Legal and Regulatory Best Practices in Offshore Outsourcing

The global outsourcing market reached $88.9 billion in 2017, with India leading other countries in location and financial attractiveness, people skills, and availability, and business environment. As the world is becoming increasingly digitized and technologically reliant, communication and partnership between businesses and third-party service providers are expanding on a global scale.

Offshore outsourcing is increasingly popular, giving a means for organizations to obtain the expertise of specialized personnel and resources by outsourcing businesses process to experienced agencies. But companies looking for outsourcing arrangements are occasionally seen legal and regulatory restrictions, many of which are different depending on the continent or country you are working with, extending down to the Federal and State level laws and regulations.

BackOffice Pro (BOP) being in the outsourcing industry for over a decade, understands the importance of adhering to the regulations while doing the business. With adequate knowledge of Offshore Outsourcing laws and regulations, BOP helps clients in offshoring business processes and avoid penalties and repercussions that can have financial and legal impacts.

Outsourcing Trends that Have Big Legal Impacts

Legal and regulatory requirements for offshore outsourcing are incredibly detailed, including regulatory frameworks, procurement processes, charging, transfer of assets, employment laws, data protection (such as GDPR laws that impact the European Union), tax, customer remedies, and insurance.

With a substantial number of topics regarding laws and regulations for outsourcing, a good place to start is to understand the trends in our society and in a global economy that are impacting offshore outsourcing laws and regulations.

Some of these trends and regulations include:

  • Digital evolution and the role of external vendors
  • Robotic Process Automation (RPA) and other intelligent technologies.
  • Managing risks and security
  • Governance and legal outsourcing contracts

Guidelines for Building a Regulatory Framework

Understanding how to approach the complexities of laws and regulations and building a regulatory framework that acts as a guide to helping manage these complexities is a critical step in best practice adherence for offshore outsourcing laws and regulations.

There are certain state and federal laws and regulations depending on the services performed in a commercial context and the industry, such as banking, or healthcare. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is an example of a federal law that regulates business agreements with third-party suppliers. Also, in some circumstances, laws and regulations aren’t governed by country, and the U.S, for example, doesn’t control outsourcing contracts; they’re controlled by individual state contract laws.

To successfully manage these frameworks when outsourcing, businesses can follow a legal structure for outsourcing arrangements, as outlined by the International Comparative Legal Guide for Outsourcing:

  • Outsourcing transaction: Development of a master contract between the client and service provider that defines service range performance practices, pricing models, etc.
  • Acquisition process: Choosing an outsourcing service provider should start with a consultation for information and a request for bids against certain requirements like financial and performance capabilities. This comprises a Term of Outsourcing Agreement that includes the length of the contract term and termination notification requirements.
  • Pricing Models: This involves expenses connected to resource procurement personnel, hours, project volume or scale, and other criteria like customer policies.
  • Resource Transfer: Projects and contracts included in the outsourcing transaction need to be provided in writing to maintain a record of consent.
  • Employment: When procuring personnel or FTE resources, state and federal law has to be acknowledged including leave of absence, discrimination, unfair practices, etc.
  • Data Protection: Different countries approach data security differently, and therefore all parties in the outsourcing arrangement need to agree to the lawful transfer, storage, management, and destruction of data.
  • Tax: Outsourcing solutions may be subject to sales and taxes particularly regarding equipment usage.
  • Customer Solutions: In the instance of contract breach, clients may seek compensation or other remedies, which are established by general law. When handling intellectual property or confidential information, there are federal mandates that protect property, trade secrets, and other information sources.
  • Liability: Most laws and courts respect contractual limitations; however, fraud or purposeful wrongdoing is not limited by contract and may be subject to legal consequences.

Trusted Services and Offshore Reliability

BackOffice Pro is staunchly adhering to international frameworks and practices for offshore outsourcing, ensuring that our legal and regulatory architecture for all processes is above reproach. Offering agile outsourcing services for core business functions, BOP is committed to abiding by legal outsourcing guides while streamlining the partnership process for our global clientele base. Contact us to know more about our offerings and discuss if you have any outsourcing requirements in pipeline.