What is the legal HR difference between outsourcing sales (paying Company A who specializes in Sales) a check for their services versus having a contract, commission only sales representative sell your products/services?

From your organization's point of view giving it to another company means Staff is not you headache. Payroll, numbers retention, PF, ESIC taxes, inspections by regulatory authority are not your head ache. You are just paying for services of another firm.

staff kept on contract "could" spell trouble ...
as they would be doing work exclusively & core to your business some of them can claim employment with you at a later date...

PF & ESIC inspection or audit even after many years can penalize the firm & make it pay all the contribution (including employee contribution also..... from back date)..
they dont wait for you to pay up... atleast I know of ESIC they simply freeze the company's bank account & take away the amount...

(there are recovery cells with annual targets to take out money from such defaulting companies)..

A cousin who is a director in one of the state ESIC successfully recovered Rs.11 crore last to last year... his target for last year was Rs.20 crore... Being an HR guy I didn't have the stomach to ask him this years target..

apart from punitive action.. if even one of the staff was to take it to sales union & drag the company to labour court...

but most companies dont comply... and those that comply... dont bother to make their vendors to comply... Its all about pushing luck...

cause really 20-30 crore is not even a fraction of what companies directly of through their vendors default on... the very best of them have vendors who .. forget PF ESIC.... dont even conform to minimum wages act..

weigh your options... if you are generally a lucky person... save some costs...

else comply... or have compliant vendor to host such staff...

Professor Mamta 

Hello Friend,

Legally I dont think there is a much of a problem in outsourcing.

But the area which you are trying to outsource is a problem. Sales & Marketing are the revenue generating functions for any organisation. According to me outsourcing these functions is not a good idea.

If you dont have a proper legal understanding safe guarding your interest with the outsourcing company, u will end up loosing your clientele & business to the outsourcing company.

Regards

Rajasekar

Seriously speaking, I think you need to take you call based on the following...

A. Your product / service is a great idea / niche item, that cannot be easily manufactured or serviced after-sales by anybody
B. You have a great sales network that can cut the time to market for you

The options for you are...

If you have A and also B, then i guess you would not have floated this mail at all?!?!?

If you have A, but no B, then you have no much choice but to outsource your sales & marketing functions (the cost benefits of working out a legal contract etc., far outwiegh the other disadvantages of trying to build your own sales team)

If you don't have A, then ideally you have to have B, ie. your sales network else, after a while someone may copy your product / service or seat into your revenue thru' after-sales service by running a parallel service network and so on

If you don't have A & as well as B, then you got a tough ride ahead, becos only thing you have then to bank on is some dynamic customer loyalty programmes to ensure that customers stay with you irrespective of who services them at the front-end

and don't get scared by all the pf, esi threats, these days many companies have only-commission based sales persons... insurance cos. have their agents, the direct marketers like amway, modicare have their multi-level networks, whils cos' like hll, amc use part-timers... also if you are going to have a small set-up then you'll still be exempted from pf, esi etc., so then make your choice, get going and all the best!