsourcing: 

How to Avoid Unethical Outsourcing Practices

Perform a risk assessment.

To prevent risks, you must first understand them. Begin by performing a risk assessment. Understand what’s going on so you can create a clear risk management plan. Part of risk assessment is ensuring safe manufacturing facilities and equipment.

Create a collaborative relationship with clear communication.

Ensure that the lines of contact with clients are open. There is complete transparency on the transfer schedule and cost. Also, make sure that privacy policies and outsourced ethics practices are properly defined.

Mitigate risks by maintaining rules and processes that preserve employees’ rights.

It is possible to reduce outsourcing risks with thorough planning, contractual and non-contractual alignment, and a high level of transparency. Ensuring safe manufacturing facilities and equipment is also another way to avoid hazards.

Accept that projects are changing.

Risks may continue to pose concerns when businesses work in a highly dynamic environment, no matter how well they are managed. The key here is continuous contract and supplier performance management. This will assist your team in identifying when issues arise so that they may be addressed as soon as possible.

Set legal procedures in place.

Service-level agreements with customers must include all legal aspects of the outsourcing arrangement. To protect the interests of clients, a non-disclosure agreement must be signed with workers and third-party service providers.

Implement an employee selection criteria.

The reputation of a company is only as good as the individuals it hires. Companies should perform rigorous background checks on personnel and use stringent selection processes to select honest, ethical, and responsible persons for your project. Providing personnel with proper training and growth opportunities can help to assure service quality.

shot of a young man experiencing stress during work

Implications of Unethical Outsourcing

Hiring outsourcing workers overseas is a natural byproduct of market globalization and corporations’ need to decrease costs in order to maximize profits. It is an effective business strategy that puts labor to its optimal use. In the end, the result should benefit consumers by cutting production costs, which may then be passed on to purchasers and shareholders, who will benefit from higher profit margins. However, like with most things, outsourcing has some unforeseen negative implications.

It can eliminate jobs from the domestic workforce.

While it is debatable whether the ethical issues in outsourcing include affecting the employment and job opportunities, it nevertheless removes certain sorts of work. Workers who leave their jobs are more likely to find better jobs in new industries or through greater training and education.

Low-skilled jobs that require repetitive manual labor have been outsourced to cheaper labor in other nations or to technology. Thus, many towns and cities that used to rely on assembly lines and businesses have now vanished. By producing high unemployment rates in the local labor market, unethical outsourcing may worsen poverty and inequality. As this happens, economic growth slows, worker rights are reduced, and both the product and service quality suffer.

It can tarnish the industry’s reputation and foster distrust within the organization.

If an employee knows their job could be outsourced to less expensive foreign labor, they may lose faith in their company and become disheartened. Because outsourcing has expanded from unskilled to administrative and intellectual positions, even managers cannot be guaranteed that their jobs are safe. Workplace satisfaction and productivity can suffer as a result.

It affects insourced countries.

Outsourcing also removes labor from a country’s workforce and places workers in jobs that may not be important to their own country’s development or progress, but pay better. People may be persuaded to quit agriculture or small-scale businesses in order to work as a customer service employee in a city. What happens when there are no more low-wage labor markets to exploit? Companies may then turn to technology to replace workers, resulting in both domestic and international unemployment of unskilled labor.

Outsource-Philippines: Your Ethical Outsourcing Option 

Companies that outsource specific jobs or responsibilities must ensure that ethical guidelines are followed in order to maintain high integrity and service standards. They should also ensure that each partner with whom they engage respects and gives access to working conditions, labor laws, and environmental standards to its outsourced partners.
Outsource-Philippines is a company that places a premium on business etiquette and professionalism. We understand the ethical issues in outsourcing, and so we prioritize continual training and coaching to ensure that you get the best results for your company. You may save money on recruitment and training while maintaining good operations to help your business expand by scheduling a free consultation with us today.